Cruise ship passengers arriving in Puerto Rico have long been delighted to see Spanish colonial fortresses on one shore but often gasped at the dark smokestacks of the electric power plant across San Juan Bay. Now, they also can marvel at the island’s first commercial wind turbines – white, rocket-like tubes with blades spinning elegantly above palm trees in front of the hulking power plant.

Energy costs in the Caribbean are among the world’s highest, partly because most islands rely on imported oil for fuel and because islands typically can’t tap neighbor’s electric grids to trim power costs.  Puerto Rico’s electricity now runs about 21 cents per kilowatt-hour, more than double the U.S. average.

So this year, the U.S. Commonwealth of Puerto Rico passed a law to boost renewable energy to 12 percent of power production by 2015, 15 percent by 2020 and 20 percent by 2025. It’s counting on a mix of U.S. government incentives, local incentives and island ingenuity to foster more projects like the two wind turbines installed this spring at the Bacardi rum plant on San Juan bay.

It won’t be easy to meet the new targets, wind advocates admit. The island of nearly 4 million people is known for a government slow to issue permits, politics as its national sport and environmentalists that blocked a wind farm project for years because of concerns over migratory birds. Renewable energy today accounts for only about 1 percent of the island’s power production.

But the recent success of wind turbines at Bacardi’s factory and progress on a $215 million, 100-megawatt (MW) wind farm to be built next year on the island’s south coast show that Puerto Rico may be on the cusp of a renewable energy revolution, said Raoul G. Slavin Julia, managing director of Aspenall Energies LLC of Puerto Rico, which owns and operates the two, 250-kW turbines that supply Bacardi.

“We’re at an exciting crossroads,” said Slavin, as tourists snapped photos in the front of the 13-story turbines after visiting Bacardi’s factory and tasting mojito cocktails. “But at the end of the day, we really need long-term incentives to start this industry here. And that really depends on Washington.”

Collie Powell, who runs the Puerto Rico project for San Francisco-based Pattern Energy Group, knows the island’s potential and challenges. His veteran company came to Puerto Rico in January 2008 to scope out opportunities and aims to start building the island’s first major wind farm in the south-central municipality of Santa Isabel next spring.

Pattern already has signed a 20-year contract to sell up to three-quarters of the energy produced by the wind farm to the government’s Puerto Rico Electric Power Authority starting at 12.5 cents a kWh and rising 1.5 percent a year.  This fall, it also received municipal endorsement for what Santa Isabel leaders called “a symbol of future progress and sustainable development throughout the Caribbean.”

But Powell cautions the approvals took “surgical” preparations. “It’s not for the faint of heart, the inexperienced or the newcomer,” said Powell, a Jamaican-American familiar with island complexities. “Even with a seasoned team, it took one-and-a-half years to solidly plan an execution strategy.”

One hurdle: Many islanders were turned off to wind because of years of controversy over a large project in southwest Puerto Rico rejected by environmentalists for potential harm to migratory birds.

Developers with WindMar Renewable Energy of Puerto Rico eventually negotiated, cut back plans and this March, received Planning Board approval for an $80 million, 30-MW wind farm in the municipality of Guayanilla set to break ground soon.

But the tough politics over WindMar’s project means any new wind developer has to invest time, patience and money “to become one with the community,” Powell said. “It’s not being a tourist.”

Another problem: land use. Pattern is leasing land for its wind turbines from the island government, not from private farmers as is typical in the U.S. mainland. Family farmers in sparsely-populated states often welcome turbines as a way to earn extra cash. But in densely populated Puerto Rico, corporate farms worried that turbines nearby might cast shadows on their tomatoes and other crops and sought contracts for compensation before they’d allow turbines 430-feet high in their midst, said Powell.

 “You’ve got to respect the land use a lot more in Puerto Rico compared to the states, where land is overly abundant,” Powell said before one of his frequent meetings with Puerto Rican team partners.

Working in the Caribbean also means technical challenges. Pattern will use turbines that are hurricane-resistant, designed to withstand 145 mile-per-hour winds and with nacelles that can shift in storms.  To cope with frequent brownouts and blackouts, it also is choosing turbines that can withstand voltage fluctuations and paying to install back-up power generators, said Roberto Leon, vice president of operations at Puerto Rico’s CSA Group, the engineering and consulting firm working with Pattern.

Pattern is banking on U.S. government incentives to cover about 30 percent, or $70 million, of the cost for its Puerto Rico venture. It also aims to tap renewable-energy certificates (RECs) to be issued by the Puerto Rican government to help cover the difference between the price paid to producers and their actual costs. Local officials are to set a monetary value for the RECs, which can then be traded.

Powell said he’s confident that “with enough entrants,” the market for the Puerto Rican RECs can thrive and mature. Others are less certain. Slavin worries that unless federal funds are mobilized, local initiatives may be stymied  – and major wind projects stalled.

The two-year-old administration led by Gov. Luis Fortuno vows to streamline permits to spur the island economy, which depends on energy-intensive manufacturing as its lifeblood. Pattern’s venture stands as a pioneering test. If all goes well, travelers might marvel next year at its large-scale wind farm.