The real question isn’t offshore wind’s potential.

A University of Delaware study estimated Eastern seaboard wind from Massachusetts to North Carolina to be big enough to build 330 gigawatts of installed generating capacity.

The U.S. may have, according to an NREL study, as much as 4,000 gigawatts. That would meet present U.S. electricity demand even if average capacity factor is only 25 percent -- and offshore wind’s average capacity factor is likely 40 percent.

The real question -- and it is being asked repeatedly at the American Wind Energy Association (AWEA) Offshore WindPower 2012 conference -- is how soon and how cost-competitively that potential can be developed.

Denmark built the first offshore project in 1991, and Europe now has a 4,000-plus-megawatt installed capacity, thirteen projects under construction (including the 1,000-megawatt London Array), and an estimated 150 gigawatts being planned. In 2010, Norway’s Statoil (NYSE:STO) launched its Hywind 2.3-megawatt floating turbine, and earlier this year Portugal christened a pair of two-megawatt floating turbines built by Seattle-based Principle Power.

China has 260 gigawatts of offshore capacity and wants to have 5,000 megawatts installed by 2015 and 30,000 megawatts by 2020. South Korea’s goal is to build a 2,500-megawatt installed offshore capacity by 2019. In the wake of the Fukushima disaster, Japan began making plans to ramp up its offshore capacity and recently launched a prototype floating turbine.

The U.S. has no offshore wind built and no official goal. There are about fifteen research, pilot and utility-scale projects planned or proposed, with a cumulative potential capacity of five to ten gigawatts.

Deepwater Wind may get the first turbines into Rhode Island’s seabed at its 30-megawatt Block Island Wind Farm. The first phases of the 468-megawatt Cape Wind project will not be far behind. But 500 megawatts by 2020 is a hollow achievement in light of what is possible.

Neither of those projects will have a practical levelized cost of electricity (LCOE). Only their benefits in meeting peak demand and state mandates justified state regulators’ approval of Block Island’s $0.24 per kilowatt-hour power purchase agreement (PPA) and Cape Wind’s $0.187 per kilowatt-hour PPA.  

Creating a new industry is not quick, easy or inexpensive, said Offshore Wind Development Coalition President Jim Lanard. “But do policymakers want to create a new industry, support it initially with ratepayer subsidies, and create tens to hundreds of thousands of jobs?”

It would be a gamble, Lanard admitted. If policymakers choose to support offshore wind, the price could become competitive with economies of scale, and “if it doesn’t,” Lanard said, “shut it down. But if the price comes down, we have an industry.”

On display at the AWEA conclave are emerging innovations across the sector that, when given the opportunity to scale up, are expected to bring costs down.

Turbine manufacturers are building bigger turbines because that cuts installation costs by eliminating foundation and transmission infrastructure. Siemens (NYSE:SI) just put a six-megawatt turbine with the longest blades ever used into service. Vestas (CPH:VWS) recently announced it would scrap plans for a seven-megawatt turbine and focus instead on its eight-megawatt model.

Major turbine makers like GE (NYSE:GE) in the U.S. and Goldwind (HKG:2208) in China are streamlining their machines with more efficient drivetrains and better power electronics, because lower maintenance needs reduce O&M costs.

Along the supply chain, from nacelle to interconnection, builders are taking steps to cut costs by making their materials and processes more robust, efficient and on-time. A new partnership between venerable EPC specialist Bechtel and premier European transmission and interconnection wet worker Subsea 7 (PINK:SUBCY) will, Bechtel Renewables President Jim Ivany said, leverage his company’s unparalleled ability to oversee the quality and timely delivery of Subsea’s supply chain. The partnership, Ivany added, will soon announce new offshore undertakings.

The Atlantic Wind Development (AWD)-proposed Atlantic Wind Connection backbone transmission system, funded by a Google (NASDAQ:GOOG), Marubeni Corporation (TYO:8002), Bregal Energy and Elisa System Operator partnership, will, acknowledged AWD CEO Markian Melnyk, reduce developers’ capex, estimated in Europe to be 3 to 3.5 million euros per megawatt, and shift the cost burden, estimated at 150 to 180 euros per megawatt-hour, to utilities and ratepayers. But, Melnyk noted, grid operators like PJM are also beginning to see the benefits to their ratepayers from planning the systematic integration of offshore wind.

Finally, federal agencies and research institutions are partnering to drive standard-setting and risk-reducing initiatives. The DOI is streamlining permitting, the DOE is funding pilot projects and NREL has proposed a comprehensive certification procedure.

It adds up to a more bankable industry, Melnyk said, based not on a rush to build an impressive number of megawatts in the short term, but rather to facilitate a steady installed capacity growth over the next decade. It is growth, he said, that will reinforce policymakers’ willingness to commit, as Lanard had phrased it, to “create an industry.”

Interestingly, in the conference’s first two days, GTM has yet to sit in on a session or an interview where there was no mention of floating turbines. These behemoth wonders which just two years ago seemed like science fiction are now discussed by industry engineers as the logical and foreseeable extension of offshore wind turbine development.

But will any of these innovations bring the price of power to competitiveness, much less parity? That might be the fiction still remaining in the discussion.