Sea ice-waves interactions have been widely studied in the marginal ice zone, at relatively low wind speeds and wave frequencies. Here, we focus on very different conditions typical of coastal polynyas: extremely high wind speeds and locally-generated, short, steep waves. We overview available parameterizations of relevant physical processes (nonlinear wave-wave interactions, energy input by wind, whitecapping and ice-related dissipation) and discuss modifications necessary to adjust them to polynya conditions. We use satellite-derived data and spectral modelling to analyze waves in ten polynya events in the Terra Nova Bay, Antarctica. We estimate the wind-input reduction factor over ice in the wave-energy balance equation at 0.56. By calibrating the model to satellite observations we show that exact treatment of quadruplet wave-wave interactions (as opposed to the default Discrete Interaction Approximation) is necessary to fit the model to data, and that the power n>4 in the sea-ice source term S_ice~f^n (where f denotes wave frequency) is required to reproduce the observed very strong attenuation in spectral tail in frazil streaks. We use a very-high resolution satellite image of a fragment of one of the polynyas to determine whitecap fraction. We show that there are more than twofold differences in whitecap fraction over ice-free and ice-covered regions, and that the model produces realistic whitecap fractions without any tuning of the whitecapping source term. Finally, we estimate the polynya-area-integrated wind input, energy dissipation due to whitecapping, and whitecap fraction to be on average below 25%, 10% and 30%, respectively, of the corresponding open-water values.