The project is located 2km off the west coast of Scotland and has been the subject of protests from a local anti-wind group.
In addition to wind resource issues, SSE cited the proximity to the local Campbeltown airport and local communities, and the impact on recreational sailing in the area as reasons to withdraw plans for the project.
However, SSE is proceeding with the 690MW Islay offshore wind farm located 15km off the western coast.
Although SSE said challenging seabed conditions remained an issue with the site, it planned to submit development plans to the government in 2013.