Deepwater Wind announced today that it is doubling the proposed size of its larger offshore wind farm to 200 turbines. The expanded project – which is different from Deepwater’s small pilot wind farm planned off Block Island – could generate up to 1,000 megawatts of electricity about 18 miles off Rhode Island’s coast. The Providence Journal’s Alex Kuffner offered a thorough rundown of the latest iteration in today’s paper, and I recommend his article.

This morning I called Matt Kaplan, an associate director at the Cambridge consultancy IHS Emerging Energy Research who covers the North American wind energy industry. I asked him for his take on Deepwater’s announcement, what challenges the company faces in moving forward, and how this fits into the broader offshore wind picture here in New England (think Cape Wind). Here’s a transcript of our conversation, lightly edited for clarity.

What’s your take on Deepwater Wind’s big announcement today?

The project itself is of a very large scale – 1,000 megawatts would put it up there as one of the largest proposed offshore wind projects in the U.S. So it’s a very ambitious and aggressive announcement, especially in light of some of the challenges that offshore wind has faced in the past couple of years, and that includes the permitting process, which has traditionally been a challenge, as well as making project economics work.

When you look at what Deepwater is proposing – the technology, the 2014-2015 timeline – does it sound feasible to you?

Well, I think there’s a couple pieces to this. There’s the permitting, there’s the economics, there’s the technology, and as you said, there’s the timeline. Those are the key factors.

From the permitting angle, we’ve seen the recent announcement from the federal government for the most part that’s been aimed at really making this process a lot smoother and a lot faster. One of the reasons that Deepwater cited for proposing such a large-scale project is that they saw this new permitting policy as being very favorable. But still, it’s an untested process – it looks very nice on paper but no one has moved through this process yet. Even Cape Wind went through a modified permitting process on its own because it was proposed before any offshore permitting policy existed.

You mention Cape Wind, which is set to be built in Nantucket Sound sometime in the next few years. Is there any problem with having both Cape Wind and Deepwater’s project so close together?

One of the challenges in New England is that there is a significant amount of state-mandated renewable-energy portfolio standard demand, so there’s a substantial amount of renewables demand. But in most cases, states have limited domestically-available onshore renewable resources. For instance, there’s not a lot of land in Rhode Island to build large, utility-scale wind projects. The same goes for Massachusetts and some other states as well. So that’s where offshore wind could potentially make sense.

But one of the problems that we’ve seen so far is the cost of these projects, and that’s been a real challenge for Cape Wind, for Deepwater Wind, for Bluewater Wind, for every offshore wind project that’s really gotten to the point yet where it’s talking about cost and economics, that’s been a key challenge.

Speaking of economics, back when you and I started talking about Deepwater Wind’s Rhode Island project in the fall of 2008 it looked like Congress was likely to approve some sort of policy like climate change that would incentivize alternative energy. Two years later, those proposals appear to be dead. Can projects like Deepwater’s work without a change in federal policy?

From a general wind perspective, we do have unprecedented federal policy support right now in the form of government grants, the production tax credit, the investment tax credit. The issue is that those expire at the end of 2012 and it’s uncertain exactly what scheme will be used to move forward with incentivizing wind, if any.

But maybe the larger challenge with wind is the demand-for-renewable landscape. There has been some discussion [federally] of passing a renewable portfolio standard – to require that a certain percentage of the national [electricity] generation mix come from renewables – but so far we haven’t seen any real tangible movement on that, which signals that that’s not going to pass anytime soon. There have been discussions of maybe passing a clean energy standard to support renewables but also clean-generation technologies. But there’s a lot of demand uncertainty out there now, and that’s one of the greatest challenges for the wind industry as a whole – trying to figure out what the demand is going to be in the future for these technologies.

But I would say along the East Coast, for offshore wind more specifically, there’s a clear challenge in that there are several offshore wind projects that are potentially competing in a lot of these states. If you look at this Deepwater announcement, one of the pieces was a large transmission line – I believe it was running from Massachusetts to New York. Well, if you look at the states along that line, Massachusetts has offshore wind projects proposed, Rhode Island has offshore wind projects proposed, New York has offshore wind projects proposed.

So the question is, with the economics being a challenge on those projects, are states going to be willing to buy power from out of state even if it’s offshore? Because the trend so far has been really promoting jobs and local economic benefits within state markets and rationalizing that as a reason to pay a premium for these projects. But if you’re importing this power from out of state, that might make that a little more of a questionable argument for promoting these projects.

So bottom line, do you expect a lot of these offshore wind projects are going to become reality, and in five to 10 years we’ll look out and see turbines spinning over the ocean?

Well, I think it’s pretty clear that you’ll see more than we have today –

Which is none, right?

[Laughs.] Which is none. But I think it’s going to be difficult to move forward at the pace a lot of companies would like to move forward at, and that’s simply because the economics, I think, is a real challenge for these [offshore wind] projects, especially compared to onshore wind and other renewables which can be more cost competitive. So I think that’s the real challenge moving forward.

But there is the demand created by these renewable-portfolio standards, and these states don’t have a lot of options if they want to procure renewables domestically. It just comes down to, what is the price that they’re willing to pay in order for them to get domestic renewable resources? What we’ve seen so far is surprise when these offshore wind projects come to these utilities or utility boards and present the cost of the projects because they’re much, much higher than what utilities and customers are used to paying for power.