WASHINGTON -- A giant of coal-fired power won a $1.6 million lease to build the first wind farm off the coast of Virginia on Wednesday, a development that renewable energy advocates are cheering.

Dominion Virginia Power had the winning bid on 112,800 acres of land 27 miles off Virginia's coast. Bidding on the plot went for six rounds, escalating from a starting offer of just $225,600. Dominion's final bid topped that of Charlottesville, Va.-based Apex Clean Energy.

"I'm very pleased with the sale and the vigor of the competition," said Tommy Beaudreau, director of the Bureau of Ocean Energy Management, in a call with reporters following the sale.

The bureau, a division of the Department of the Interior, estimates that the lease area can produce up to 2,000 megawatts of wind power, enough to provide electricity for 700,000 homes.

Dominion is currently developing two six-megawatt pilot turbines through a grant from the Department of Energy at a site adjacent to the lease. The company expects to have the test turbines up and running by 2017 in what will be its first wind power project. Dominion estimates it will be 10 years before it puts any turbines on the plot it won Wednesday.

For the Bureau of Ocean Energy Management, this is the second offshore wind lease auction. The first, held in July, was for 165,000 acres off the coast of Massachusetts and Rhode Island. Deepwater Wind, an offshore-focused company, had the winning bid.

The lease auctions are the first step in the construction of offshore wind farms. So far, there are no utility-scale wind farms in the outer continental shelf of the U.S. But the Department of Energy's National Renewable Energy Laboratory has estimated that up to 54 gigawatts could come from offshore wind by 2030, enough to power 18 million homes. Beaudreau said that the Bureau of Ocean Energy Management expects to hold lease auctions for areas off the coasts of Maryland, Massachusetts and New Jersey in the coming year.

Dominion Virginia Power and its parent company, Dominion Resources, are best known as major users of coal for electricity generation, making the venture into wind power significant. "It's just too big of a resource," company spokesman Jim Norvelle told The Huffington Post. "We've got to look at this."

The project, Norvelle said, would aim to bring down the cost of wind power. "Right now, it is expensive to do," he said. "That's why we're involved. We think it could be beneficial to customers if the price is right."

By comparison, Dominion recently built a 600-megawatt coal-fired power plant in Wise County, Va. If the company builds a wind farm that exploits the full identified potential of the plot in Wednesday's auction, it would be enough to replace more than three such coal-fired power plants.

Offshore wind remains a "huge untapped resource," said Rob Sargent, director of the clean energy program at the environmental group Environment America. "The interest we're seeing now from even companies like Dominion is a very good sign."

"We have a heavy reliance on coal-fired power in the Southeast," said David Carr, general counsel for the Southern Environmental Law Center. "It would be great to get some of these installations up and running."

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