Donald Jessome and his partners are on track to break ground next summer to bury a 350-mile stretch of cable – much of it on the murky bottoms of Lake Champlain and the Hudson River – to bring a mix of hydro and wind power from Quebec to New York City’s congested electricity grid.

The US $2 billion underwater transmission system, which avoids the problem of unsightly and controversial overhead power lines, would dramatically boost the region’s use of clean energy. Except there’s one hitch: New York State doesn’t consider large-scale hydroelectric power a renewable source of electricity.

This obstacle is among many that Canada faces as it looks to plug more of the huge U.S. market into its expanding green-energy grid.

In Canada, hydroelectric power is considered a clean, renewable energy source and accounts for nearly two-thirds of the country’s electricity generation.

That’s in sharp contrast to the United States, where views on hydropower vary from state-to-state and carbon-emitting, coal-fired plants make up half of the country’s electricity output.

Canada, the largest hydropower producer after China, has room to double its current capacity and also has huge prospects for wind energy, second only to Russia.

“For Canada to take full advantage of its renewable energy potential, it would have to become an exporter on a significant scale,” said Paul Cassidy, one of Canada’s leading environmental and energy lawyers, based in Vancouver with the law firm Blakes Cassels & Graydon LLP. “Canada is already the single largest energy supplier to the United States and obviously the safest. More renewable exports [to the US] are going to be inevitable as a result of concerns about energy security and fossil fuels.”

The question, of course, is when.

With a carbon tax no longer on the horizon, some in the industry worry that renewable energy projects may end up on the backburner while shale gas exploration and new U.S. coal developments are fired up.

Canada is a net exporter of electricity, with as much as 9% going out of the country, most of it to the United States.

While renewable exports are likely to continue adding to the mix, an explosion in demand probably won’t come until government policy makes the price of producing and transmitting the energy more attractive, industry experts said.

One major bottleneck is a lack of adequate transmission.

Ontario, for example, needs to invest nearly $90-billion over the next twenty years just to meet its own needs and reduce its reliance on coal with hydro, solar and biomass schemes, said Stephen Lewis, leader of Ernst & Young’s renewable energy advisory practice in Canada. “Some large hydro projects are coming on stream and a portion will be exported, but the Canadian economy is expanding as well and…[while] there’s still substantial hydro potential, the easy stuff has been done.”

Jessome, chief executive of Transmission Developers Inc., said he “could probably fill ten Libraries of Congress with different problems” he’s run into over the past year as he seeks to get state, local and federal approvals to sink six-inch cables from the Canadian border to New York City’s Con Edison plant in Astoria, Queens.

Even without the green designation, the numbers add up because the company is targeting the most congested, high-priced electricity market in the United States, said Jessome, a co-founder of Transmission Developers, which launched in Toronto in 2008. “When we looked at North American markets that could afford to pay, we quickly zeroed in on the Quebec-New York City market.”

The venture, which is expected to deliver power for at least 40 years, got a big endorsement in 2010 when deep-pocketed private-equity giant Blackstone Group decided to buy control of the company for an undisclosed sum.

When up and running in early 2016, the project will deliver enough electricity to serve one million residential customers and could cut the region’s pricey electric bill by $800-million, said Jessome. “It sells itself. It’s connecting clean energy from Canada into New York City with no worries about transmission lines going through properties.”

Jessome sees a further upside with the likelihood that hydropower will eventually get a green stamp of approval, allowing it to fetch a premium over carbon-based products like coal and natural gas.