RWE, the owner of Worcester-based Npower, plans to more than quadruple ts renewable energy generation.
The German firm, which is Europe's largest polluter, aims to increase investments mainly in windpower to at least one billion euros (£714.5 million) annually from 2008.
Chief executive Juergen Grossmann said group was increasing environmen-tally friendly generation in response to the European Union policy that us making it more costly to emit carbon dioxide.
Renewable energy sources are "highly significant for our public acceptance and not least for the economic future and growth strategy of our group," said Mr Grossmann, who is in his eighth week as chief executive of RWE.
"We are still in time to enter this market," he added.
The utility is seeking to catch up with peers such as Germany's E.ON, the world's largest utility, which has already started spending billions of euros on renewable energy assets in Spain, the United States and Canada.
Utilities aim to increase the use of low carbon power sources as the European Union forces companies to have certificates to emit the greenhouse gas and is tightening the supply of those permits, making them more costly.
To coordinate its renewables activities, RWE is setting up a unit to pool some 1,500 megawatts - most of its renewable-energy resources, from February next year - it said.
Fritz Vahrenholt, former chief executive of German windfarm maker Repower, has been named head of the division.
Mr Grossmann said: "The business model includes the planning, construction and operation of plants for renewable power generation and energy recovery.
The division, called RWE Innogy, will at its start have annual sales of some 400 million euros (£285.8 million) - about one per cent of RWE's overall sales in 2006.
It will have the same profitability targets as the rest of the group, Mr Gross-mann said. Generating power using the sun or the wind is more expensive than coal, but the costs are cushioned by a legal right to charge more in countries such as Germany.
The utility aims to have some 20 per cent of its generation capacity using renewables by 2020, in line with a target for the member countries of the European Union, renewables Mr Vahrenholt said.
About five per cent of RWE's power plants use renewable energy sources at present. The utility plans to raise that share, through the expansion of existing businesses and - to a lesser extend - through takeovers.
While the utility's focus is on wind-power, it is prepared to invest in all other forms of renewable energies such as hydropower and biomass, Mr Grossmann added.
It may also invest directly in companies developing renewable energy and may sell shares in the new division to investors in an initial public offering.
RWE does not plan to buy manufacturers such as windfarm makers, Mr Grossmann said, rebutting speculation that RWE was considering entering the engineering business.