U.S. utility giant Dominion Energy (NYSE:D) is shifting its profile, looking to get cleaner and greener. That's nothing unique; many peers are heading in the same direction. However, it recently embarked on a huge offshore wind project that investors need to watch. Here's what is going on.

Dominion Energy recently made headlines for canceling a massive pipeline project called Atlantic Coast. At the same time, it agreed to sell most of its existing pipeline business to Berkshire Hathaway. That move will materially shrink Dominion's business and result in a dividend cut. This is a big move in some ways, but not really a change in the trend for Dominion.

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For more than a decade, Dominion has been shifting toward more regulated and conservative businesses. The first material step in this process was exiting the oil drilling business. The pipeline business was still desirable at that point because it was predictable and there were expansion opportunities. However, a change in tax law in 2018 shifted the funding math on building new pipelines, and legal, regulatory, and environmental headwinds to projects have continued to increase. Since pipelines are no longer as predictable, Dominion is selling most of its midstream business to focus on its utility operations.

Once it has slimmed down, the utility expects that its growth rate will increase and that it can quickly resume dividend increases. To put some numbers on that, Dominion is projecting that growth after the business reset will be in the 6.5% range, with dividend growth (backed by a modest 65% payout ratio) coming in just slightly below that at 6% or so annually. Both are solid numbers for a utility of Dominion's size. The reason for all that growth will be that there's shifting and changing taking place in the utility space. That includes general upkeep of existing assets and spending to improve grid reliability. However, there's another piece of the spending story that's going to be a big long-term benefit as well -- clean energy.

Companies like Dominion are quickly building solar and onshore wind facilities in the United States. Regulators are generally happy to see such spending and, thus, are more likely to approve rate requests. That said, the big clean energy project to watch at Dominion is happening in the waters off Virginia. In fact, the utility recently completed the construction of a two-turbine, 12-megawatt project roughly 27 miles off the Virginia Beach coast. That's enough juice to power 3,000 homes.

It's understandable if you aren't exactly impressed. The truth is that, at around $300 million or so, this is a tiny project -- for now. The goal is for Dominion to learn by doing. That includes figuring out how the construction process plays out and what it's like to operate the turbines on an ongoing basis. Those learnings will be put to good use as Dominion builds out the full project, which is 2.6 gigawatts in size and can power 650,000 homes.

Dominion Energy Virginia Offshore Wind Project

Electric capacity

2.6 gigawatts

Cost

Roughly $8 billion

Total stages

Four -- a pilot test followed by three 800-megawatt construction phases

Current status

Pilot project construction completed

Final in service dates

Between 2024 and 2026

Information source: Dominion Energy.

At this point, Dominion expects the offshore wind project to cost around $8 billion and take until 2026 to fully complete. This is not a small investment or one that will wrap up quickly. But Dominion isn't trying to do it all at once, as the two-turbine pilot test shows. Indeed, once it is happy with this test, the real investment begins, but it will be spread over three phases. Each phase will provide roughly 800 megawatts worth of power.

Like the pilot, the goal is to learn from each of the stages so that the next phase of development can be handled more easily. It also allows the company to stop at multiple points along the way if things aren't going as smoothly as hoped. That said, these are still the very early days of the project, which won't really start in earnest until around 2023. But long-term investors need to start watching now for the updates on this big dig. In fact, at this point in time, Dominion's wind farm is the largest offshore wind project in the Americas, so this project is important for Dominion, but also for the entire U.S. utility sector.

Now that Dominion has completed the construction of the two pilot turbines, the best place for investors to get updates will likely be in quarterly conference calls. At this early stage, the updates are likely to be pretty vague and sparse, but as long as the company remains upbeat on the results it's achieving, the next big step to look for is the green light on the first of the three major construction stages. While that stage won't really start in earnest until 2022 or 2023, the go/no go decision will likely happen much sooner.

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The Largest U.S. Offshore Wind Farm Has Its First 2 Windmills - Motley Fool