Hornsea Project Two has been given development consent from Business and Energy Secretary Greg Clark and when complete, the site will deliver up to 1,800 megawatts of low carbon electricity to around 1.8 million UK homes.
The windfarm should create up to 1,960 construction jobs and 580 operational and maintenance jobs.
It will comprise up to 300 wind turbines and will connect to the grid at North Killingholme in North Lincolnshire.
The Government said the decision was made on the merits of the scheme based on a report and recommendation from the Planning Inspectorate which is being published today.
It covers the entire project including the turbines, foundations, offshore and onshore substations, array cables and export cables.
However the decision had been delayed for three months while the Secretary of State reviewed the impact construction would have on harbour porpoises.
Mr Clark said: “The UK’s offshore wind industry has grown at an extraordinary rate over the last few years, and is a fundamental part of our plans to build a clean, affordable, secure energy system.
“Britain is a global leader in offshore wind, and we’re determined to be one of the leading destinations for investment in renewable energy, which means jobs and economic growth right across the country.”
The Danish energy giant DONG had asked the Government to start work on the project. But bcause of its scale, Mr Clark had the final say on whether it should go ahead, following a recommendation from the planning inspectorate.
Wind power is currently delivering an estimated 12 per cent of the UK’s electricity, a figure expected to increase to 20pc by 2020, with offshore wind alone providing 10pc.
Brent Cheshire, DONG Energy’s UK country chairman, said: “Development consent for Hornsea Project Two is very welcome. We have already invested £6 billion in the UK, and Hornsea Project Two provides us with another exciting development opportunity in offshore wind.
“Hornsea Project Two is a huge potential infrastructure project which could provide enough green energy to power 1.6 million UK homes. A project of this size will help in our efforts to continue reducing the cost of electricity from offshore wind and shows our commitment to investing in the UK.”
The announcement comes after DONG Energy pulled out of a project that promised to create thousands of jobs in the green energy sector on the Humber.
The company said it would not be investing in the £450m Able Marine Energy Park, at North Killingholme, which was expected to create 4,000 jobs and was a “critical” part of plans to make the Humber a world leader in green energy.
Although blades for the vast offshore wind farm making up Hornsea Project One will be manufactured at the new Siemens factory in Hull, other components made elsewhere in Europe could be bought straight to the site 120km offshore, rather than being assembled on the Humber, at Grimsby or Hull.
Hugh McNeal, chief executive of the trade body RenewableUK, called the announcement a vote of confidence in the offshore sector.
He said: “This huge infrastructure project will provide much-needed investment and energy security for our country. Offshore wind represents a massive economic opportunity to the UK and our coastal regions. It is creating new jobs and regenerating local communities”.