From: Reuters
Published May 14, 2008 12:12 PM

World's largest offshore wind farm in the works

By Tom Bergin

LONDON (Reuters) - British utility Scottish & Southern Energy Plc (SSE) will build the world's largest offshore wind farm and has awarded $3 billion in contracts to U.S. engineer Fluor Corp and Germany's Siemens AG.

Despite industry doubts about the viability of offshore wind SSE said on Wednesday it would build the farm off Britain's east coast. Work would begin on the 504 megawatt Greater Gabbard project shortly and power generation would start in 2011.

The utility added it had bought Texas-based Fluor's 50 percent stake in the project for 40 million pounds ($77.8 million).

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Earlier this month Royal Dutch Shell Plc said it wanted to sell its stake in a planned 1,000 MW British offshore wind farm project called London Array, raising doubts as to whether that project would be built.

London Array partner E.ON AG, the German utility, acknowledged that rising steel costs and a tight market for turbines had made the economics of the project challenging, despite government incentives for CO2-free generation.

Falling turbine sales in the first quarter at the world's biggest turbine maker, Denmark's Vestas Wind Systems A/S, added to fears that a boom in wind energy in recent years -- driven by fears of climate change -- may be cooling.

However, SSE spokesman Justyn Smith said that while rising costs were a feature of the wind industry the utility was confident Great Gabbard would "meet our rigorous investment criteria."

Fluor will build the wind farm and the company said in a statement the contract was worth $1.8 billion.

Europe's biggest engineering company Siemens will provide and service the 140 turbines to be installed. The Munich-based company said it would be paid 800 million euros ($1.2 billion).

The British government, which criticized Shell's decision to exit London Array, welcomed SSE's announcement.

"The massive potential of the UK shoreline coupled with the right market conditions mean the UK is one of the most attractive places in the world to invest in offshore technology," Business Minister John Hutton said.

(Editing by David Holmes)

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