The future of U.S. energy is offshore – and we're not talking oil. The government is doling out massive leases for cheap offshore wind projects, and Dominion (D 1.55%) grabbed its own piece of the pie earlier this week. With a new player in the mix, let's see what offshore wind has in store.

Offshore wind 101
Offshore wind made its debut off the coast of Denmark in 1991 and has since spread worldwide. Most projects are located in shallow waters off the coast of Europe, but the U.S. is eyeing offshore wind as a potential player in the search for greener domestic energy sources.

Source: BOEM.gov 

With 53% of our population on coastlines, offshore wind could bring major power to the people . Offshore offers stronger and more consistent winds , and a 2012 report estimates offshore capacity at 4,223,000 MW – that's four times our total current generation .

Where wind stands now
To say offshore wind is in its infancy would be an understatement. The U.S. has yet to complete a single offshore wind project, and worldwide there are just 50 farms totaling 4,450 MW of capacity . But that same amount again is under construction, and over 30,000 MW have been given regulatory go-aheads around the globe . With the right support, infant industries can grow fast.

In the U.S., first place will likely go to privately held Cape Wind Associates. The company plans to start construction later this year, plopping 130 turbines totaling 468 MW of capacity off the Massachusetts coast . According to Cape Wind, the project should be fully operational by 2015 .

Dominion's purchase this past week isn't a game changer, but it does set the power company up for potential projects. The $1.6 million lease is a drop in the bucket for an estimated 2,000 MW of capacity 27 miles off the coast of Virginia . With a $4 million matching grant to push R&D ahead, Dominion expects to install its first turbine in 10 years. While that might seem like a long time to wait, Dominion's late entry into the offshore wind world gives it more staying power than NRG Energy (NRG -0.02%) seems to have sustained.

Treading in murky water
In November 2012, BOEM leased 96,000 acres off the coast of Delaware to Bluewater Wind Delaware LLC, a subsidiary of NRG Energy . A lease is far from a fully franked wind farm, and the future of this project remains unclear. Despite a regulatory process dating back to 2009 , NRG's website states that the "active development of its offshore wind options" has been on hold since January 2012 , and a December 2011 release put wind energy on hold as federal loan guarantees disappeared . NRG had also expected wind production tax credits to get the ax in 2012 , but they've been extended through at least 2013 .

Diversity while you wait
With no one sure when and where offshore wind will permanently pop up, an investment in turbine manufacturer General Electric (GE -0.68%) may be the smartest move today. While the company is far from a pure play on offshore wind, its Power & Water division (which includes wind) accounted for 19 % of 2012 revenue. Wind sales even got a specific shout-out in the company's latest annual report as sales increased 10% last year . The company already has a 4.1 MW turbine on the market "specifically designed for the offshore environment" with lower operating costs and reliable slow speed components .

Source: General Electric, Offshore Model 

Is the answer blowing in the wind?
Offshore wind power may be a long way off – but its potential is here today, and prices are dirt cheap. With a lease in the bag, Dominion's long-term vision could pay off in the years to come. The speed and scale at which offshore wind becomes viable will depend largely on government loans and tax credits. But if our nation takes its search for a cleaner, more independent energy source seriously, offshore wind should continue to see support in the years to come.