RWE Innogy has formed a joint venture with Munich municipal utility Stadtwerke München and Siemens to install 160 turbines, operational by 2013.
Gwynt y Môr, 10 miles offshore in Liverpool Bay, will have a capacity of 576 megawatts.
Work will start towards the end of 2011 and RWE Innogy has ordered a new offshore construction ship [pictured] to be built by the Korean shipyard Daewoo, costing €100m. The new construction ship is expected at the end of 2011.
All permits for the wind farm, covering an area of 79 square kilometres, have already been obtained. Siemens will supply, install and maintain the wind turbines, and provide the connection to the grid.
Secretary of State for Energy and Climate Change, Chris Huhne, said: "This is the first, of what I hope will be many, examples of how we can make the most of our island's huge renewable energy potential. I want to make sure we grab all the opportunities the rapidly expanding renewables industry has to offer, and that wind power can come of age under this government."
Prof Fritz Vahrenholt, CEO of RWE Innogy, added: "In 2008 we started making RWE greener. With an output of almost 580 MW and an annual saving in CO2 production of around 1.7 million tonnes, Gwynt y Môr will contribute significantly to this. This is the fifth offshore wind farm which RWE is not only developing but also building – a balance to be proud of."
The wind farm is planned to start generating electricity as early as 2013 and to be completed in 2014. From then onwards it is forecast to generate around 1,950 gigawatt hours of electricity annually, enough to supply around 400,000 British households.
RWE said Liverpool Bay's comparatively shallow water and very high wind speeds made it an ideal location.
Siemens will supply and erect 160 wind power installations each with a capacity of 3.6 megawatts for the Gwynt y Môr project. Siemens will also be responsible for connecting the wind turbines to the grid, which entails the delivery of two turnkey offshore transformer platforms. Using high-voltage sea cables, power will be transmitted to St Asaph, from where inland distribution will take place. Siemens will also be responsible for maintenance of the wind farm for five years, with the option of an extension for a further seven years. The contract is worth €1.2bn to Siemens.