"Projects of this scale were made possible thanks to the reformed regulations and incentives system in Germany that were passed in the German parliament in early June," Blackstone said in the statement on Tuesday.

"(It) will cost in excess of 1 billion euros to build."

Confirming a July 9 report by Reuters, Blackstone said it had formed a joint venture "Meerwind" with Germany's Windland Energieerzeugungs GmbH for the 400 megawatt project over an area of 40 square kilometres about 80 kilometres north of Germany.

The European Union earlier this year detailed plans to supply a fifth of all Europe's energy demand from renewable sources by 2020, up from less than 9 percent in 2005.

Germany and Britain are expected to open the floodgates to offshore farms to capture ample wind in the North Sea and northeast Atlantic. Britain last month hinted at more attractive subsidies and Germany increased its support.

"We welcome everyone who demonstrates interest in showing that wind energy production off shore is feasible -- and to do it as quickly as possible," a German Environment Ministry spokesman said.

But ambitious plans so far lag actual projects compared to those for onshore wind, because of the trouble of grid connection plus a need for large, less proven turbines.

A Lehman research note last month estimated there were some 30 gigawatts of planned offshore wind projects in Europe, compared with 1.1 GW actually installed. The bank forecast 50 percent annual growth in installed capacity over the next five years.

BOTTLENECK

The Blackstone project will have to overcome supply bottlenecks, with German engineering company Siemens the only firm worldwide that could take currently big orders for offshore turbines, said an analyst who declined to be named.

"It looks like they want to operate the asset which isn't the most straightforward approach," the analyst added, referring to execution risk given less proven technology as well as supply and labour constraints.

"The biggest short-term issue is constraint in supply," said Ben Warren, a partner in the renewable energy team at advisory firm Ernst & Young, referring to the offshore wind sector.

The German government has a goal of reducing emissions of planet-warming greenhouse gases by 40 percent by 2020 from 1990 levels. It currently gets about 14 percent of its electricity from renewables and aims to sharply increase that.

Germany has reformed its renewable energy law, leading to an increase in the rates utilities have to pay for offshore wind energy while accelerating a reduction in rates for solar.

Last week privately held German investment company Windland Energieerzeugungs GmbH and Blackstone declined to comment on the Reuters report. (Additional reporting by Gerard Wynn in London, and Markus Wacket, Philip Halstrick and Peter Dinkloh; Editing by Quentin Bryar)