Dominion Energy officials are bullish on the utility’s “decarbonization opportunity” and confident that its 2.6-GW offshore wind project will meet cost projections despite rising raw material costs.

During the company’s first-quarter earnings call Tuesday, CEO Robert Blue said the company’s evaluation of turbine designs and data from its two test turbines indicates its assumed capacity factor of 41% is too low, although he offered no specifics.

Blue said there has been “robust” response to the company’s procurement solicitations for the project but that it has seen a recent increase in raw material costs. “In the case of steel, for example, the return of pandemic-idled steelmaking capacity hasn’t yet caught up to global demand,” he said.

Nevertheless, he said, “taken as a whole, there’s no change to our confidence around the project’s expected [levelized cost of energy] range of $80 to $90/MWh.”

‘Decarbonization Opportunity’

Blue said the company expects to spend $72 billion on decarbonization through 2035, calling it “the largest, the broadest in scope, the longest in duration and the most visible regulated decarbonization opportunity among U.S. utilities.”

In addition to the estimated $1.7 billion OSW project, the company sees up to $20 billion in spending on solar generation, up to $7 billion on energy storage, up to $15 billion on electric grid transformation and up to $9 billion on gas distribution modernization and renewable natural gas.

It also expects to spend as much as $4 billion extending the lives of its nuclear fleet. Shortly before the earnings call, Blue said the Nuclear Regulatory Commission informed the company it had approved the extension of the operating licenses for the two-unit, 1.7-GW Surry Power Station for an additional 20 years, through 2053.

Over the next five years, the company plans $32 billion in capital spending, more than 80% of which it says is “decarbonization focused” and more than 70% of which is eligible for recovery via bill riders. (See related story, Virginia SCC Gives IOUs a Pass on RPS Plans — for Now.)

In response to a question from J.P. Morgan analyst Jeremy Tonet, Blue said it was too soon to determine any impact on the company from the Biden administration’s infrastructure proposal, which includes numerous decarbonization initiatives. “To decarbonize as quickly as we can, reliably and affordably makes all the sense in the world,” he said. “We’re very well positioned to do that. This is not something that’s new to us.”

Remembering Tom Farrell

The company reported it earned $1 billion ($1.23/share) in the first quarter, a rebound from the $270 million loss (‑$0.34/share) for the same period in 2020.

Operating earnings were $893 million ($1.09/share) versus $788 million ($0.92/share) a year ago. The company said the difference between GAAP and operating earnings for the quarter reflected a net benefit from its nuclear decommissioning trusts, economic hedging activities and other charges.

Blue opened the call with a tribute to his predecessor, Thomas Farrell, who died of cancer earlier this month, a day after retiring as the company’s executive chairman. Farrell was CEO from 2007 though 2020.

“Tom’s passing on April 2 was heartbreaking to those of us who loved, admired and respected him. It’s quite clear that while Tom’s list of accomplishments was long, the list of people whose lives he touched was much, much longer,” Blue said. “He could be gruff occasionally. Many of us participating on this call may have experienced that from time to time. But much more often we experienced his generosity, his loyalty, his dry sense of humor and his focus on improving our company, our community and our industry.”