Tariffs Drive Offshore Wind Project Costs to $11.2 Billion

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PORTSMOUTH, Va. (WAVY) — The ambitious Coastal Virginia Offshore Wind project, poised to be the largest of its kind in the United States, is currently two-thirds complete. However, Dominion Energy, the project’s developer, is grappling with challenges that threaten its commitment to delivering the project both on time and within budget. These challenges primarily stem from escalating tariffs and complications with their newly acquired ship.

During an earnings call with investors on Halloween, Dominion Energy’s Chairman, President, and CEO, Bob Blue, shed light on the hurdles the project is facing. He explained that the imposition of steel tariffs has led to a significant increase in the overall cost of the wind farm. Originally budgeted at a lower amount, the project’s cost has now surged to $11.9 billion, representing a more than 21% rise from its initial projections.

Further complicating matters, the timely completion of the wind farm is under threat due to delays with the Charybdis, a $715 million turbine installation vessel. Blue expressed concerns that the vessel is still not ready to begin operations, casting doubt on the timeline for bringing this new power source online.

Despite these setbacks, Blue remains optimistic that the wind farm, which aims to generate 2.6 gigawatts of energy, will begin contributing to the grid by late next year. Nevertheless, the challenges have left him feeling frustrated as the company navigates these unforeseen obstacles.

Blue remains hopeful the 2.6 gigawatts of energy the farm is to produce will be flowing the grid by late next year. But he is frustrated.

“I’m extremely disappointed that Charybdis has again not met expectations,” Blue told investors. “I recognize the importance of executing consistently against any commitment, and we failed to deliver regarding Charybdis.”

The mammoth ship, built by Seatrium AmFELS of Brownsville, Texas, arrived to the Portsmouth Marine Terminal in September.

It is the first Jones Act-compliant wind turbine installation vessel, meaning it was built in America, flagged in America, crewed by Americans and owned by an American-based company. The Jones Act, among other things, makes it so only U.S.-flagged vessels can transport merchandise between U.S. points.

While the Belgium-based heavy-lift vessel Orion has been able to legally place the 176 25-story tall cylindrical bases into the ocean floor, Charybdis will need to carry and install the turbines.

While all major systems are operating well, Blue said there are still a “variety of quality assurance level items” that need to be addressed. He did not go into specifics.

“It’s become clear that while the ship’s design and construction methods are consistent with global best practices, we didn’t properly account in our timing estimate for the risk inherent in being the first Jones Act-compliant wind turbine installation vessel to be built and regulated in the United States,” Blue said.

He is hopeful the issues can be fixed this month. The goal is for project to deliver its first power to the grid by this spring. When complete, the 113,000-acre farm is estimated to produce 2.6 gigawatts of energy, enough to power up to 660,000 homes and avoid the carbon emissions equivalent to the removal of one million cars off the road each year.

Under an agreement struck with Attorney General Jason Miyares, ratepayers will not be on the hook for all the costs overruns.

Instead, Dominion Energy, as well as Stonepeak, their alternative investment firm financier, will also be on the hook for 50%.

The current charge to the average ratepayer for the Coastal Virginia Offshore Wind project remains between $11 to $12 per month, according to a spokesperson.