The U.S. wind industry — launched in California in the ’80s under the leadership of former governor Jerry Brown — has become a major player in global markets with traditional onshore power generation applications, leading the world in terms of accumulative wind capacity for the last two years. Yet efforts to move offshore, where wind resources are far superior but logistics are more challenging, have been hampered by a lack of regulatory support, particularly at the federal level of governance.

The American Wind Energy Association (AWEA) sponsored an offshore wind power conference in early October in Atlantic City, New Jersey. It started off with a bang: U.S. Department of the Interior Secretary Ken Salazar signed a 28-year lease for the first off-shore wind project in the U.S., to be located off the coast of Cape Cod, Massachusetts. The Cape Wind project, which will grow to 468 megawatts (MW) when completed, took 8 years to gain final project approvals.

In a passionate speech, Salazar pointed out that taking eight years to permit an offshore wind project was unacceptable. He promised that by the end of 2010, the federal government hopes “to identify places where offshore wind makes sense.” He suggested that this approach — which has been utilized by European countries such as Denmark — could help reduce the length of future permitting battles as environmental reviews could be expedited up-front, “so developer proposals will have a better chance.”

Looking at a map of the U.S., the best offshore wind resource in the U.S. is the Atlantic Coast from Georgia to Maine, with 1,256 gigawatts (GW) of potential development, with the best resources in the Northeast. Though the West Coast has 930 GW of potential, the steep drop-off renders it impossible to secure foundations for offshore wind turbines, which may reach in 10 MW a piece in scale! However, trends in offshore wind deployments are to go farther from shore, and in deeper and deeper water. Floating foundation structures tethered to the ocean’s floor are under development that may allow California, Oregon and Washington to ultimately tap a significant new source of renewable energy.

Even further down the road, it might be possible to integrate wave energy resources into these offshore wind networks. Pacific Gas & Electric is conducting research on wave devices just off the Coast of Humboldt County, and one of the first wave pilot projects was completed off Oregon.

Despite the hype and headlines, there was also some sobering news at the AWEA conference. The National Renewable Energy Laboratory (NREL) projects that if you include the current PTC and other available federal incentives, the cost for offshore wind is still over 22 cents/kWh. An estimate from Europe was even higher – 26 cents/kWh.

Given the high costs of offshore wind, the rationale for policy support is increasingly focused on economic development. One study by Siemens showed that offshore wind provides 22 jobs per MW in Europe, which compares to approximately 7 jobs per MW for onshore wind there. Jobs in the U.S. are much lower, according to the study, with just 2 jobs per MW for onshore wind, the key difference being Europe’s market features 90% local content, while the U.S. is closer to 50%. Rather than manufacturing being the key to maximizing jobs on land-based wind projects, it is ongoing maintenance that provides 70% of employment benefits for offshore wind over the long term.

The other big news as far as offshore wind is concerned is that Google is investing heavily in a $5 billion transmission “backbone” off the Atlantic Coast to help bolster this emerging market. The transmission line, which is expected to be constructed 20 miles offshore and stretch from Virginia up to New Jersey, could be up and ready for business as early as 20156. Other partners include Good Energies, an investment firm specializing in renewables, and Marubeni, a Japanese trading firm.

This is not Goggle’s first foray into wind. This past May, the firm raised its profile on green energy when it sank almost $40 million into two North Dakota wind farms. The wind farms are being developed by NexEraEnergy, the subsidiary of Florida, Power & Light that owns and operates the largest fleet of wind farms in the U.S.

A transmission “backbone” off the Atlantic Coast would send a clear signal to the rest of the world that the U.S. is serious about offshore wind. The prime advantage of the backbone approach is that transmission infrastructure is cheaper than storage. Since the wind blowing off the Atlantic Coast in the Northeast is well beyond energy demand, and prevailing patterns move parallel to the coast, building a transmission backbone that hugs the coastline is an infrastructure project that could really be a game changer. This approach allows premium wind resources to complement production from less robust sites, smoothing our fluctuations, and thereby “firm up” this notoriously variable renewable resource.

The U.S. Department of Energy estimates that 54 GW of offshore wind could be included in the 300 GW required to meet 20% of the U.S. electricity needs in 2030.

Europe is still way out in front of the U.S. in this clean energy sector. At present, 17 offshore wind projects are under actual construction in Europe totaling more than 3.5 GW in potential capacity. The projected growth rate for 2010 is 75% when compared to 2009, with 1 GW expected to come online by the end of the year. Though the U.K. is now by far and away the market leader, Germany – in spite of its very limited coastline – may soon move into second place.

To get a sense of scale of this opportunity consider that one off-shore wind project proposed in the U.K. would total 9 GW alone, and would represent the fifth largest infrastructure project in the world. All told, 5 GW of offshore wind are at various stages of development in the UK with a goal of 33 GW of offshore wind development by 2020, an investment of $150 billion.

Peter Asmus has been covering the wind power industry for two decades. He is author of Reaping the Wind (Island Press, 2001). He is currently a senior analyst with Pike Research: www.pikeresearch.com.