* Atlantic Array would have had capacity of 1.2 GW
* Could have powered up to 900,000 British households
* RWE to focus on less technically challenging sites
* Decision comes amid uncertainty over UK energy policy
FRANKFURT, Nov 26 (Reuters) - German utility RWE has scrapped plans to build one of the world's largest offshore wind parks in Britain, as soaring gas and electricity prices fuel uncertainty over the UK government's commitment to renewable energy subsidies.
RWE said on Tuesday it would not go ahead with the proposed 1.2 gigawatt (GW) Atlantic Array wind park off southwest England, which would have featured up to 240 wind turbines with the potential to power as many as 900,000 British households.
"This is not a decision we have taken lightly, however given the technological challenges and market conditions, now is not the right time for RWE to continue to progress with this project," Paul Cowling, director of offshore at RWE's renewable energy unit Innogy, said in a statement.
Britain's energy sector has come under intense scrutiny in recent months, after opposition leader Ed Miliband said he would cap prices following years of steep rises, forcing the government on to the back foot.
In response, Prime Minister David Cameron has said he would cut so-called green taxes. Environmental taxes and social charges contribute nearly 10 percent to domestic energy bills, which average more than 1,200 pounds ($1,900) a year for each household.
The six energy companies that dominate Britain's energy market - which include RWE - have defended steep price rises, blaming green costs, wholesale prices and the cost of using the national grid.
Offshore wind parks have a relatively high risk profile compared with onshore sites, as turbines are installed in open water and need to withstand more challenging weather conditions such as higher wind speeds.
"We will continue to focus on the other less technically challenging offshore projects within our extensive offshore pipeline of up to 5.2 GW," RWE's Cowling said.
RWE, under pressure from plunging wholesale power prices, a boom in renewable energy capacity in its home market as well as Germany's decision to abandon nuclear power by 2022, is in the process of a major restructuring that has led it to slash about 13,000 jobs, or about 18 percent of its workforce since 2011 and to halve its dividend for this year.
Burdened by 30.8 billion euros ($41.6 billion) of debt, the group has embarked on a "capital light" strategy, aiming to partly outsource funding for expensive renewable energy projects, including offshore.