BEIJING (REUTERS) - China's top wind power company has started building the country's second-largest offshore wind farm, state media said, as Beijing aims to boost the nation's clean power industry and cut dependence on fossil fuels that are contributing to smog.

Construction of the project in the eastern coastal Fujian province, which is majority owned by Longyuan Power Group Corp Ltd, will take three years at an estimated cost of 8.2 billion yuan (S$1.79 billion), Fujian Development and Reform Commission records show.

Local government gave the greenlight for the project last month.

The plant on Nanri island off the southeast coast of Fujian province will have installed capacity of 400 megawatts (MW) by 2018, state-run news agency Xinhua said on Friday (Dec 4).

When complete, it will be second only to two other projects which have planned capacity of 600MW.

State-owned and Hong Kong-listed Longyuan, a unit of China Guodian Corp, will invest 5.7 billion yuan, or 70 per cent of the total funds, with the rest supplied by Jiangyin Sulong Heat and Power Generating Company.

Since last year, China, the world's fifth-biggest offshore wind power producer, has approved 44 offshore wind projects in 11 provinces with combined installed capacity of 10.53 gigawatts (GW), according to the National Energy Administration (NEA).

But only two of those were up and running by July, with many stalled by high construction costs of around 20,000 yuan per kilowatt engine, NEA documents show.

As part of the country's target to have installed capacity of 200GW of wind power by 2020 and encourage investment in the growing sector, China has set prices for offshore wind power generators at 0.75-0.85 yuan per kilowatt hour, higher than the grid tariff of coal-fired plants.

Grid congestion has stalled onland wind power delivery.

Earlier this week, China said it would prioritise renewable energy, including wind and solar, as part of its electricity sector reforms.

Offshore wind is a relatively new market for China, which launched its first 100MW project in Shanghai in 2009.