United Technologies has mothballed an offshore turbine project and handed funding back, as it looks to refocus instead on the production of smaller onshore models.
Clipper Windpower, part of United, hoped to create around 1,000 North East jobs by designing and building giant offshore wind turbines in the region.
Government grants would have underpinned the Britannia project for 10MW turbines which would have been tested at Blyth’s National Renewable Energy Centre and then manufactured on a custom-built site at the Neptune Yard on the banks of the River Tyne.
Clipper was picked by Crown Estates to lead the way in producing the thousands of turbines to be placed 100 miles out to sea at Dogger Bank.
Nearly £2m handed to Clipper to help with this aim has been handed back after the two sides agreed to terminate contracts.
A further £5m which had been set aside by development agency One North East to help the manufacturer was not accessed and is likely now to be returned to the Government rather than be held for further regional investments.
Clipper’s parent company in America is expected to send senior executives to Tyneside in the coming weeks to discuss options.
Peter Christman, president of Pratt & Whitney Power Systems, the subsidiary of United Technologies which owns Clipper, said: “We have not decided to move out of offshore wind but it is a question of timing and we did not want to hold up the Crown Estate.”
He said there were a number of factors in his decision, including an increase in the number of competitors, and the current turmoil in financial markets.
Last night Bruce Shepherd, from whose firm the factory land is leased, said he remained optimistic for the future of wind production.
“This is obviously something for Clipper to comment on, but we are happy to support Clipper’s parent company in the ambitions for the site. What is important to remember is that this site is included in the new enterprise zone and that offers a series of incentives which will entice more firms here.”
A spokesman for the Crown Estates said: “After a long and detailed discussion with UTC about the development of the Britannia project, the Crown Estate received notification from Clipper Windpower of its desire to terminate the Britannia project agreement.
“A termination agreement was subsequently concluded under which the Crown Estate’s entire £1.6m plus VAT investment has been returned to it by UTC.”
He added: “The Clipper project had an important role in stimulating the offshore wind turbine market in the UK, resulting in the development of the next generation of offshore wind turbines.
“The Crown Estate has no plans to invest in another offshore wind turbine prototype, and we are continuing to work with turbine manufacturers and UK ports to bring turbine suppliers to the UK.”
A One North East spokesman said: “To date, none of that funding has been drawn down by the company as it was linked to the eventual manufacture of the turbine blades on Tyneside.
“The investment was the culmination of two years’ collaboration between Clipper Windpower, One North East, Government and UK Trade and Investment to bring the project to the region and identify supply chain development.”