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The past couple of years have been tough ones for the offshore wind industry, which is still struggling to launch. The recession has made states reluctant to invest, even when the payoff looks huge. Cheap natural gas is hurting the market for renewable energy just as wind and solar have started hitting their stride. Congressional dysfunction has prevented the renewal of critical tax credits that the wind industry still needs to compete.

A few other states are making fitful progress towards building offshore wind farms, but they have conditions Virginia doesn’t: higher energy prices that make offshore wind more competitive with fossil fuels, renewable energy standards that push utilities to become buyers for the electricity, and congested transmission grids that favor local generation.

But of course, Virginia has its own advantages, including possibly the best wind resources in the mid-Atlantic, skilled workers, and extremely competitive port facilities. And the enthusiasm of our legislators and public for the idea of offshore wind matches that of any state.

At the same time, though, our governor and our major utility give decidedly mixed signals, extolling our offshore wind potential at one moment, and in the next opining that no one would actually want to pay for it. And yet Dominion Power hopes to buy up all the Virginia-area offshore wind leases that are offered for bid this fall. So what gives with Dominion and offshore wind?

One answer comes from Guy Chapman, Dominion’s Director of Renewable Energy Research and Program Development, who spoke at a wind conference held at James Madison University this past June. He said that right now with natural gas so cheap, the company doesn’t expect to build any wind at all, on land or at sea. But if conditions improve, the company wants to be in a position to change its mind, and that means buying up the offshore leases and doing site surveys, technical and environmental studies, and other planning that will add up to $40 or 50 million. Dominion would rather lose the money than be locked out of a potential new growth area.

What this means for the rest of us is that when we read somewhere that Dominion has “plans” for offshore wind, or that it has two wind farms in Virginia’s mountains “under development,” we should realize it defines those terms to mean, “Don’t hold your breath, honey.”

This presents something of a puzzle for decision-makers at the federal Department of Interior. If they let Dominion buy up the leases for the whole Virginia wind energy area, knowing the company isn’t actually planning to build a wind farm, then they aren’t advancing the cause of offshore wind any. By contrast, the other bidders include companies like Apex Wind and Fishermen’s Energy that make their money by building wind farms, so they are highly motivated to follow through.

Selling the lease to Dominion might mean no one builds a wind farm off Virginia. That would be okay with Dominion—for a monopoly, keeping out competition is an end in itself—but it wouldn’t serve the public interest.

On the other hand, if something happened to make Dominion actually want to build, the fact that it’s a regulated utility means they could probably do it more cheaply than Apex or Fishermen’s. That would benefit ratepayers and make the energy more competitive with other fuels, like natural gas.  

What might make Dominion want to build? Some combination of the following factors would likely play a part:

The cost of offshore wind might come down relative to fossil fuels. With no offshore wind farms operating in the U.S. yet, cost projections are still speculative. The first projects here will be expensive, as all “firsts” are, but industry members are confident that prices will come down dramatically as the industry matures. Dominion and other companies and researchers, using federal grants, are currently studying opportunities to slash costs.

Virginia might grow bolder. It’s conceivable, though not really likely, that Virginia will take a decisive step towards offshore wind by enacting an effective renewable energy standard or offshore wind mandate, to replace the sham that is our current renewable energy law. This wouldn’t happen under Bob McDonnell’s leadership; in spite of his “all of the above” rhetoric, he is adamantly opposed to real change in state policies that favor coal. Chances would improve in 2014 under Terry McAuliffe or possibly Bill Bolling (but not Ken Cuccinnelli).

Congress might finally take action to deal with climate change. Sure, and pigs might fly. But drought and heat waves are changing minds across the country about the reality of global warming. Even skeptics may decide to hedge their bets. And even if not, the economic and national security case for renewable energy has already swayed some conservatives, and may bring more on board as other countries outpace us. A carbon tax, a national renewable electricity standard, or some other incentive would do for offshore wind in Virginia what Virginia isn’t likely to do itself.

Originally posted to Power for the People on Mon Sep 10, 2012 at 09:15 AM PDT.

Also republished by Virginia Kos.

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Comment Preferences

  •  Two words: Cape Wind (0+ / 0-)

    10+  years.  Hold up?  The feds.

    Enviros tie ourselves in knots.

     Sheesh...

    "When you're wounded and left on Afghanistan's plains, And the women come out to cut up what remains, Jest roll to your rifle and blow out your brains An' go to your Gawd like a soldier." Rudyard Kipling

    by EdMass on Mon Sep 10, 2012 at 09:33:17 AM PDT

  •  I beg to differ with the following: (1+ / 0-)
    Recommended by:
    PrahaPartizan
    On the other hand, if something happened to make Dominion actually want to build, the fact that it’s a regulated utility means they could probably do it more cheaply than Apex or Fishermen’s.
    This might be true if VA is some magikal, unique state in this regard, but it has never been true anywhere to my knowledge. Regulated utilities are granted monopolies in exchange for which they are guaranteed profits. That is not an exchange, but a license to steal.

    That, in its essence, is fascism--ownership of government by an individual, by a group, or by any other controlling private power. -- Franklin D. Roosevelt --

    by enhydra lutris on Mon Sep 10, 2012 at 09:37:39 AM PDT

  •  Renewal of the PTC is the biggest barrier (0+ / 0-)

    to wind development, both on and off-shore. Congress needs to grant a 5-10 year extension to the Production Tax Credit so that the wind industry will have time to plan, get permits and financing, and build projects out.

    The wind industry has generated thousands of jobs in Iowa and South Dakota, and could do the same on the East Coast with consistent tax policy.

    As far as Dominion Power goes, a little competiion would do everyone some good. Well, everyone but Dominion. And with other states passing real renewable energy standards, it's not necessarily Virginia where the market would be. Maybe Maryland, Delaware, or DC would be in the market for a bit of wind-generated power even if Virginia remains stuck in the Coal Age.

    NC-4 (soon to be NC-6) Obama/Biden 2012

    by bear83 on Mon Sep 10, 2012 at 12:17:30 PM PDT

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