The proximity of the scheme, one of several under consideration, to London is a big plus, Mark Draper, managing director of European generation asset management at Powergen told Reuters in an interview.

"It has the advantage of bringing power in an area where the energy is needed," Draper said, adding plans were at a very early stage.

Other large schemes are expected to be built in the waters off north-west Scotland where winds are strong but these are far from demand centres in central and southern England, raising questions about how to fund the long-distance power links.

The Thames scheme is one of a number of feasibility studies Powergen is carrying out with partners for 400-800 MW projects in preparation for the next round of offshore leases expected to be awarded this year.

The government sees the growth of offshore wind generation as key to Britain meeting its target of producing 10 percent of its power from green sources by 2010.

Many onshore wind schemes run into planning problems while other technologies like biomass and solar are too expensive to deliver the quick growth in renewables the government wants.

Wind power costs have fallen to about three pence per kilowatt hour from 11 pence at the start of the decade whereas biomass companies need five pence to make a profit. Wholesale power prices are currently around two pence a kilowatt hour.

To kickstart investment, the government has ordered suppliers to buy at least three percent of their energy from renewable sources from this year. This rises to just over 10 percent by 2010.

POWERGEN ALSO INTERESTED IN BIOMASS

Draper said Powergen, whose takeover by German energy giant E.ON should be finalised this year, had revised its business plans in December to raise investment in green power.

The company wants to increase its renewable generation capacity to 1,000 MW by 2010 from 100 MW presently with the portfolio split 80/20 percent in wind and biomass schemes.

"Growth will be predominantly offshore. We are limited by sites onshore and also by the difficulty in getting consents," said Draper.

Most of the current portfolio is onshore wind but the firm has a stake in the Blyth offshore plant in Northumberland, the first of its type in the UK, is seeking permission for the 80 MW Scroby Sands scheme off the Norfolk coast.

He said the company was looking at a number of options for biomass, including adapting coal power stations to run on wood and straw but the government will only allow this co-firing until 2006.

"We can only do this until 2006. We are looking at the options of growing energy crops like willow (trees)," Draper said.

Powergen expects to build specialised biomass plants by 2004 or 2005 but the capital costs are high and fuel costs difficult to estimate, he said.