Centrica and Dong Energy ditch Irish Sea offshore wind farm plans

British Gas owner confirms £40m (British puund) writedown from Celtic Array project, following warnings last week that UK should slow development of offshore wind farms

The UK's offshore wind industry has suffered a fresh setback today, after Centrica and DONG Energy confirmed they have shelved plans for the giant Celtic Array offshore wind farm in the Irish Sea.

Announcing the news in its interim results, Centrica said the project had proved uneconomic and would lead to a writedown of around £40m.

Since winning the rights to develop the Irish Sea zone in the Crown Estate's Round 3 licensing round in 2010, Centrica has repeatedly raised doubts about the economics of the proposed Celtic Array and last week the company issued an energy "manifesto" calling on the UK government to slow the development of offshore wind farms on the grounds that they are too expensive.

"We have reviewed the economic viability of our Round 3 Irish Sea Zone project, Celtic Array, and following discussions with The Crown Estate and our partners in the project, Dong Energy, development activity has now stopped," the British Gas owner said in a statement.

"We have recognised a charge of £40m, principally in respect of writing off the total book value of the project, and as a result the renewables business reported an operating loss."

The Crown Estate this morning confirmed that one of the main reasons for the shelving of the Celtic Array was the discovery of "challenging seabed conditions", and as such the organisation has no plans to reoffer the zone to other developers.

The decision echoes that of RWE over the Atlantic Array in the Bristol Channel, plans for which were also shelved as a result of seabed conditions.

However, the news is likely to come as a blow to the offshore wind industry, which has experienced a turbulent 12 months, with a number of other projects halted, including the second phase of London Array and the Argyll Array, as well as the Atlantic Array Round 3 zone.

However, RenewableUK director of offshore renewables, Nick Medic, maintained that the sector still had a healthy pipeline of projects under various stages of development.

"Although it's disappointing that this particular project isn't going ahead, the reasons are understandable - conditions on the seabed would make the project economically unviable at this stage," he said. "Overall we still have over 37GW of offshore wind capacity in the UK's project pipeline, so we're set to maintain our huge global lead in offshore wind, creating tens of thousands of jobs in the decades ahead to add to the 13,000 we have already."

He added that the offshore wind industry was still well positioned to play an increasingly influential role in the UK's energy mix. "Offshore wind is already powering the equivalent of two and a half million British homes and that's set to more than treble by the end of the decade, providing a secure supply of clean energy at a cost which is reducing constantly through economies of scale," he said.

RenewableUK said there were currently 62 offshore wind farm projects planned in UK waters, 22 of which are already operational, and a further five are under construction.

Another 11 projects have been consented and nine are in the planning system. A further 15 projects are being developed but have not yet entered the planning system.

The news came as British Gas sparked a fresh row over energy companies' prices and profits, after it confirmed profits fell as a result of the mild winter and rejected calls for it to cut prices further as a result of falling wholesale gas prices, insisting forward-purchasing practices make rapid changes to prices unviable.