Dong Energy, E.ON and Masdar have decided to invest €2.2bn in building the first 630MW phase of the London Array offshore wind farm in the Thames Estuary.

On completion, the scheme will be the world’s largest, and the first 1GW offshore wind farm.

The announcement follows the UK Government’s recent proposal to increase its support for offshore wind power.

Prime Minister Gordon Brown said: “The London Array is a flagship project in our drive to cut emissions by 80% by 2050 and meet future energy needs.”

The offshore wind farm, to be built in two phases 12 miles off the Kent coast in time for the London Olympics in 2012, will be installed on a 90 square mile site. The first phase will consist of 175 turbines. The second phase will add enough capacity to bring the total to 1,000MW. Onshore work is now due to start in the summer, with offshore work due to start in early 2011.

The project will supply enough power for around 750,000 homes.

The project had been on hold due to drying up of capital (due to the economic recession as well as the rise of turbine prices due to the fall in the British Pound when compared with the Euro).

The boost to the Renewables Obligation Certificate (ROC) incentive mechanism, announced in last month’s Budget, was crucial. As per the information available, at current costs, offshore developments come in at about £3bn per GW. The ROCs regime was developed to offset the imbalance. Electricity retailers are required by law to derive a growing proportion of power from renewable sources. By issuing the ROCs to generators – to be sold on to utilities to prove the obligation has been fulfilled – the system provides an extra revenue stream. Under the new rules, the allocation for offshore wind has gone up to 2 ROCs per MW hour (MWh), compared with 1 ROC per MWh for onshore wind.