DOE pulls $40M in funding for Dominion's offshore wind pilot

Dive Brief:

Dominion Virginia Power has lost a $40 million grant from the U.S. Department of Energy (DOE) to help build two, 6-megawatt offshore wind turbines, the company said in a press release.
The decision by the DOE came after the utility was unable to guarantee the turbines would be built by 2020. The turbines are part of a pilot project, called the Virginia Offshore Wind Technology Advancement Project (VOWTAP), intended to demonstrate the feasibility of offshore wind in the U.S.
In a statement, Dominion said it is now "assessing options" after losing DOE funding for the project, which is estimated to cost between $300-380 million based on a second round of bids made by developers.

Dive Insight:

While offshore wind has taken off in Europe, it has struggled to get off the ground in similar fashion in the U.S.

There are over 4,000 gigawatts (GW) of offshore wind potential in the country, according to the DOE, but the first offshore wind project has yet to come online. A developer, Deepwater Wind, is working on getting the first such project — Block Island, off the coast of Rhode Island — online by the end of 2016.

At one point, Dominion claimed it would be the first to get offshore wind online in the U.S., but the utility faced hurdles getting offshore wind online and the project has been plagued by cost and regulatory challenges.

While Dominion had previously estimated the turbines could be built at a cost of $230 million, an initial round of bids from developers came in well over that — at $375-$400 million. A second round of bids brought the cost estimates down to $300-375 million, and those bids are still under consideration.

Dominion's offshore wind project was one of three that received DOE funding in 2014. But after the utility told the DOE it "could not guarantee" it would be online before 2020, the federal agency decided to withdraw its funding. Dominion had initially proposed the project would be online in 2017, then later saying it would be in 2018.

"While the company has been working toward an earlier date, there are too many uncertainties to meet DOE's request," the company said in a statement. "These include the high cost of the project, the inability to get firm construction contracts, and the increasing complexities of gaining regulatory approval for energy infrastructure projects."

With the utility losing $40 million in funding from the DOE, the project could now be in jeopardy. Dominion has long been concerned that state regulators will reject the project for being too costly, and the loss of funding won't help ease those worries. The project had been proposed to help demonstrate the feasibility of offshore wind.

"This project is a first in many ways," Mary C. Doswell, senior vice president of Dominion Energy Solutions, said in a statement. "As such, you need to account for many variables when attempting to lock in on a date with any degree of certainty."

Environmentalists have decried the utility's efforts in getting the project built, with the Sierra Club saying the utility is "sabotaging offshore wind” and being “disingenuous about their intentions,” according to The Virginian-Pilot. The organization accused the utility of focusing on building new nuclear and gas plants instead of offshore wind.

A Dominion spokesman countered that its offshore wind pilot is not yet dead in the water. “The wind is not out of the sails [for this project],” the spokesman told The Virginian-Pilot.