Pessimistic headlines this month about a major United States offshore wind developer cancelling a project raised pointed questions about the future of the industry. This overlooks another important development that happened the same day – one that provides lessons in how to build a thriving wind industry, with a Southern state leading the way.
The same day that New Jersey developers pulled the plug, federal officials approved the country’s largest offshore wind project in Virginia – which is on budget and schedule.
What has Virginia gotten right that other states haven’t?
It’s essential for our country’s climate future that we make offshore wind work: it is a critical resource for achieving a cost-effective, reliable, and zero-carbon grid because it generates dependable electricity when the sun isn’t shining and in winter months when solar production tends to fall.
Virginia is on track to make offshore wind a reality with the federal approval of Dominion Energy’s 2.6-gigawatt offshore wind project, which will generate enough electricity to power 660,000 homes.
Unlike many other projects, the Coastal Virginia Offshore Wind (CVOW) project is currently on time and on budget, with an expected in-service date of 2026. How?
First, in 2020 Virginia passed one of the nation’s most ambitious climate agendas, known as the Virginia Clean Economy Act, making clear the urgent need to invest in new clean energy sources.
Second, the Virginia State Corporation Commission – a little known but powerful state regulator – approved the offshore wind project with bold consumer protections, putting the financial onus on the major corporation behind it, rather than the state’s residents.
Taken together, Virginia charted a path for a major investment in carbon-free electricity, but in a way that ensures an equitable energy transition that will be critical for our climate future.
No climate and clean energy transition will succeed if it focuses exclusively on power generation, which is why any successful climate policy must also equally prioritize grid reliability and affordability.
Offshore wind has no fuel requirements; it is free from fuel supply issues that threaten reliability. In 2021, Texas experienced a massive power outage due to extreme winter weather, and the Federal Energy Regulatory Commission (FERC) concluded that much of the problem lay in natural gas power plants and fuel infrastructure. It reached similar conclusions about Winter Storm Elliott in 2023.
Virginia’s legislative push to move to carbon-free, reliable sources of power was step one. Ensuring the clean energy transition is affordable was step two.
With CVOW, Virginia has taken strong steps to protect customers from the risk that the project will go over budget or fall behind schedule, or that the project will not perform as promised, forcing utilities to buy replacement power elsewhere to make up the shortfall.
When the State Corporation Commission approved CVOW, it imposed a “performance guarantee,” requiring Dominion’s corporate shareholders to pay if the project did not deliver. Dominion balked and threatened to cancel the project. After negotiating with environmental and consumer advocates, the Attorney General’s office, large energy buyers, and the Commission Staff, Dominion finally conceded that customer protections were necessary, and the parties proposed cost caps in lieu of the performance guarantee.
This cost cap, which the Commission adopted, requires Dominion shareholders to bear the risk of cost overruns or project delays. Fortunately, Dominion locked in many of its supply contracts well in advance, which appears to have insulated the project from many of the supply chain issues now plaguing other wind efforts worldwide.
To fight climate change, we need zero-carbon electricity, but we must ensure that electricity is reliable and affordable. Offshore wind is a critical complement to solar and energy storage, and there are common sense measures to develop offshore wind responsibly, safeguarding natural resources and making sure the costs are fair to consumers. Virginia has a proven model for getting major projects approved and underway in a manner that protects customers. Hopefully other states will follow our example.