Vestas Wind Systems A/S shelved plans to build one of Europe's largest offshore-turbine factories in southeast England as the wind industry calls for clarity on subsidy programs.

Vestas and the Port of Sheerness announced the decision to scrap plans for the facility in Kent today in a website statement. The Aarhus, Denmark-based company had intended to develop its biggest offshore turbine, a 7-megawatt machine, at the plant, creating 2,000 jobs.

The announcement is a blow to U.K. efforts to attract the largest turbine makers as it seeks to build 18 gigawatts of offshore turbines by 2020. Britain, overhauling its energy market to spur clean-power investment, proposed an Electricity Market Reform bill in May that includes replacing an offshore- wind subsidy with “contracts for difference,” which set long- term prices for power and are so far only in outline form.

The lack of detail on the new contracts fuels uncertainty for wind investors, Gordon Edge, policy director at industry group RenewableUK, told a committee of lawmakers this week.

Doosan Power Systems Ltd. said in April it abandoned a 170 million-pound ($265 million) plan to develop offshore wind turbines in Scotland, citing economic difficulties in Europe.

Even with output costs that exceed onshore wind, gas-fired power and coal-fed generation, offshore wind is of “strategic national importance” as the government works to meet demand, curb emissions and add jobs, Energy Secretary Ed Davey said last week.

Strong Commitment

“Vestas’s strong commitment to the development of both the offshore and onshore wind industries is not affected by this decision,” said Chief Sales Officer Juan Araluce. The company said more than a year ago that construction at Sheerness, a port southeast of London, was dependent on regulatory certainty and sufficient orders for its V164-7.0 model.

“The problem with the draft EMR legislation is not that it’s half-baked,” RenewableUK’s Edge said June 19. “It’s the fact that it’s only going into the oven now, so the cooking time is very short. The risk is that we’ll end up with something that’s burnt on the outside and soggy in the middle.”

Vestas didn’t specify a reason for its decision and said it couldn’t comment further because of “legal obligations.” Kasper Ibsen Beck, a spokesman, said by e-mail that Vestas is looking at options for making the 7-megawatt model. It will build parts of it at a test facility on the Isle of Wight and install a prototype in 2014, the company said.

Foreign Investment

Energy Minister Charles Hendry said June 13 the “lion’s share” of early investment in offshore wind would come from foreign companies locating production bases in the U.K. Gamesa Corp. Tecnologica SA, Samsung Heavy Industries Co. and Mitsubishi Heavy Industries Ltd. have all announced U.K. offshore wind plans.

While Britain remains attractive for wind-industry manufacturers, “delivery on green jobs needs certainty and confidence in the market,” Maria McCaffery, chief executive officer of RenewableUK, said in an e-mailed statement.

Vestas’s plant, which would have covered 70 hectares (173 acres) of land, was to be one of the largest of its type in Europe, according to company documents posted on the website of the local administration. Vestas received local approval from the Swale Borough Council on May 24.

Copyright 2012 Bloomberg

Image: Cancelled via Shutterstock