On the finish of October, Danish wind big Ørsted introduced that it’s canceling its pair of huge offshore initiatives in New Jersey — marking the newest in a collection of setbacks for the U.S. trade. That very same day, Virginia utility Dominion Power gained ultimate approval for its $9.8 billion Coastal Virginia mission, the biggest wind farm deliberate for U.S. waters.

These developments spotlight the contradictory place for offshore wind within the U.S. Supported by beneficiant taxpayer {dollars} at each the state and federal ranges, the trade has been pressured to sharply cut back within the final six months as provide chain snarls, rising prices, regulatory hold-ups and shifting costs for renewable vitality have induced the delay or cancellation of a number of main initiatives.

Dominion Power, nonetheless, is undaunted. 

The two.6-GW Coastal Virginia mission “continues to maneuver ahead on time and on price range,” mentioned Dominion president, chair and CEO Robert Blue at an October occasion marking the arrival of the primary monopiles (the big metal towers that maintain up the turbine blades) on the Port of Virginia.

Dominion’s success is because of regulatory luck, native help, bipartisan laws in Richmond that calls for five.2 GW of offshore wind in state waters, and considerable federal tax credit which have helped mitigate the corporate’s threat.

None of that ensures that the mission will really get constructed and go into service, as deliberate, in 2026, nor that the corporate and the Commonwealth of Virginia will obtain their clear vitality objectives. At a time when the way forward for offshore wind in the USA is in severe doubt, although, the success of Coastal Virginia Offshore Wind (CVOW) would supply the beleaguered trade with a highway map.

The yr of falling aside

Rising inflation and provide chain delays have stalled or straight ended improvement of various deliberate offshore wind farms within the U.S. 

• Ørsted is pulling out of the Ocean Wind I and II initiatives off the New Jersey shore, and can take a $4 billion loss associated to the initiatives. 
• Three initiatives slated to offer 3.2 GW to Massachusetts and Connecticut have additionally been shut down.
• Siemens Gamesa introduced on Nov. 15 that it’s suspending development on the Portsmouth Marine Terminal, slated to produce generators for Dominion’s Coastal Virginia mission.
• The trade is nearly definitely not going to fulfill the Biden administration’s aim of getting 30 GW of offshore wind in operation by 2030.

In complete, near $22 billion in deliberate offshore wind improvement funding within the U.S. has been canceled or indefinitely delayed in current months.

S&P International Commodities Insights mentioned it might downgrade its outlook for 2030 offshore wind capability from its present 22 gigawatts expectation, a quantity already nicely beneath the Biden administration’s 30 GW goal.

The U.S. trade is in its infancy in comparison with offshore wind improvement in Europe. Present working offshore wind energy capability in U.S. waters totals solely 42 MW, a fraction of the 32 GW already producing electrical energy in Europe, the place builders had a minimum of a decade’s head begin. 

“Macroeconomic headwinds are creating challenges for some initiatives,” mentioned John Podesta, senior advisor to the president for clear vitality innovation and implementation, on a Nov. 16 name with reporters, “however momentum stays on the aspect of increasing the U.S. offshore wind trade.”  

Dominion’s excellent storm: legislative, regulatory, and group help

Dominion enjoys 4 fundamental benefits over its counterparts in different states: legislative help; a positive regulatory surroundings; little of the NIMBYism plaguing different builders; and an intensive group outreach arm toned by years of looking for, and infrequently profitable, group help for large development initiatives.

In 2020, Virginia handed the Virginia Clear Financial system Act (VCA), which declared 5.2 GW of offshore wind vitality to be within the public’s greatest curiosity (and which mandates Dominion, already serving two-thirds of the state’s inhabitants, to ship electrical energy from one hundred pc renewable sources by 2045). “The VCA was actually instrumental” in giving Dominion’s offshore wind program momentum, mentioned Julia Pendleton, program director at Southeastern Wind Coalition. Virginia’s State Company Fee (SCC), the physique with the facility to approve or reject Dominion’s utility, “was actually inclined to approve the CVOW proposal,” Pendleton added.

That results in one other key issue: Dominion’s standing as a regulated utility. Non-public builders equivalent to Ørsted should finance multi-billion-dollar initiatives themselves, or discover buyers, and should search prospects through power-purchase agreements. Dominion, against this, will fold the price of the Coastal Virginia mission into its state-approved electrical energy charges. And Dominion is a vertically built-in energy firm, that means that it owns the era, the transmission, and the distribution of electrical energy, enabling it to firmly forecast and handle prices. 

“As a regulated mission, we secured agreements early with offshore wind suppliers for materials and providers, whereas giving them confidence in our mission’s completion,” mentioned Jeremy Slayton, a Dominion spokesperson. “We mitigated threat to the best extent doable by utilizing fastened value contracts in addition to hedging forex and commodity prices.”

Regulatory certainty additionally gave Dominion a protracted runway, mentioned Pendleton: “Dominion was so forward of the sport right here … so a lot of their contracts proceeded previous to the trade going through provide chain points and inflationary strain.”

It also needs to be famous that Dominion has a protracted historical past of wielding outsized — and in critics’ views unseemly — political clout in Richmond. Dominion has used its quasi-monopoly in Virginia to help, and in some instances write, laws that “progressively neutered the SCC, freed the utility’s charges from regulation, and allowed Dominion to overcharge Virginians … by about $2 billion … on their electrical payments,” wrote George Packer in an investigation within the Atlantic. (Dominion Power didn’t reply to questions on its political exercise.)

In 2021 Dominion agreed to a settlement with the SCC that included $330 million in refunds to prospects together with greater than $300 million in funding for varied initiatives — together with Coastal Virginia Offshore Wind.

Sure, in my yard

Residents of Virginia’s 10,000 miles of shoreline, in the meantime, have been comparatively muted of their objections to a mission that may finally comprise 176 big generators.

“From the outset, this mission has been extremely popular within the Hampton Roads area and throughout Virginia,” mentioned Slayton, citing “broad-based help from bipartisan political leaders, environmental teams, labor unions, financial builders, native companies and residents from throughout the area.” 

It helps that the mission zone is 27 miles off Virginia’s southern coast, making it just about invisible from the lodge balconies of Virginia Seaside. And Dominion, well-versed within the artwork of public relations and group outreach, mounted an exhaustive marketing campaign to win the hearts and minds of native communities — together with an settlement to cap buyer prices within the case of price range overruns. 

The IRA and offshore incentives

Dominion has additionally benefited from an array of tax rebates and different authorities help. The Inflation Discount Act options the part 48 funding tax credit score (ITC), which offers a 30 p.c credit score for the price of offshore wind elements for initiatives that start development earlier than 2026. A current replace from the Treasury Division permits tax credit for added elements for offshore wind farms, together with standalone battery storage and undersea cables.

The federal help “will present vital certainty for offshore wind initiatives as they finalize funding selections,” mentioned Podesta. 

Tasks can even obtain stackable 10 p.c bonus credit — along with the 30 p.c out there from the ITC — for utilizing home metal and manufactured merchandise, finding the amenities in fossil-fuel powered communities and establishing small energy stations in low-income communities or on tribal lands. And the renewable electrical energy manufacturing tax credit score offers homeowners and builders annual federal revenue tax credit for each kilowatt-hour of carbon-free electrical energy equipped to the facility grid for as much as 10 years. 

All of which implies that Coastal Virginia will price far much less over time than the sticker value signifies. And Blue, the Dominion CEO, mentioned on the corporate’s third-quarter earnings name that it’s working “to determine a noncontrolling fairness companion” — an out of doors investor — within the mission. 

Except the tax credit are repealed, different offshore amenities will obtain equally ample authorities help. Which implies that offshore wind is way from useless within the U.S.

“As we transfer into 2024, the trade is getting into a brand new part and studying from our errors,” mentioned Sam Salustro, vp of strategic communication at Oceantic Community, an trade group that helps offshore wind. “The whole pipeline of initiatives permitted to start development will quickly exceed 7 GW, a considerable improve in simply the final yr, and one other 10 GW is in a near-term pipeline for approval.”

In late November, installers positioned the primary turbine for the 136-MW South Fork Wind mission, the primary facility off the coast of New York state. The builders? New England energy supplier Eversource Power and Ørsted.