PORTLAND, Maine (AP) -- A University of Maine-led effort to build an offshore wind pilot project was dealt a significant blow Wednesday when it failed to a win a competition for a $47 million federal grant, expected to be a key source of funding.

The U.S. Department of Energy's decision to pass over the Maine Aqua Ventus project for the grant means an uncertain future for the proposal, which would put a two turbine, 12-megawatt project off the coast of Monhegan Island, and the goal of making Maine a hub for offshore wind development.

While Maine it failed to win the grant, it will receive $3 million from the federal government to complete the design and engineering of the project. Officials said they remain confident they will secure funding for the demonstration of floating turbine technology called VolturnUS.

"We're certainly going to have the opportunity to continue to try to demonstrate this technology at full scale and whether it's directly with DOE as a partner or through some other vehicle that's something we'll have to be working on over the next years," said Jake Ward, vice president for innovation and development for UMaine.

In January, Maine Aqua Ventus received initial approval for a state contract for the roughly $120 million project that's slated to be placed 15 miles off the coast near Monhegan Island.

At 23 cents per kilowatt hour, it's expected to cost ratepayers roughly $9 more a year on their utility bills generate enough power for up to 7,000 homes.

If successful, the goal is to build a larger wind farm generating up to 500 megawatts in the Gulf of Maine.

Officials had hoped approval from the state would help them win the federal grant. Jeff Thaler, legal counsel for the project, said they were waiting for the decision from the federal government before moving forward with negotiations for the 20-year contract with the state.

Maine lost to proposals in Virginia, New Jersey and Oregon. It was selected as an alternate and could receive the larger grant if one of the winning projects fails to live up to its obligations over the next year, officials said.

Meanwhile, Maine's congressional delegation vowed to support the university as it seeks funding and help it move forward.

Renewable energy advocates placed their hopes for building an extensive offshore wind industry in the state on the success of the Maine Aqua Ventus project after Norwegian company Statoil spiked its plans in October to put four three-megawatt wind turbines 12 miles off Maine's coast.

Statoil's decision followed maneuvering by Republican Gov. Paul LePage's administration to reopen the competitive bidding process to allow UMaine to submit a bid. LePage's administration opposed Statoil's project because it said would have a negative impact on utility customers and lacked enough economic benefits for the state.

Wind power supporters said the Department of Energy's decision was a setback, but they remained hopeful that UMaine officials can find partners in the private sector to finance the project.

"Obviously it's a disappointing day for clean energy in Maine," said Jeremy Payne, executive director of the Maine Renewable Energy Association. "But hopefully their team can work with ... others to find the capital that they need to move things forward."