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 sequence of setbacks for the U.S. trade. That very same day, Virginia utility Dominion Vitality gained closing approval for its $9.8 billion Coastal Virginia undertaking, the most important 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 reduce within the final six months as provide chain snarls, rising prices, regulatory hold-ups and shifting costs for renewable power have triggered the delay or cancellation of a number of main initiatives.

Dominion Vitality, nonetheless, is undaunted. 

The two.6-GW Coastal Virginia undertaking “continues to maneuver ahead on time and on funds,” stated 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 plentiful federal tax credit which have helped mitigate the corporate’s danger.

None of that ensures that the undertaking 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 power objectives. At a time when the way forward for offshore wind in america is in severe doubt, although, the success of Coastal Virginia Offshore Wind (CVOW) would offer the beleaguered trade with a street map.

The yr of falling aside

Rising inflation and provide chain delays have stalled or straight ended growth of numerous 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 supply 3.2 GW to Massachusetts and Connecticut have additionally been shut down.
• Siemens Gamesa introduced on Nov. 15 that it’s suspending building on the Portsmouth Marine Terminal, slated to produce generators for Dominion’s Coastal Virginia undertaking.
• The trade is sort of actually not going to fulfill the Biden administration’s aim of getting 30 GW of offshore wind in operation by 2030.

In whole, near $22 billion in deliberate offshore wind growth funding within the U.S. has been canceled or indefinitely delayed in latest months.

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

The U.S. trade is in its infancy in comparison with offshore wind growth 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 at the least a decade’s head begin. 

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

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

Dominion enjoys 4 principal benefits over its counterparts in different states: legislative help; a positive regulatory setting; little of the NIMBYism plaguing different builders; and an in depth neighborhood outreach arm toned by years of looking for, and infrequently successful, neighborhood help for giant building initiatives.

In 2020, Virginia handed the Virginia Clear Financial system Act (VCA), which declared 5.2 GW of offshore wind power 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 100% renewable sources by 2045). “The VCA was actually instrumental” in giving Dominion’s offshore wind program momentum, stated 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 software, “was actually inclined to approve the CVOW proposal,” Pendleton added.

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

“As a regulated undertaking, we secured agreements early with offshore wind suppliers for materials and providers, whereas giving them confidence in our undertaking’s completion,” stated Jeremy Slayton, a Dominion spokesperson. “We mitigated danger to the best extent attainable by utilizing mounted worth contracts in addition to hedging foreign money and commodity prices.”

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

It must also 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 circumstances write, laws that “regularly 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 Vitality 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 clients 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 undertaking that can finally comprise 176 big generators.

“From the outset, this undertaking has been extremely popular within the Hampton Roads area and throughout Virginia,” stated 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 undertaking 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 neighborhood 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 funds 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 gives a 30 p.c credit score for the price of offshore wind parts for initiatives that start building earlier than 2026. A latest replace from the Treasury Division permits tax credit for added parts 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 choices,” stated Podesta. 

Initiatives may also obtain stackable 10 p.c bonus credit — along with the 30 p.c accessible 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 provides house owners and builders annual federal earnings tax credit for each kilowatt-hour of carbon-free electrical energy provided to the facility grid for as much as 10 years. 

All of which implies that Coastal Virginia will value far much less over time than the sticker worth signifies. And Blue, the Dominion CEO, stated on the corporate’s third-quarter earnings name that it’s working “to establish a noncontrolling fairness associate” — an outdoor investor — within the undertaking. 

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

“As we transfer into 2024, the trade is getting into a brand new part and studying from our errors,” stated Sam Salustro, vice chairman of strategic communication at Oceantic Community, an trade group that helps offshore wind. “The overall pipeline of initiatives authorized to start building 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 undertaking, the primary facility off the coast of New York state. The builders? New England energy supplier Eversource Vitality and Ørsted.