Known as Moray East, it will be sited between Fraserburgh and Wick in the Moray Firth,
When completed in the next five years, the 950MW scheme will be Scotland’s biggest offshore wind farm – overtaking the 588MW Beatrice field being constructed nearby.
With around 100 204m-tall turbines, Moray East will generate enough electricity for around one million homes.
The development, a joint venture between Spanish renewables giant EDPR and French utility firm Engie, is the only Scottish wind project to have been awarded a 15-year Contract for Difference (CfD) from Westminster’s Department for Business, Energy & Industrial Strategy in the current round of licensing.
The new agreement, with a strike price of £57.50 per megawatt hour, represents a significant drop in the cost of offshore wind generation.
The latest price is nearly two thirds less than in 2015 and dramatically cheaper than the £92.50 per megawatt hour deal with the new Hinkley C nuclear power station.
Announcing the contracts, UK energy minister Richard Harrington, said: “We’ve placed clean growth at the heart of the industrial strategy to unlock opportunities across the country, while cutting carbon emissions.
“The offshore wind sector alone will invest £17.5bn in the UK up to 2021 and thousands of new jobs in British businesses will be created by the projects announced today.
“This Government will continue to seize these opportunities as the world moves towards a low-carbon future.”
The Scottish Government granted consent for the project in 2014, but Wilfrid Petrie, chief executive of Engie in the UK, said the contract marked an important step forward.
The announcement has been welcomed in Scotland.
Jenny Hogan, deputy chief executive of Scottish Renewables, said: “The results of this latest auction are good news for Scotland, for our environment and for our energy system. The cost reductions seen in offshore wind in particular have been dramatic and are testament to the determination of developers to drive down costs.”
Scottish energy minister Paul Wheelhouse said it shows “renewable energy is now the best route to delivering sustainable, affordable electricity for consumers”.