The company announced Friday it anticipates producing electricity at its $9.8 billion Coastal Virginia wind farm for $77 a megawatt hour, down from earlier forecasts of between $80 and $90. The largest US project yet to win regulatory approval remains on track to begin offshore construction next year and is eventually expected to supply enough power for 660,000 homes.Dominion shares surged as much as 7.2%, the most intraday since April 2020.
The company’s strategy has helped it avoid pitfalls faced by competitors, said Atin Jain, senior wind analyst at BloombergNEF. “They are the offtaker,” Jain said in an interview. “They can pass on cost increases to consumers.”
There are other key reasons Dominion’s project is succeeding. Notably, it lined up supply deals with turbine makers in 2021, before rising inflation drove up costs for some of its competitors. Also, Coastal Virginia will be huge with 2.6 gigawatts of capacity. That means the company will benefit from economies of scale, Jain said.
Dominion also is developing a specialized ship that will be necessary to install the massive turbines at sea. The $650 million vessel, called Charybdis, is 77% complete and is expected to be finished by early 2025. That will also help lower costs for Dominion because it won’t have to pay to use another company’s ship and it will be able to recoup some costs by offering it to other developers when not needed for Coastal Virginia.
“It’s a smart strategy,” Jain said.
Rivals including Orsted A/S and Avangrid Inc. have been canceling or delaying projects and taking writedowns on other offshore wind projects because they were locked into long-term contracts that became unviable after costs surged.
The company has invested $2.3 billion to date on the project and that figure should increase to $3 billion by the end of the year. Dominion is meeting all of its target milestones, Chief Executive Officer Bob Blue said during a conference call Friday.
“The project, which is fully regulated, is on time and on budget. Let me just repeat that,” he said. “Our project is progressing in alignment with our unchanged cost estimate and our unchanged in-service target date.”
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