Dominion Energy Inc. finally found a partner to help it develop offshore wind resources in Denmark's Dong Energy.
Since 2013, Dominion has held a lease from the Bureau of Ocean Energy Management on nearly 113,000 acres off the coast of Virginia, but until now no vendor would commit to a firm price on the work, said Tom Farrell, chairman, president and CEO of Dominion.
"We don't do open-ended contracts when we construct things. It's one of the reasons why they come in on time and on budget all the time. They are fully engineered before we turn the first spade of dirt," Farrell said in a recent interview.
He pointed as an example to the company's $4 billion Cove Point liquefied natural gas export facility under construction in the Chesapeake Bay.
"Projects all over the world are late and vastly over budget. This project is on time and on budget, and we'll be exporting at the end of this year," he said.
"But with wind turbines, we couldn't get anybody to say, 'OK, we'll build you these two turbines for this price.' They would just say, 'We'll build them, and it'll cost you whatever it's going to cost you, and then we'll put a profit on top of that.' And we're going like, 'No, we're not doing it,'" he said.
"We would like to be able to put a couple of test turbines out there and see what happens. I mean, if you can get it done cost-effectively, why wouldn't you do it?" Farrell asked.
Yesterday, he found a vendor in Dong who gave him the firm price he had been seeking.
"The all-in number is $300 million, and that includes some of the money that has been spent to date by Dominion on research and development," said David Botkins, a Dominion spokesman.
Dong has built 22 offshore wind farms in Europe and Asia totaling 3,900 megawatts.
The deal calls for Dong to build two 6 MW wind turbines 27 miles offshore of Virginia Beach.
Resting 80 feet below the water, they will "stand approximately 600 feet from the ocean's surface, which is essentially the same height of the Washington Monument," Botkins said.
The two turbines amount to a test of the technology for Dominion, Farrell said, and when completed in late 2020, they will give the company important data on wind speeds and how the foundations hold up. "We're not immune from hurricanes where we are," he said.
As part of the deal, Dominion is giving Dong exclusive rights to explore a partnership about developing a commercial-scale wind farm of up to 2,000 MW based on successful deployment of the initial test turbines.
The project would be only the second offshore wind farm in the nation. The first wind farm in the U.S. totaling 30 MW went into operation off Rhode Island late last year.
Offshore wind is among the most expensive ways to generate electricity, but Farrell is optimistic that will change with scale.
"If you look at the cost curves in Europe where they have actually infrastructure built up, the per-turbine cost has come way down," he said.