There are over 4,000 GWs of renewable energy potential – over four times the total U.S. electricity demand – resting just a few miles from the biggest population centers in the country and little is being done to harvest it.

U.S. offshore wind has been on the verge of getting started for years while industries in Europe and China grow stronger. The U.S. industry suffered a setback last year when its flagship development, Cape Wind, stalled at the brink of beginning construction.

But some aggressive developers like Deepwater Wind are looking to kick the industry into high gear. The Rhode Island company has moved the 30 MW Block Island pilot project all the way into construction and is on track to bring it online by the end of 2016. With the continued backing of the Department of Energy and Bureau of Ocean Wind Management (BOEM), it could provide an example for other projects looking to harness the plentiful, but pricey, potential of offshore wind.

“Offshore wind is still an emerging industry but when we see the turbines in the water, it will move from an idea to a reality and it will gain momentum,” said Nancy Sopko, a manager for advocacy and federal legislative affairs at the American Wind Energy Association (AWEA), an industry group.

“The biggest thing right now is getting turbines spinning in U.S. waters and Deepwater Wind is eager and tenacious and is leading that charge at Block Island,” she said. “They installed five foundations last summer and they seem to be right on track for turbines spinning on them by the end of 2016.”

Tax credits and state of U.S. offshore wind today

Wind energy's growth onshore is expected to accelerate over the next five years as the extension of its $0.023 per kWh production tax credit (PTC) peaks before phasing out after 2022. A similar extension of a 30% investment tax credit (ITC) for offshore facilities isn't expected to have as potent an effect.

“There are not a lot of projects in the pipeline for that five year window," Sopko said. “My best guess is there will be less than a handful of projects in the years the ITC is currently available and real development in offshore wind will likely take off in the early 2020s.”

The industry’s biggest strength is its potential, she said, and recent U.S. Department of Energy (DOE) studies and Department of the Interior (DOI) show that it's there.

Under the “Smart from the Start” program that pre-identifies areas with the best development prospects, BOEM has issued leases for tracts of ocean on the nation’s outer continental shelf that offer an estimated installed capacity of at least 5,768 MW and possibly as much as 13,538 MW.

BOEM is now evaluating wind energy areas off New Jersey and North Carolina that have almost 9,000 MW more of potential capacity and is beginning to look at other coastal regions.

While no U.S. projects have been completed, there are 21 projects representing 15,650 MW of capacity in development. Thirteen of those, representing 5,939 MW, are in some degree of advanced development, according to the recently-released 2014-2015 Offshore Wind Technologies Market Report from the National Renewable Energy Laboratory (NREL).

Developers with projects totaling 3,305 MW say they will be online by 2020. DOE’s Wind Vision, a long-term look at the U.S. wind industry, forecasts deployment of 22,000 MW of offshore wind by 2030 and 86,000 MW by 2050. Future deployment, it says, will be along the Atlantic, Pacific, and Gulf of Mexico coasts and in the Great Lakes.

Meanwhile, around the world...

As the offshore wind industry has sputtered in the United States, it has gained significant traction elsewhere.

Global offshore wind set an installation record in 2015, upping its 1,069 MW performance in 2014 to at least 3,996 MW. Cumulative global capacity is now over 11,800 MW and it is on track to reach as much as 47,000 MW by 2020, according to DOE. Although the majority of this capacity is being built in Europe, the industry is becoming more geographically diverse, with projects now also under construction in Asia.

Over 65% of 2015’s new capacity, 2,467 MW, went online in Germany, according to a recent report from Navigant Research. The UK added 1,054 MW of new capacity. The Netherlands added 129 MW. China’s 2015 number is currently 97 MW but two other projects remain to be added to the statistics.

Government policy supports have grown the industry in Europe and China. Germany and the UK have strong mandated renewables financial supports like Germany’s feed-in tariffs and the UK’s Renewables Obligation Certificates. Both are, according to Navigant, “well into a transition phase to more market-oriented policies that track and fluctuate alongside broader market rates and also include competitive bidding.”

Denmark, the Netherlands, France, and Belgium are moving in the same direction and competition is driving prices down. In Denmark, Navigant reports, “the most recent competitive bid for a 400 MW project came in 32% cheaper than the project immediately preceding it, and it represents the lowest priced project in Danish waters awarded to date.”

Offshore technologies continue to advance and turbines are getting bigger. Capacities now range from 5 MW to 8 MW. Siemens has the biggest market share. Vestas, Senvion, and Adwen (an Areva-Gamesa joint venture) follow.

The market will continue to be largely limited to the UK, Germany, the Netherlands, France, Belgium, and China, Navigant forecasts. Through 2020, it will add at least 24 GW at a compound annual growth rate of 33.1% to reach a cumulative capacity of over 32 GW.

BOEM and the need for good policy

The Obama administration has been “really supportive” of offshore wind as a means to revitalize ports and the manufacturing sector and grow sustainable jobs, Sopko said. The White House sees offshore wind as a huge source of emissions-free energy available without the need for significant new transmission because it is so close to the most electricity-hungry population centers.

The DOE-funded Advanced Technology Demonstration fund pledged up to $47 million to innovative pilots proposed by Dominion Power’s VOWTAP, Fishermen’s Atlantic City Windfarm, and Principle Power’s WindFloat Pacific. It followed that with $3 million grants to the University of Maine’s Aqua Ventas I project and LEEDCo’s Icebreaker project.

But the administration’s biggest contribution came from BOEM.

“It is important to remember the Department of the Interior’s regulatory authority over wind development on the continental shelf was only granted in the 2005 Energy Policy Act and the Bush administration didn’t do much with it,” Sopko said.

The DOI’s 2010 Smart from the Start initiative, through BOEM, streamlined the regulatory process and created federal and state level task forces to identify opportunities, engage stakeholders, and de-conflict differences, she said.

Since 2009, BOEM has issued eleven leases to develop wind off the shores of Massachusetts, Delaware, Rhode Island, Virginia, Maryland, and New Jersey and “is in the planning stages for areas offshore New York, North Carolina, South Carolina, Oregon, and Hawaii,” according to Spokesperson Tracey Moriarty.

“The most significant obstacle to U.S. offshore wind development is project economics,” acknowledged Chief of the BOEM Office of Renewable Energy Programs James F. Bennett. “Though the offshore environment offers high resource potential, constructing and operating in the marine environment is much more expensive than onshore.”

“It is a new technology and it will necessarily be more costly in the beginning. That is a fact,” Sopko said.

What is needed now are more policies that create demand, certainty, and incentives, she added. The ITC is crucial. Other examples are a pending Massachusetts bill with a 2,000 MW offshore wind carve out, the Maryland 2013 Offshore Wind Energy Act’s mandate that 2.5% of state electricity come from offshore wind, and New York’s just-instituted 50% renewables by 2030 mandate.

“The major market driver globally for offshore wind energy is the demand for clean and diversified energy sources from an increasing number of governments,” Navigant reports. Such policies and the market forces they unleash “are reducing the cost of offshore wind projects to ratepayers, taxpayers, and other stakeholders and thus ensuring a sustainable offshore wind market.”

“There is a need to create conditions that allow European experience and U.S. know-how to work together to bring best technology, practices and costs to offshore wind projects in the U.S.,” noted GE Renewable Energy Offshore Wind CEO Anders Søe-Jensen.

GE, the biggest U.S. turbine manufacturer, is participating in the Block Island development.

Key to a bigger industry is stable policy that lowers risk by providing long-term certainty to investors because that will lead to innovation and to the volume that generates economies of scale, Søe-Jensen added.

Cape Wind's failure

2015 was supposed to be Cape Wind’s year.

After winning 26 legal challenges, the 468 MW project was scheduled to sink steel into Nantucket Sound. It had $1.5 billion in funding from the Bank of Tokyo Mitsubishi, Rabobank of Holland, and French investment bank Natixis, and was shopping for more.

The company also had a turbine deal with Siemens. A port of New Bedford build-out, the first in North America specifically designed for offshore wind staging and assembly, was nearing readiness. And power purchase agreements (PPAs) with National Grid and NSTAR, Massachusetts’ dominant utilities, were in place to cover 77.5% of the project’s output.

But lingering Koch-funded legal challenges imposed further delays, potential financing fell through, and the utilities terminated their PPAs, citing the project’s failure to meet contractual milestones.

“Cape Wind is an outlier because there is one really rich person who has made it his mission to destroy the project,” Sopko said, referencing billionaire industrialist William Koch, who funded many of the legal challenges over the course of more than a decade.

Jim Gordon, the Cape Wind head who has put $100 million of his own money into his 15-year fight with Koch, is still fighting.

A D.C. appeals court case, a case before the Massachusetts Supreme Judicial Court, and a third in a federal district court remain. Gordon also has to get Cape Wind’s permit renewal past an Energy Facilities Siting Board that is politically hostile despite endorsements from the Audubon Society, the Conservation Law Foundation, and the mayor of New Bedford.

The Koch-funded Alliance to Protect Nantucket Sound continues to argue offshore wind is too expensive and does not belong in the Sound. The project's financial woes are "very good news for Massachusetts ratepayers,” according to Audra Parker, the group's head.

“What happened to Cape Wind is not general to offshore wind,” Sopko insisted. “The environmental community is largely in favor of correctly-sited projects.”

Block Island and beyond

Where Cape Wind failed, Deepwater Wind hopes to succeed.

The company's 30 MW, five-turbine Block Island Wind Farm (BIWF) off Rhode Island's coast will be the first operating U.S. offshore wind project. Its 20-year PPA calls for all output to go to National Grid, one of New England’s biggest electricity suppliers, at $0.244/kWh.

Deepwater Wind closed financing in March 2015 with a $290 million debt package. Construction, which will eventually create up to 300 jobs, began in the summer of 2015, according to Navigant. Five turbine foundations and supporting infrastructure are in place. Five 6-MW, direct-drive Alstom Haliade turbines and the cable connecting Block Island to the grid will be installed this spring and summer.

The Block Island facility does not necessarily clear significant barriers for other U.S. wind farms, but verifies the U.S. has the necessary fundamentals, Navigant says. They include high demand and high-priced electricity on the eastern seaboard where there are strong offshore winds.

Important further growth requires more policy certainty like the ITC extension. It also requires policy advances to get PPAs for offshore wind from coastal utilities and an amendment to the Jones Act allowing non-U.S. vessels to operate between U.S. ports, Navigant suggests.

Dominion Virginia, the first utility to show interest in building offshore wind, won a DOE grant for a 12 MW pilot project but has not followed through.

“They said they are looking at what is cost-competitive for their ratepayers,” Sopco said. “But that is a matter of momentum.” Once projects are built, starting with Block Island, and people see the benefits, more will be built and more PPAs will be signed and costs will start coming down, she explained.

European offshore wind advocates and stakeholders have targeted a 40% cut in offshore wind’s LCOE by 2020, NREL reports. The resulting policies included competitive bidding in the UK and Denmark that produced almost unprecedentedly low power prices for offshore wind. Besides the Danish 32% price drop mentioned above, two successful UK bids were 29% to 32% below 2010 levels.

This progress shows what can be done and “should translate to U.S. projects and allow developers to offer offshore wind power at increasingly competitive prices,” NREL forecasts. The BIWF, DOE-backed pilots, European technology, and project-specific U.S. innovations “are expected to help streamline and de-risk offshore wind investment.”

State policies are emerging in response to the enormous opportunity right off the shore, Sopko said. “Few projects will come online in the next handful of years and it is hard to say which ones they will be but real development will happen by the early 2020s.”

The promise of the U.S. market was made evident when Denmark’s DONG Energy, the biggest offshore wind developer in the world, leased acreage off Massachusetts and opened an office in Boston, Sopco said.

“A company like DONG would not enter the U.S. offshore wind market if it did not see real potential,” Navigant says. “It is only a matter of time when the right confluence of policy and power demand combine to initiate major construction from the many developers vying to unlock the potential of the U.S. offshore wind market.”