Avangrid Sells Part of Kitty Hawk Offshore Wind Lease to Dominion Energy

 

Dominion Energy and Avangrid have agreed to the terms of a deal that would sell a portion of the Kitty Hawk offshore lease area to a division of Dominion for potential future development. Since even before the Virginia company began construction on its first large-scale wind farm it has expressed interest in the possibility of expanding wind energy’s contribution to meet the commonwealth’s power needs.

Under the terms announced late today, Avangrid would sell the smaller north portion of its lease, which is located about 25 miles south of Dominion’s Coastal Virginia Offshore Wind which began offshore construction about six weeks ago. Dominion will pay a total of $160 million, including $117 million for the lease acquisition, and also reimburse Avangrid a further $43 million in development costs. They are highlighting it is an all-in cost of about $3,000 per acre for the nearly 40,000-acre lease.

Avangrid received the lease for Kitty Hawk in 2017 and has divided the area into a North and South project. The company has completed surveys and in 2021 submitted a first draft of a construction and operation plan to the Bureau of Offshore Energy Management. While it is still in review, speculation on the timeline said construction could begin as early as next year and see Kitty Hawk North in operation by 2029.

The lease is approximately 27 miles from the Outer Banks of North Carolina. The total area is 122,405 acres and has the potential for approximately 3.5 GW, although the large portion is at Kitty Hawk South which Avangrid will retain. The company says the sale provides a “significant capital infusion for reinvestment,” as it continues its projects in New England and early planning for Kitty Hawk South.

"With electric demand in our Virginia territory projected to double in the next 13 years, Dominion Energy is securing access to power generation resources,” said Robert M. Blue, chair, president and chief executive officer of Dominion Energy. He says the project leverages the company’s experience with its first project Coastal Virginia Offshore Wind.

Dominion Energy uses a regulated business model approach for its offshore wind which is different from the approach taken in New England. The company believes it provides better certainty and points to the approach as helping it to keep the first project on budget and on time even as it has moved into offshore construction.

Kitty Hawk North, which will be renamed Coastal Virginia Offshore Wind South, has the potential for 800 MW. Details and costs for the project will be developed going forward. They noted they are aware of community concerns over Avangrid’s proposal to land the power in Sandbridge, Virginia, and would be working with the residents and the state on the planning.

Offshore work on the first project which is located off the Virginia Beach area began on May 22. The company reports that 25 monopiles have already been installed in the first weeks. The target is to have 70 to 100 monopolies installed before work suspends at the end of October due to whale migration patterns. The project is designed with a capacity of 2.6 GW and is expected to be in service by the end of 2026.