Wind Energy – Cost Increase
Dominion Energy recently provided several updates for the Coastal Virginia Offshore Wind (CVOW) project and revealed that the cost of the 176-turbine project has gone up by around 9%.
The 2.6 GW, fully permitted project is now approximately 50% complete and remains on track for on-time completion at the end of 2026. CVOW continues to achieve significant construction milestones including the successful installation of the first 16 transition pieces which serve as the junction between the foundation and tower for each of the 176 wind turbines.
Delivery of the first of three 4,300-ton offshore substations to the Portsmouth Marine Terminal in Virginia Beach occurred at the end of January. Fully fabricated monopiles, transition pieces, undersea cable and other major components continue to be delivered in preparation for on-schedule installation. Wind turbine tower and blade fabrication is now underway, with nacelle fabrication to begin later this quarter.
SiemensGamesa, the project’s wind turbine supplier, is manufacturing the same turbine model for CVOW as has been successfully fabricated, installed, and is now operating at the Moray West offshore wind project. Charybdis, the American built, flagged, and crewed, wind turbine installation vessel (WTIG) is now 96% complete and has commenced sea trials in Brownsville, Texas.
As said, estimated total project costs, inclusive of contingency and excluding financing costs, have increased by around 9 percent, from $9.8 billion to $10.7 billion. This is the first and only increase since the original project budget was submitted to the Virginia State Corporation Commission (SCC) in November 2021, approximately 39 months ago.
The project remains an affordable source of electricity for Dominion Energy Virginia customers with robust cost-sharing mechanisms that protect customers and shareholders.
As a result of the comprehensive stakeholder settlement approved by the SCC in December 2022, 50% of the updated total project costs above $10.3 billion are unrecoverable from customers and borne by the project owners.
As a result of the total project cost update, the expected average impact over the life of the project to a typical residential customer bill using 1,000 kWh per month is a 43 cent per month increase. The project’s updated levelized cost of energy (“LCOE”) of ~$62 (vs. the prior estimate in November 2024 of $56) continues to benchmark very favorably with new generation alternatives including solar, battery and gas-fired generation.
In addition to the existence of robust cost-sharing mechanisms for customers, as part of the comprehensive business review, Dominion Energy completed a non-controlling equity financing with Stonepeak. Under the terms of that agreement, Stonepeak agreed to fund 50% of project costs up to $11.3 billion, with additional sharing of costs over $11.3 billion. As a result, Stonepeak will fund half, or ~$450 million, of the ~$900 million increase in total project costs. Further, Stonepeak and Dominion Energy will each absorb 50% of increased total projects costs that are not expected to be recovered from customers under the December 2022 settlement order. As a result, Dominion Energy expects its Q4 2024 results will include an ~$100 million charge, which will be excluded from operating earnings (non-GAAP), for such amount.
