Is offshore wind expensive? Not compared to the alternatives

offshore wind turbines

A massive wind farm 27 miles off the coast of Virginia Beach moved one giant step closer to reality last November when Dominion Energy filed its Coastal Virginia Offshore Wind development plan with the State Corporation Commission. Dominion expects to begin construction on CVOW in 2024, and have all 2,587 megawatts of power connected to the grid in 2026.

But the wind farm’s price tag of $9.8 billion, and its $87 per megawatt hour levelized cost of electricity (LCOE), is causing heartburn over at the attorney general’s office. Scott Norwood, an expert for the Division of Consumer Counsel, criticized the project on three main grounds: that the cost of building CVOW is more than building a new nuclear reactor and 2-3 times as much as building solar facilities; that Dominion has overstated the benefits of the project; and that in any event, Dominion doesn’t need the energy before at least 2035. 

Recognizing that the General Assembly already made most of these points moot by declaring the project to be in the public interest, however, Norwood also recommended the SCC adopt consumer safeguards including periodic status reports and cost oversight. 

Anyone familiar with Dominion’s tendency to pad profits will say “Amen” to the call for strict SCC oversight. With a project this huge, the SCC must be especially vigilant.  Some of Norwood’s criticisms, however, seem more calculated for effect, while others miss the point. 

Norwood certainly knows his comment that CVOW is more expensive than nuclear is not true. The price tag of the only two nuclear reactors under development in the U.S. has ballooned so high ($30 billion and counting) that it almost makes Dominion’s former dream of a third nuclear reactor at North Anna look good. Norwood’s own devastating testimony likely helped kill the North Anna 3 project, which would have delivered electricity for $190 per megawatt-hour.

Norwood says Dominion has fudged the CVOW numbers and the project will cost customers more than the company admits, but still, Dominion would have to gold-plate every turbine before it could touch the cost of nuclear. 

This wasn’t the first time the General Assembly put its thumb on the scale for a Dominion project. The habit goes back to 2008, when a Dominion coal plant, the Virginia City Hybrid Energy Center, became the first project legislatively deemed “in the public interest.” Even back then its projected levelized cost of electricity was $93/MWh. Today, VCHEC loses so much money for customers that Dominion faces pressure at the SCC to close the plant. 

For that matter, I also see that my latest electricity bill from Dominion includes a non-bypassable charge for coal ash disposal of $5.68—an amount that exceeds the charges for participation in RGGI, new solar projects and the RPS program, combined. Pollution is also a cost of using fossil fuels, but it’s never included in the LCOE. 

Mr. Norwood did not suggest Dominion pursue new nuclear or new fossil fuel plants instead of offshore wind. If Dominion needed new generation, he says, solar is the low-cost alternative. It’s cheaper to build, and it produces electricity at a lower cost than offshore wind. He’s right: if all you cared about was LCOE, no one would build anything but solar in Virginia. 

But as critics never tire of pointing out, solar can’t provide electricity 24/7. Offshore wind has a hidden superpower: while solar production peaks in the middle of the day, the wind off our coast can produce electricity both day and night, is often strongest in the evening when demand rises, and is stronger in the winter when solar is less productive. Solar and offshore wind are complementary, and we can’t get to a carbon-free grid without both. So yes, we need CVOW.

Virginia’s leaders are also taking the long view on cost. In any new industry, early projects are more expensive than later ones. Europe’s 30 years of experience developing an offshore wind industry shows costs fall steadily as project experience and new technology enable developers to produce more energy with fewer turbines. States up and down the East Coast are pursuing offshore wind projects not only because they want clean energy, but because they expect these early investments to lead to lower-cost power as the industry achieves scale. 

State leaders also see economic development and job growth as important benefits, and those aren’t reflected in LCOE either. This is another area where SCC oversight can ensure the greatest public benefit from CVOW. Testimony filed by a Sierra Club expert urges that Dominion’s economic development plan be revised with specific metrics around the VCEA’s goals for diversity, equity and inclusion in the offshore wind workforce. Like reducing pollution, creating jobs for residents from low-income and minority communities adds to CVOW’s overall value.

Having criticized the VCEA’s overly-generous cost cap myself at the time, I agree with the AG’s office that the SCC has to keep a tight watch on expenses as Dominion moves forward with CVOW. But move forward it should, because Virginia needs offshore wind. 

This commentary originally appeared in the Virginia Mercury on April 1, 2022.