The UK wind energy industry received a boost on Wednesday with the announcement of the world’s biggest offshore windfarm, to be built off the north-east coast.

Dong Energy said its multi-billion pound Hornsea project, which is expected when complete to power as many as 1m homes in the region, will occupy more than 400 square kilometres, situated about 120km off the Yorkshire coast.

The company, which has already put £6bn into wind power in the UK, said this was its largest investment in offshore wind to date. Dong, Denmark’s state-backed energy utility, told the Guardian it expected to invest another £6bn in the UK by 2020, in a fillip to the beleaguered wind industry. Brent Cheshire, chief executive of Dong Energy in the UK, said: “We are making a major financial investment to construct this giant windfarm and this underlines our commitment to the UK market. Hornsea Project One will support the supply chain and help create local jobs.

“To have the world’s biggest ever offshore windfarm located off the Yorkshire coast is hugely significant, and highlights the vital role offshore wind will play in the UK’s need for new low-carbon energy.”

Amber Rudd, secretary of state for energy and climate change, said: “The UK is the world leader in offshore wind energy and this success story is going from strength to strength. The investment shows that we are open for business and is a vote of confidence in the UK and our plan to tackle the legacy of under investment and build an energy infrastructure fit for the twenty first century.” An estimated 2,000 jobs will be created for the construction of the project, with a further 300 jobs likely to be created for its operation. However, prospects for the wind industry in the UK were hit last year when the government announced the ending of subsidies for onshore wind generation.

While offshore wind is still favoured by ministers, the blow to onshore wind - which is much cheaper, and when carbon emissions are taken into consideration is cheaper than traditional fossil-fuel forms of generation - has been a cause of concern to wind investors. The potential investment into wind turbine manufacturing factories, much vaunted under the coalition government, has been called into question.

RenewableUK, which represents the UK’s wind power industry, said the Hornsea project was a major step forward.

Maf Smith, deputy chief executive of the organisation, said: “[This] is an important step in making this historic project a reality. It signals the start of creating a new landmark in the North Sea. Its size is guaranteed to bring a multitude of benefits to the UK, [such as] a huge amount of inward investment and the creation of local jobs. It will play an important part in meeting our commitments [under the Paris accord on climate change and] help create the new energy infrastructure this country desperately needs.”

The 1.2GW Hornsea project will be made up of 7MW wind turbines, the largest generally available, each more than 190m high, which is taller than the Gherkin building in the City of London. Dong is planning to have them built at a factory in Hull owned by Siemens, the German industrial giant, but it is uncertain whether all of them will come from there. The green light for the Hornsea wind farm is also a boost to three other mooted offshore wind farms that are in the offing: Neart na Gaoithe and Beatrice One in Scotland, and East Anglia One. Offshore wind has had a chequered history in the UK. It is more problematic than onshore wind because it requires bigger and more robust turbines, and has higher levels of maintenance and much greater installation costs than onshore wind Rising costs caused problems for the London Array, which was at the time the biggest offshore wind farm to be built.

However, the government is understood to favour offshore wind over onshore turbines owing to local objections on land, and the UK has more installed offshore wind than any other country, though Germany is catching up. Polls have, however, regularly found the British public in favour of onshore wind energy generation.