The headwinds that are keeping offshore wind production at bay are easing up somewhat. It’s all because the Obama administration has finished an environmental assessment that is giving de facto approval to development in some areas.

But having the administration’s blessings does not equate to building wind generation off the coasts of New Jersey, Maryland, Delaware and Virginia. While the environmental review is a milestone, bigger ones would involve getting the financing needed to go ahead, as well as to conquering some of the technical hurdles. That’s why the U.S. Department of Energy is working to remove some of the barriers to entry by funding some of the research and development.

“Offshore wind energy can reduce greenhouse gas emissions, diversify our energy supply, and stimulate economic revitalization,” says Secretary Steven Chu. “The Department of Energy is committed to working with our federal partners to provide national leadership in accelerating offshore wind energy deployment.”

Under the National Offshore Wind Strategy, the Energy Department wants to have 10,000 megawatts of offshore wind generating capacity by 2020 and 54,000 by 2030. Those scenarios include development in both federal and state offshore areas, including along Atlantic, Pacific and Gulf coasts as well as in Great Lakes and Hawaiian waters, the agency says.

In the United States, 46,919 megawatts of wind capacity exist while another 8,300 megawatts is under construction, says the American Wind Energy Association. That is coming from 38 states. While land-based wind farms are experiencing growth, those offshore have stalled; no such projects are currently in operation, although that could change.

The best known among the offshore wind proposals is that of Cape Wind, which got approval to operate in 2010 after nine years of regulatory battles. The power facility, which would operate off the coast of Massachusetts and deliver electricity to the residents of Nantucket Sound, must still resolve some legal issues.

Recently, a court upheld a power purchase agreement it had with National Grid to buy half of the power that it would generate -- a proposition that makes financing the project more feasible. If it comes to fruition, it would generate 468 megawatts. 

Deep Pockets

Google, which along with its co-investors, collectively said that they would put in $5 billion to develop an underwater transmission system in the Atlantic. If that goes through, there’s at least a decade’s worth of work to do.

Why are Google and company so confident about the approval process while the Cape Wind project has languished for years? Cape Wind, designed to offset fossil fuel usage in the area, would be located in waters where the politically powerful surround. The proposed super-grid in the Mid-Atlantic, for now, enjoys broad public support from the politicos and its would-be patrons.

That's because the Atlantic has shallow waters relative to most other potential off-shore sites, meaning the wind mills could be located far enough away so as not to be an eye-sore. At the same time, the four on-land connection points are much less hassle than the number that would be required if a 350-mile transmission system was built on land.

Still, the cost of the project is said to be about 50 percent more than if the generation was land-based. The investors, though, are factoring in potential subsidies and tax benefits as well as tougher environmental regulations dealing with carbon emissions -- calculations that have likely diminished in recent months and which may alter their decision making. Once built, meanwhile, the transmission system would get federally-regulated rates of return.

A Pike Research analysis indicates that offshore wind has high associated costs.  The price of such generation is greater than that of onshore wind, adding that in some cases it is two to three times more. NRG, for example, won’t go forth with its  wind deal off the Delaware coast until it can find dependable investment partner.

“By developing these resources in a way that’s smart from the start, the administration can give this budding industry the boost it needs to start delivering the economic, health and environmental benefits it promises,” says Kit Kennedy, counsel for the Natural Resources Defense Council.

The challenges surrounding offshore wind are enormous but if they can be met, the energy source has huge potential. To get there, costs must come down and technologies must improve, which would make it easier to attract capital. With its offshore energy plan, the Obama administration is trying to jump start the process.

EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Follow Ken on  www.twitter.com/ken_silverstein

energybizinsider@energycentral.com

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