"It will be very difficult for the government to keep to its target for offshore wind," Mark Woodall of finance house Climate Change Capital told a renewable energy seminar.

"With the current economics, offshore wind will not reach the 3-4 gigwatts capacity the government is relying on."

The government is banking on offshore wind power to provide about 40 percent of its 2010 target of generating 10 percent of the UK's power from green sources.

The first two commercial schemes are up and running off the coasts of Norfolk and north Wales.

But others have been delayed. Offshore leases for 17 projects proposed in the first licencing round in 2001 are due to be completed by this July but not all sites will be ready, said the Crown Estate which awards offshore licences.

"We are seeing steady progress but obviously not as fast as we had hoped," Frank Parrish, head of marine estates at the Crown Estate, said.

Industry body British Wind Energy Association (BWEA) estimates that about 10 of the 17 wind farms will be built by the target date of 2007.

FUNDING GRID LINKS CAUSING A PROBLEM

More ambitious farms with hundreds of turbines were proposed in round two for sites in the Irish Sea, off the Wash in eastern England and the Thames Estuary but these face delays if concerns over funding grid links are not sorted out soon.

"The grid issue is causing consternation. If we want to make the 2010 deadline the grid work has to start now," said Gordon Edge, head of offshore at the BWEA.

Under its licence, the National Grid has to seek guarantees from generators planning new power stations that they will cover the costs it incurs extending the grid if they decide not to go ahead with their plant.

Expanding the grid could cost over a billion pounds ($1.89 billion) and offshore developers say they can not take the risk and give these guarantees as they do not have all the consents in place so some projects might not go ahead.

Regulator Ofgem says it is in talks with National Grid and the Department of Trade and Industry about the problem.

For financiers, the high risks involved in using new offshore technology raises funding costs although these will drop in future as the industry gains experience, said Shane Bush, head of renewable energy at Standard Chartered Bank.