Op-Ed by Katherine Collins
Virginia consistently ranks as one of the most business friendly states in the country.
On Friday, Nov. 2, the Commonwealth removed one of the few remaining barriers to hosting part of a new, multi-billion dollar industry when the State Corporation Commission (SCC) ruled on the Coastal Virginia Offshore Wind (CVOW) project was in the public interest.
This ruling paves the way for the two-turbine, 12-megawatt project to be the first offshore wind turbines built in federal waters — solidifying Virginia as a leader in this new U.S. industry.
There are several things this project is not, as the Daily Press Editorial Board repeatedly points out in its Nov. 6 editorial about the approval. It is not the cheapest way to install 12 MW of generating capacity.
Demonstration projects of any kind rarely are. It’s also not the lowest cost electricity generated from offshore wind.
The Commission notes in its ruling that farther north, specifically the Vineyard Wind project, prices per kilowatt-hour for full-scale offshore wind developments are much lower than the CVOW demonstration project. But what the Editorial Board is missing is the entire purpose of the project.
By approving this demonstration project, the SCC is approving a relatively small investment (compared with the cost of building the 800 MW Vineyard wind project) in exchange for one of the most important returns for a new industry – lessons learned.
For the CVOW project, Dominion is partnering with Orsted — a trusted offshore wind developer with experience building 27 percent of the world’s offshore wind capacity.
Prior to this enterprise, Dominion had issued two separate rounds of competitive bidding for a project partner. It wasn’t until Orsted came along that an agreement could be reached that would allow the project to move forward in a prudent manner. This partnership brings with it significant benefits for ratepayers, including fixed costs for a majority of the project which will ensure ratepayers are adequately protected from cost overruns.
Even for the most experienced developer, the southeast Atlantic presents unique challenges to building offshore wind, warranting the demonstration project.
CVOW represents a unique opportunity to translate these lessons learned into cost-savings for ratepayers, potential opportunities for the Commonwealth’s universities and, ultimately, a full-scale buildout of Virginia’s offshore wind resources. Full buildout will grow the Commonwealth’s economy and diversify its portfolio of electricity generation sources.
Members of the General Assembly recognized the importance of offshore wind, and the need for a demonstration project when it passed the Grid Transformation and Security Act of 2018. This landmark piece of legislation represented a perfect example of forward-thinking policy by explicitly putting a small offshore wind demonstration project in the public interest — solidifying the case for the SCC to approve this project.
This year’s State Energy Plan recommends going beyond a small demonstration project to construct 2000 MW of offshore wind within the larger commercial Wind Energy Area held by Dominion Energy. In order to meet this goal and take advantage of the rapidly falling prices for offshore wind, the lessons learned from the construction and operation of the CVOW project will be critical.
States up and down the Atlantic coast have recognized the opportunity for heavy industry waiting at their doorsteps. One key factor manufacturing companies will consider when siting their facilities will be proximity to demand for their components.
As demonstrated by the 2015 BVG Associates Ports Analysis, Virginia’s ports offer significant opportunity for component manufacturing, including over 1,500 direct jobs from manufacturing and associated activities. But if all of the offshore wind projects are being built in the Northeast, manufacturing will be drawn there as well.
The State Energy Plan’s recommendation to form regional collaborations will bring further incentive for manufacturers to consider the Commonwealth for hundreds of millions in manufacturing investment. Virginia can work with its neighboring states, including North Carolina with its complimentary workforce, assets, and goals, to strengthen its position within the industry and maintain its competitive advantage with some of the most active states in the Northeast.
The decision by the SCC to ultimately approve the CVOW demonstration project keeps Virginia on the path of responsible progression towards building a new industry. The CVOW project creates the potential for lessons learned, low-cost electricity from offshore wind, and new manufacturing boosting the Commonwealth’s economy. This is why the CVOW project is a wise and prudent investment for the state.
Kollins is president of the Southeastern Wind Coalition.