Tariffs Threaten to Turbulize Dominion Energy’s Offshore Wind Ambitions

Dominion Energy’s $10.8 billion Coastal Virginia Offshore Wind (CVOW) project, a cornerstone of its renewable energy strategy, faces a significant headwind: tariffs. The company estimates that U.S. trade policies could add up to $500 million to the project’s cost by its 2026 completion date, with Dominion’s share alone reaching $130 million due to a 50-50 cost-sharing agreement with partner Stonepeak Infrastructure Partners. This tariff-driven uncertainty underscores the challenges renewable energy projects face in a politically charged trade environment, even as they strive to meet climate goals.

The Tariff Tide Rises

The tariffs in question—applied to components like turbine blades, nacelles, and transition pieces—have already contributed to a $120 million cost increase through Q1 2025. The total $500 million estimate reflects cumulative tariffs if current policies persist. While Dominion has set aside a $222 million contingency fund (6% of remaining costs), further escalation could strain this buffer.

The tariffs are layered atop broader grid modernization costs. Dominion’s recent filings reveal a 7% increase in generation-related fees and a 12% rise in transmission tariffs to fund grid upgrades. A 5% surcharge for offshore substations directly impacts CVOW’s Phase 1 development, which relies on such infrastructure. These adjustments, tied to Dominion’s $2.1 billion 10-year grid investment plan, aim to ensure reliable grid integration of renewable energy.

Navigating Regulatory Crosscurrents

CVOW’s progress remains intact for now, with 55% of the project complete, including 78 of 176 turbine foundations and an offshore substation. However, Dominion’s two other offshore wind leases—CVOW-South and an adjacent 176,505-acre site—are stalled. Their permitting processes, delayed by President Trump’s freeze on new federal leases, won’t likely begin until 2026, pushing development into the 2030s. This regulatory limbo has even stalled LS GreenLink’s $681 million submarine cable plant in Chesapeake, which awaits federal tax credit clarity.

The political landscape looms large. Virginia’s 2020 Clean Economy Act, mandating 100% renewable energy by 2045, provides a counterweight to federal uncertainty. Dominion emphasizes that bipartisan support and state mandates anchor CVOW’s viability. Still, unresolved policies on pass-through costs for federal permitting delays introduce further risk.

Cost Competitiveness Amid the Storm

Despite the tariffs, Dominion asserts CVOW’s levelized cost of energy (LCOE) remains competitive at $62 per megawatt-hour—on par with solar, batteries, and natural gas. The project’s 2,000 jobs and $2 billion in local economic activity also bolster its case. For customers, the tariff impact translates to a mere $0.04 monthly bill increase over the project’s lifetime—a fraction of the potential savings from reduced fossil fuel reliance.

Yet, Dominion’s self-developed approach to offshore wind, unlike competitive-bidding models in other states, raises regulatory scrutiny. Critics argue it lacks safeguards against overcharging, a concern as tariffs and costs rise.

Conclusion: Anchored in Progress, Adrift in Uncertainty

Dominion’s CVOW project exemplifies the paradox of renewable energy: it is both economically viable and politically vulnerable. With 55% completion and a cost-competitive LCOE, the project is on track to deliver clean energy at a reasonable price. However, tariffs and regulatory uncertainty—particularly for future projects—threaten to erode its promise.

The $222 million contingency fund and bipartisan state support provide a safety net, but Dominion’s fate hinges on federal policy stability. If tariffs ease and the permitting freeze lifts, the $500 million tariff cost could fade into history. If not, projects beyond CVOW may remain stranded—delaying the U.S.’s offshore wind ambitions and leaving investors in choppy waters.

For now, Dominion’s focus on CVOW’s 2026 deadline offers a beacon of progress. Yet, as tariffs and trade wars reshape the energy landscape, the real test lies in whether policymakers can provide the calm seas needed for offshore wind to thrive.