RD91 - Virginia Offshore Wind Development Authority Annual Report – November 1, 2022

Executive Summary:

The Authority continues to work with and support the efforts by the Virginia Department of Energy (Virginia Energy), the Federal Bureau of Ocean Energy Management (BOEM), Dominion Energy, Avangrid Renewables, and other stakeholders to help accelerate offshore wind development projects in Virginia, address environmental and financial issues, and create port and supply chain economic opportunities.

The past year brought significant milestones to enhance Virginia’s potential as the location of choice for investment in this flourishing industry:

• CVOW Project:

Dominion Energy submitted its petition to the State Corporation Commission (SCC) on November 5, 2021 for the CVOW Project, which consists of 176 14.7 MW Wind Turbine Generators (“WTGs") located in the Lease Area, as well as related Offshore wind energy power export facilities that will transport the generated electricity onshore to the cable landing location in Virginia Beach. The project as proposed would have a combined nominal capacity of 2,587 MW.

On October 28, 2022, Dominion Energy, the Office of the Attorney General, Walmart, the Sierra Club, and Appalachian Voices agreed to a stipulation that sets up cost-sharing responsibilities between Dominion's ratepayers and shareholders in the event of cost-overruns and provides a mechanism for evaluating operational performance and determining appropriate cost-allocation in the event of under-performance. The matter is currently pending before the Commission.

The SCC approved the CVOW project on August 5, 2022. Dominion Energy objected to the inclusion of a performance guarantee and the case was opened for reconsideration. The project as approved is expected to have a capital cost of $9.8 billion and will likely be the largest capital investment and single largest project in the history of Dominion Energy Virginia. For residential customers over the projected 35-year lifetime of the project, Rider OSW is projected to result in an average monthly bill increase of $4.72 and a peak monthly bill increase of $14.22 in 2027.

• Virginia Energy Plan:

Governor Youngkin unveiled the quadrennial 2023 Virginia Energy Plan (VEP) on October 3, 2022. The VEP cites Virginia's leadership in offshore wind and supports the development of wind facilities off the Commonwealth's coastline. The plan also encourages Virginia to develop technologies and generating resources that could be complementary to offshore wind, such as energy storage and hydrogen facilities.

• Inflation Reduction Act:

The Inflation Reduction Act (IRA) was signed into law on August 16, 2022. It contains several provisions designed to facilitate offshore wind development in the US. The IRA appropriates $100 million for convening stakeholders and conducting analyses related to interregional transmission development and development of transmission for offshore wind energy. The energy Investment Tax Credit (ITC) provision provides a tax credit for offshore wind projects that begin construction before January 1, 2026. The base ITC is 6% but can increase to 30% for facilities that meet certain wage and workforce development requirements. Projects meeting certain domestic content requirements could be eligible.

• Virginia Port Authority:

On January 26, 2022, it was announced that the Virginia Port Authority will receive a $20 million grant from the Department of Transportation for improvements upgrading Portsmouth Marine Terminal into a staging area to support the CVOW Project. The funds came from the Department of Transportation’s Port Infrastructure Development Program, a competitive discretionary grant program run by the Maritime Administration.

• Letters of Comment:

In June, in response to the BOEM Central Atlantic Call for Information and Nominations, Governor Youngkin’s Office, VOWDA, and Virginia Energy submitted letters of comment in response to the BOEM Central Atlantic Call for Information and Nominations.

Based on activities and accomplishments in 2021-2022, the Authority makes the following recommendations for 2023 to further advance offshore wind development and related supply chain activities in Virginia. The recommendations are ranked in order of priority.

RECOMMENDATION 1: Continue to support the current CVOW Commercial and Kitty Hawk projects, and other future projects, through

• Holding public meetings

• Submitting comments on BOEM documents and reports

• Facilitating resolution of potential use conflicts with all stakeholders, and

• Working towards meeting the offshore wind goals of the Clean Economy Act.

RECOMMENDATION 2: Continue to work with all stakeholders to create a regional supply chain for the CVOW Commercial, Kitty Hawk Offshore, and future offshore wind projects. Collaborate with stakeholders including Dominion Energy, Avangrid Renewables, other East Coast developers, Siemens Gamesa, Virginia Economic Development Partnership, universities, the Virginia Port Authority, the Virginia Maritime Association, Virginia, and European manufacturers, and others to promote Virginia companies and Virginia job growth as contributors to an enhanced supply chain for offshore wind.

RECOMMENDATION 3: Actively solicit research and development opportunities and activities to reduce the cost and risk of developing offshore wind resources and the supply chain, including leveraging the CVOW project and other uses within the Virginia Department of Energy’s Offshore Wind Research Leases in conformance with existing agreements. Work with Virginia colleges and research universities and create a platform to promote the benefits of using other areas adjacent to the Research Lease for important wind research, e.g., impacts from hurricanes, and potential impacts on marine life and commercial fishing.

RECOMMENDATION 4: Continue to work to identify possible power offtakers in the Commonwealth and elsewhere, such as utilities, military installations, large data companies with clean energy commitments, and other major corporations.

RECOMMENDATION 5: Recognize and continue to support the tri-state SMART-POWER MOU between VA, NC, and MD to support workforce development and job creation in the mid-Atlantic region, bring clean energy to the tri-state electric grid, and bring positive benefits to disadvantaged coastal communities.

RECOMMENDATION 6: Promote the continued refinement and deconfliction of BOEM’s Central Atlantic Lease Areas off the East Coast in consultation with the Department of the Interior and all interested Virginia stakeholders.

As required by § 45.2-1808 of the Code of Virginia, the Authority submits this tenth annual report to the Governor and the Chairpersons of the House Appropriations Committee, the Senate Finance Committee and the House and Senate Commerce and Labor Committees.