Dominion Energy's CVOW Project and Grid Reliability Risks: Navigating Regulatory Uncertainty in Renewable Energy Infrastructure

Dominion Energy's Coastal Virginia Offshore Wind (CVOW) project, a flagship initiative in the U.S. offshore wind sector, has become a focal point for assessing the strategic and financial risks posed by regulatory uncertainty in renewable energy infrastructure. With a projected capacity of 2,600 megawatts (MW) and a $10.7 billion price tag, CVOW was poised to deliver clean energy by late 2025, supporting Virginia's grid reliability and clean energy goals. However, a 90-day suspension of construction ordered by the U.S. Department of Interior in December 2025-citing national security concerns raised by the Department of Defense-has thrown the project into disarray, exposing vulnerabilities in the regulatory framework governing large-scale renewables according to Dominion Energy. This pause not only threatens Dominion's financial stability but also underscores broader challenges for the renewable energy sector in an era of shifting policy priorities.

Regulatory Uncertainty and Immediate Financial Impacts

The suspension of CVOW has triggered immediate market reactions, with Dominion Energy's stock plummeting 4% to 8.4% in the wake of the announcement. Investors are now grappling with the risk of cost overruns, stranded capital, and potential delays in revenue generation. Dominion has warned of grid risks after the Interior Department's order. The project's reliance on the Inflation Reduction Act (IRA) tax credits-critical to offsetting its high upfront costs-adds another layer of complexity, as potential changes to federal incentives could further erode its financial viability.

This scenario reflects a broader trend: regulatory uncertainty is increasingly destabilizing renewable energy projects. According to a report by Deloitte, U.S. renewable investments fell by 36% in 2025 due to policies under the Trump administration, including the "One Big Beautiful Bill Act," which accelerated the phaseout of tax credits and imposed stricter "Foreign Entity of Concern" (FEOC) restrictions according to Deloitte's analysis. These measures have created a climate of unpredictability, deterring capital flows into projects that require long-term planning and stable policy environments.

Strategic Implications for Grid Reliability

Dominion has emphasized that CVOW is essential for maintaining grid reliability, particularly for military installations and Virginia's burgeoning data center industry, which demands a stable and low-carbon energy supply according to Dominion Energy. The project's delay risks exacerbating existing grid vulnerabilities, especially as aging infrastructure and delayed interconnection requests create bottlenecks in the U.S. energy system. With electricity demand projected to surge in the coming years, the absence of CVOW's 2,600 MW could strain Virginia's grid, increasing the likelihood of outages and higher costs for consumers.

This tension between regulatory caution and grid resilience is not unique to Dominion. The International Energy Agency (IEA) noted in its Renewables 2025 report that global offshore wind capacity expansion is expected to grow, but project cancellations and undersubscribed auctions in Europe have reduced overall forecasts by 24% according to the IEA report. The CVOW case highlights how national security concerns-while valid-can clash with the urgent need to decarbonize energy systems and modernize grids.

Industry-Wide Trends and Investor Sentiment

The CVOW saga is emblematic of a sector-wide reckoning. While global clean energy investments reached $2 trillion in 2025, the U.S. has lagged behind China and the EU, where policy frameworks are more aligned with long-term decarbonization goals according to industry analysis. In the U.S., the phaseout of tax credits and FEOC restrictions have created a "double whammy" for developers, compounding the challenges of supply chain disruptions and grid constraints according to Deloitte's analysis. For investors, the lesson is clear: renewable energy projects are increasingly exposed to policy-driven risks that can override technical and financial readiness.

Dominion's response to the CVOW suspension-highlighting the project's bipartisan support and extensive security reviews-signals a strategic pivot to reassure stakeholders according to Dominion Energy. However, the company's ability to mitigate stranded costs and maintain investor confidence will depend on its capacity to navigate a regulatory landscape that remains highly politicized.

Conclusion: A Call for Policy Clarity

The CVOW project's regulatory hurdles underscore a critical need for policy clarity in the renewable energy sector. While national security concerns must be addressed, the current approach risks undermining the very grid reliability it seeks to protect. For investors, the key takeaway is that regulatory uncertainty is now a dominant risk factor, necessitating a reevaluation of project timelines, capital allocations, and diversification strategies. As the U.S. grapples with its energy transition, the CVOW case serves as a cautionary tale: without stable, forward-looking policies, the promise of renewable energy infrastructure may remain unfulfilled.