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The Norwegian Government gave Britain's renewable energy sector a boost yesterday by announcing that it would invest £500 million in an offshore wind farm.

The investment by Statkraft, the Norwegian state-owned power utility, bucks the recent trend for companies to pull out of the renewables sector.

Statkraft has bought a 50 per cent stake in the Sheringham Shoal wind array off the cost of Norfolk. It will jointly develop the £1 billion project with StatoilHydro, the Norwegian oil company.

The 88-turbine wind farm will generate 1,100 megawatt-hours of electricity a year, enough to power 220,000 homes. Construction is scheduled to begin this summer and will be completed in 2011.

Energy companies have scaled back their renewable projects as financing has become harder to find. Oil companies are also under pressure to cut their investment in the sector after a steep drop in the price of crude.

Iberdrola, the Spanish power company that invests in wind farms and owns ScottishPower, said two weeks ago that it would cut spending on renewables by 40 per cent.

Shell has also said that it will no longer invest in wind turbines but will concentrate on biofuels instead. The Anglo-Dutch company pulled out of the London Array, a £3 billion wind farm in the Thames Estuary, last year.

BP has completely opted out of the UK renewables market because of the poor anticipated returns. Yesterday, BP said that it would cut 620 jobs from its solar power business and that two plants in Spain and part of a plant in the US would be shut.

However, Statkraft said yesterday that it saw the UK as one of the best markets for wind power in the world. Knut Fjerdingstad, a spokesman for Statkraft, said: "The UK is a very interesting market for our industry because 40 per cent of the wind resources are in Europe. The wind is predictable and the financial framework is good."

Statkraft is Europe's largest generator of renewable energy, particularly hydroelectric power. It also owns three onshore wind farms in Norway and is developing two small wind projects in Wales and Scotland.