OFF THE COAST OF VIRGINIA BEACH, Virginia — On an emerald swath of ocean here, a 30-foot-wide hammer attached to a ship is pounding carbon steel into the seafloor.
The giant turbine foundations are a critical step in building Dominion Energy’s Coastal Virginia Offshore Wind project (CVOW), which will be the largest U.S. offshore wind project when completed, able to provide more power than 2 nuclear reactors.
“The Dominion project is a credible testament to the capability to build wind farms at large scale,” said Theodore Paradise, a partner at K&L Gates law firm focused on energy.
The project, which is under construction this summer and expected to be operational in 2026, shows how offshore wind projects with certain characteristics — such as locking in costs before inflation surged in 2023 — are barreling forward, even as other projects are faltering. Dominion bought a new lease this week from the Biden administration for nearly $18 million to build additional wind projects adjacent to CVOW.
But Dominion, like the rest of the U.S. industry, is reliant on other countries to provide much of its components and assisting ships. The lagging U.S. supply chain has led to canceled or delayed projects and threatens to stymie U.S. plans to build a domestic offshore wind industry, industry observers say.
Last year, two offshore wind projects off the coast of New Jersey were canceled, in part because the developer couldn’t get a ship to install them on schedule, for example.
Along with ships to carry workers and install foundations and turbines, offshore wind construction requires ports to assemble giant machines and manufacturing facilities for blades, nacelles, gearboxes and towers. For Dominion’s project, the carbon steel foundations are monopiles fabricated by German company EEW SPC. A Belgium heavy lift vessel, DEME’s Orion, is hosting the hammer pounding the steel turbine foundations into the seafloor.
“Mostly all of our components are coming from Europe,” said John Larson, director of public policy and economic development for Dominion Energy.
Sam Salustro, vice president of strategic communications for the Oceantic Network, an offshore wind supply chain group, warns that even though the U.S. supply chain is expanding, it faces “intense competition” with Europe to lure offshore wind businesses. “They’re just buying offshore wind left and right,” he said of European countries. “It’s really pushing new investments to locate up there.”
That’s partly because the European Union has set a much more aggressive target for offshore wind than the U.S., calling for 60 gigawatts by 2030. The United Kingdom and northern European nations also have ambitious targets. The long-term goals, even if aspirational, are goosing big manufacturers to focus investment across the Atlantic, Salustro said.
As one example, the Dutch power cable company TenneT, which has developed a standardized offshore wind platform and cable system, has announced more than $40 billion in grid expansion by 2031 to service projects in Europe. In the U.S., turbine manufacturers and other supply chain companies don’t have the same opportunity to execute large orders, leaving little incentive to build a plant for one or two wind projects.
The U.S. is facing a period of “stabilization,” where the industry figures out exactly what equipment will be needed for the next suite of offshore wind projects, as well as the needed size of ships and turbines, Paradise said.
“The market is waiting for orders of a certain scale,” he said.
‘It positioned us really well’
Dominion is trying to help jump-start the domestic offshore supply chain by building a $715 million ship that will be the first-ever in the U.S. to install massive turbines at sea.
Named after the Greek mythological creature, the Charybdis is expected to be contracted out to other companies’ projects after Dominion finishes raising turbines in Virginia. As many as six of these massive turbine installation vessels would be needed to hit the Biden administration’s goal of 30 gigawatts of offshore wind by 2030, according to the Department of Energy’s National Renewable Energy Laboratory.
Everything about Dominion’s project — which could see partial power turned on next year — is supersized. By mid-August, Dominion Energy had completed pounding 50 steel foundations into the sandy seafloor using Orion, which stretches nearly one-third of a mile long.
The turbines that go on top of those monopile foundations will reach roughly 830 feet, from the water’s surface to the top of the blade tip. CVOW is unique as the only wind development in the U.S. built by a regulated utility. That has helped the company drive down its investment risk, because it has a captive customer base to pay for the wind farm and guarantee its immediate profit.
Its status is different from wind farms being built in the U.S. by independent developers, which often don’t make back their money until they begin producing and selling power.
The utility also announced this year that it would sell a 50 percent noncontrolling stake in the project to Stonepeak, an asset management firm, to generate more cash to cover the project’s costs. The investor plans to pay Dominion $3 billion if the deal is approved.
The two companies would split the capital costs to finish building the project. Dominion’s confidence in the offshore wind market is high, even as many independent developers have been shaken by a year of high costs. In addition to the lease it bought at auction Wednesday, the utility announced this summer it would buy an offshore wind lease area off the coast of North Carolina from Avangrid for $160 million.
The Virginia project also was able to duck the wider industry’s financial challenges by securing fixed prices for steel and other key commodities before high inflation pushed up prices across the energy sector after the pandemic. A handful of other projects that were in advanced stages, such as Dominion’s project, have similarly been able to escape the inflation storm and are under construction off the coast of New England.
Dominion expects to spend roughly $9.8 billion on its wind array — not counting the cost of the massive turbine installation ship.“We took care of that commodity risk. It positioned us really well,” Larson said of fixing costs. “Now, at $73 per megawatt hour, we’ve got one of the lowest costs for offshore wind.”
In comparison, New York recently signed average $150 per megawatt hour contracts for the Sunrise Wind and Empire Wind 1 projects after the developers told the state that their original agreements were no longer viable due to higher costs. Other New York projects are in limbo after developers similarly said previous contracts are not workable due to higher costs.
Dominion hasn’t been completely immune from price jumps, but its position as a regulated utility offers it some protection in comparison to producers with fixed price contracts. If its cost to build goes up, its customers likely bear that increase.
Dominion does have an obligation to provide power at a reasonable cost, but state regulators approve both new construction and the amount of revenue the company can make off its investments. Still, critics have slammed the company for overspending on offshore wind.
In 2022, after the cost for CVOW ballooned by about $2 billion, the company bartered an agreement with the state and some of its biggest customers such as Walmart to cap customer liability if prices rose again. Larson said the roughly $2 billion increase was because earlier costs were based on consultant estimates.
The price now, after contracts were bartered for the construction project, is higher but fixed, he said.
Trump, steel and a boom
Dominion’s efforts come as other areas of the U.S. wind supply chain like blade manufacturing also have failed to materialize despite the growth of the industry overall, Salustro said.
GE Vernova recently scrapped plans to churn out a massive 18-megawatt turbine at a facility in New York, because the company is focusing on a different model that can generate more profit. The move led to three offshore wind project contracts falling through in New York because they’d been designed around the turbine.
GE Vernova, Siemens Energy and Vestas Wind Systems are the largest turbine and blade manufacturers outside of China, and all three experienced high financial losses in their offshore business last year.
“They are really trying to dig out from the economic upheaval that we just lived through,” Salustro said of the blade manufacturers. “That’s gonna be the hardest sector to bring on board just because of the macro-economic pressures that it’s under globally.”
But some parts of the U.S. supply chain are growing, even if they lag far behind China – the world’s largest offshore wind producer — and many countries in Europe. Ships smaller than Charybdis are being constructed or retrofitted to serve offshore wind projects.
Nine wind projects have been approved by the Biden administration so far, enough to power 4 million homes if built.
Earlier this year, the Florida company St. John Shipbuilding — a facility owned by Americraft Marine — said it had delivered the second of three crew transfer vessels or “CTVs,” which ferry workers to offshore energy projects.
“We are supporting the proud tradition of American shipbuilding, which is the backbone of the U.S. economy,” St. Johns Ship Building President Joe Rella said in a statement.
CTVs are the “workhorses” of the offshore wind sector, said Salustro. Ten have been produced in the U.S. so far to support offshore wind, with half being delivered this year. Sixteen additional crew transfer vessels have been announced, he said.
The shipping boom is also driving orders for U.S. steel mills, Salustro said. It’s a sea change from where the U.S. was a few years ago, even if the administration is falling short of Biden’s 2030 target, according to Paradise.
“Look at what we’ve built in just the last decade,” he said.
There also may be an upside for the U.S. industry from the current dependence on European components. Timothy Fox, managing director at ClearView Energy Partners LLC, an energy research and consulting group, said the Dominion project is a good example of how European expertise has helped offshore wind grow in the U.S.
“They brought their expertise. They brought capital, and they partnered — usually with a domestic utility or domestic project developer — to get these initial projects online,” he said. The supply chain challenges are not nearly as much of a problem for Biden’s goals as the coming presidential election, he said.
“The bigger long-term risk is a second [Donald] Trump administration,” he said, noting that the former president and presumptive Republican nominee has promised to stall offshore wind if he takes office.
As for Dominion, its foundation installation will continue until the fall and begin again in the spring. No pile driving is allowed between November and April to protect the North Atlantic right whale, an endangered species that migrates through the area.
Next year, the company plans to move Charybdis from its construction site at a Brownsville, Texas, shipyard to the Virginia Beach project area and begin placing turbine towers. According to Larson, the biggest variables for CVOW going forward are fuel prices for the ships.
