As U.S. west coast states go, Oregon isn’t exactly know for its gnarly waves. Unless, that is, you’re in the wave energy business, in which case action off the Oregon coast is as tantalizing as Malibu Beach swells are for California surfers.

Recently, Oregon coastal waters have attracted the interest of some of the world’s biggest wave power companies, including New Jersey-based Ocean Power Technologies and Aquamarine Power, based in Scotland.

In 2010, Ocean Power Technologies received nearly $6 million in U.S. Department of Energy funding to scale up its PowerBuoy technology and begin building a utility scale wave energy project off the Oregon coast large enough to provide power for around 400 homes. The Oregon Wave Energy Trust (OWET), a state-funded non-profit tasked with supporting the development of wave power in Oregon, recently awarded Aquamarine Power a $100,000 matching grant to deploy several Acoustic Doppler Current Profilers–devices used to measure wave energy potential–to assess Oregon coastal waters.

Oregon is not alone among U.S. states in wooing wave power companies and exploring the opportunity to help build a potentially lucrative industry; California, Washington, Maryland, and Massachusetts also have a toe in the water. But so far Oregon has emerged as the U.S. leader.

So what makes Oregon such a hot destination for wave power entrepreneurs?

“It has to do with the fact that prevailing winds go from west to east, meaning that the entire west coast gets lots of powerful waves rolling up on shore,” says Jason Busch, executive director of OWET. “But it’s not just about the waves; Oregon also has other resources you need to deploy ocean energy, like a robust grid infrastructure and the capacity to absorb nearly 500 megawatts of new power generation without any major upgrades to the grid.”

Aquamarine CEO Martin McAdams agrees, adding that Oregon has also demonstrated the desire to become a center of the burgeoning wave energy business. “Oregon looked at Denmark [a global leader in wind power technology] and its success and decided to capitalize on its tremendous wave resources by making moves to attract wave power companies.”

Indeed, during the past several years Oregon has made a significant push to become America’s west coast epicenter of the nascent wave power industry. Besides OWET, Oregon is also home to the Northwest National Marine Renewable Energy Center (a test center for wave and tidal power technologies co-hosted by Oregon State University and the University of Washington, and funded in part by OWET and the DOE), and the O.H. Hinsdale Wave Research Laboratory at OSU’s top-ranked Coastal and Ocean Engineering program.

This past August, Oregon governor John Kitzhaber designated the first week of the month as “Oregon Wave Week,” in support of OWET’s sixth annual Ocean Renewable Energy Conference. And for the past three years the Oregon Department of Land Conservation and Development has been working on a “Territorial Sea Plan” to guide the development of ocean-based power generation.

“The opportunity exists for Oregon to establish itself as the leader in wave energy and become the national center for wave energy research and commercial demonstration,” reads a mission statement on the Oregon.gov website. Embracing the opportunity, the statement adds, will result in copious benefits, including an economic boost for coastal economies, opportunities for the state’s robust but underutilized metal fabrication sector, and a shot in the arm for Oregon’s renewable energy industry.

But reaping the benefits of becoming a hotbed of wave energy development is hardly assured, in Oregon or elsewhere, primarily because, at the moment, whether or not wave energy will make the leap from cool, niche technology to a viable industry is still very much in question.

The basic technological premise of wave energy is simple: harness the motion of waves to power electricity generating turbines–an idea that’s been around since the late 1700s. The technology’s attraction lies in the endless abundance of powerful swells throughout the oceans. Scientists estimate that ocean waves harbor enough raw power to meet the world’s electricity demand many times over. Although only a small percentage of total wave power is even theoretically accessible, waves could still provide around 10% of global energy needs, according to UK-based Centre for Alternative Technology.

Harnessing wave power and converting it to electricity at a cost competitive with fossil fuels, though, has remained elusive.

For roughly the past century, hundreds of inventors, entrepreneurs, and schemers have tried and mostly failed. Even during the fuel crises of the 1970s, which generated significant interest in and funding of alternative energy, wave power technology made relatively little progress compared to solar, wind, and biofuels.

A central reason for wave energy’s minimal progress, according to MIT professor of engineering and wave expert Chang Mei, is that while waves harbor copious energy, they’re also unstable and unpredictable, making it exceedingly difficult to design a wave energy converter that will actually work at sea.

“It’s one thing to build and test a device in the lab in a controlled setting where the waves are of uniform size and frequency,” Mei says. “But in the ocean, where waves come in many different shapes and sizes, the devices haven’t performed as well.” Plus, due to their size (Wave Power Technology’s PowerBuoy is around 150 feet tall by 40 feet wide and weighs 200 tons) and the need to anchor them to the ocean floor, wave power machines tend to be expensive. (Each PowerBuoy costs around $4 million.)

Today, though, concerns about climate change and the depletion of fossil fuels have rekindled interest in renewable energy and generated considerable interest wave power.

In 2008, the world’s first commercial wave farm went live off the coast of Portugal, using technology designed by the Scottish wave power company Pelamis. (Due to technical difficulties, the farm was deactivated a mere two months later and has not yet come back on line.) In 2010, DOE awarded $37 million to fund 27 ocean power-related projects (including Ocean Power Technology’s Oregon venture). Aquamarine Power, Ocean Power Technologies, and other companies (including Pelamis, Verdant Power, AWS Ocean Energy, Wavegen, and Finavera Renewables) have second and in some cases even 3rd generation devices in development.

Busch, for one, remains enthusiastic.

“Ocean energy is at the precipice of commercialization,” he says. “The technology is undergoing rigorous testing and in some cases is already generating power on commercial scales.”

But even if the current crop of wave energy devices prove sea-worthy and able to compete with fossil fuel-generated power, other hurdles remain.

Similar to wind turbines and solar arrays, no single wave energy converter produces enough energy to match a conventional fossil fuel-burning power plant.

A single Pelamis device, for example, generates enough electricity to power approximately 500 homes, compared to a medium-sized coal-fueled power plant, which can power tens of thousands.

Future wave farms, then, will most probably be relatively small-scale ventures pumping electricity to nearby grids supplying coastal towns and cities. To approach conventional utility scale power generation, a wave farm would have to commandeer large swaths of ocean–a prospect that gives pause to fisherman and others working in ocean-dependant industries.

Consequently, regulatory challenges remain, in Oregon and elsewhere. Before deploying its devices, Aquamarine (and other wave power companies) must secure seabed leases and permission to install on-shore power stations from the Oregon Department of State lands–a process dependent on the still-evolving specifics of the state’s Territorial Sea Plan that’s been in committee since 2008.

Although Busch is optimistic that the leases and permits will come through, he acknowledges that convincing dozens of regulatory agencies to green light the project will take some doing.

“It’s a chicken and egg issue with the agencies; they want to know how wave power devices will impact fish, for example, which is something we can’t know until we get the devices in the water, but they want that data before moving forward,” he says. “That’s maintaining the status quo, which is unacceptable from my perspective. Once we get large devices in the water and measure the impact, then we can begin answering questions and moving forward more quickly with other deployments.”

Testing wave power technology and demonstrating its safety and feasibility in Oregon waters will be good for the companies that make them, and good for Oregon, Busch says.

“Every company that comes here and sets up shop is creating a feedback loop. One company brings another, which builds up supply chains, which in turn create incentives for other ocean energy companies to locate here. That’s what we hope to see happen.”