In the wake of the Gulf oil spill atrocity, both The Colbert Report and The Huffington Post did bits on "wind spills." The jokes were especially topical because -- almost, it seemed, in coordination with the oil spill -- the Interior Department announced it was clearing the way for final approval of Cape Wind, the long-beleaguered Nantucket Sound offshore wind project. 

The Obama Interior Department is pushing as hard as it can to create opportunities for offshore energy. By approving Cape Wind, the Administration demonstrated that it is willing to put the nation's energy needs ahead of resolvable environmental and aesthetic objections. So, will the U.S.' first offshore "wind spills" be in Massachusetts waters?

Frank Maisano, an energy expert with Washington, D.C. law and lobbying firm Bracewell-Giuliani who has worked on behalf of offshore wind projects for years, says developers face three significant obstacles: (1) economics, (2) transmission and (3) technology.

Most pending offshore wind projects are along the New England and Mid-Atlantic coast for three reasons: First, the strong, consistent winds there -- which a recent University of Delaware estimated as having the potential to generate 330 gigawatts of power, enough to meet a significant proportion of the energy needs of the Atlantic coastal states from Massachusetts to North Carolina -- can be tapped on the broad, shallow continental shelf.

Second, the winds there are adjacent to huge population centers and would therefore require relatively little new transmission to deliver. And finally, power prices in those coastal urban areas are already high enough that the cost of offshore wind would be less of an obstacle.

Though the wind blows for free, the costs of the 3-to-5 megawatt turbines, the undersea transmission they require, the challenging construction necessary, and all of the siting and permitting procedures that developers have to go through make the price of the electricity they produce significantly higher than retail rates.

Electricity in the U.S. costs 9.35 cents per kilowatt hour on average according to the Department of Energy, with prices in Atlantic states like Connecticut and Massachusetts averaging in the 14 to 17 cents per kilowatt hour range. National Grid will buy Cape Ann power for 20.7 cents a kilowatt hour staring in 2013.

"We'd love to see them go forward first," said Jim Lanard, Managing Director with New Jersey-based Deepwater Wind. "But we're worried, like everybody else, that the litigation will although not officially tie up the progress that Cape Wind can make, make it very tough to raise the funding that's necessary to put down deposits on turbines, cables, and vessels, and as a result, delay the development...If our company were facing the litigation threat that Cape Wind is, we would not be able to raise the investor capital and get the debt that we need until there's a resolution."

Like Maisano, Lanard thinks one of two smaller projects to be built in state rather than federal waters will be the first in the U.S. to produce electricity from offshore wind.

"When we ask the question who's likely to be first in the water," Lanard said, "we come to two answers: either Deepwater Wind in its state waters project off of Block Island, Rhode Island of up to 8 turbines or 30 megawatts, or Fishermen's Energy's up-to-20-megawatt project in state waters off of Atlantic City, New Jersey."

"I still think Rhode Island is probably in the front of the line," Maisano agreed. "The problem in my mind that [Cape Wind and other offshore projects] face is an economic problem."

With any wind project, but especially with offshore wind projects, it's all about the financing. As both Lanard and Maisano emphasized, U.S. offshore wind holds great potential both for electricity generation and economic expansion. But it is just at its beginning in the U.S. and lacks the economies of scale that will eventually bring prices down.

There is also almost no transmission to serve offshore wind and, as Maisano emphasized, transmission "is almost as important as getting projects in the water right now." Eventually, there will be a "backbone system" offshore to which new projects can connect that will make them less expensive and allow them to start putting power on the grid and reaping the reward for doing so sooner -- but today's project developers are pioneers in every sense of the word.

Possibly the most time-consuming obstacle that offshore wind developers face is that of regulatory approvals. Lanard said it is now estimated to be a 7-to-9-year process from the initial application for a 24-square mile lease tract to the generation of electricity.

The huge amounts of money needed to see an offshore project through two full seasons of building -- the cost of turbines, massive foundations, undersea cables, leasing of ports, construction barges, cranes and the thousands of supply chain materials (from steel for support structures to copper for the electrical current) -- could be on hold for months or even years while developers work through regulatory snafus.

That is why insiders see the Rhode Island project that Lanard's Deepwater Wind is sponsoring as the likely first mover. It will be built in state waters, so it will not face federal scrutiny. Like Cape Wind, it has an above-retail rate PPA from National Grid. Lanard believes the 24.4 cents per kilowatt-hour that Deepwater will be selling power for, likely as soon as 2012, will be adequate to meet his investors' modest goals. And it will allow his company to begin the process of building bigger projects and achieving economies of scale.

Most importantly, as Maisano said, Rhode Island seems to want the project. "They've got the most active government, they've got the most targeted area. Parties on both sides are working very aggressively. They literally want it to happen there," he said. "I still am not convinced that Massachusetts wants this to happen there."

Fishermen's Energy recently placed a research buoy in New Jersey waters off Atlantic City, where perhaps 3,000 megawatts of wind power potential await development. Placing the buoy begins a two-year pursuit of the kind of weather and environmental data that will be necessary before the greenlighting of an offshore wind project can happen.

New Jersey wants offshore wind as much as Rhode Island and neither state is likely to sabotage the development of its rich offshore assets the way Massachusetts has.

Tags: cape ann, denmark, energy independence, general electric, huffington report, kilowatt hour, massachusetts, offshore wind, rhode island, siemens, stephen colbert, vestas, wind