The unit of PG&E Corp said it would pay $1.4 billion to own up to 250 megawatts (MW) of solar generation, its first direct investment in renewable generation in more than a decade.
PG&E will seek to set up most of its own photovoltaic solar panels, which transform the sun's light into electricity, at existing power station sites or on land it already owns.
The program will meet 1.3 percent of its electric demand, and is part of PG&E's effort to meet state mandates requiring utilities to produce 20 percent of their power from renewables such as wind and solar power by 2010, and then 33 percent by 2020.
The announcement comes as the credit crisis has dried up funding for renewable energy projects. Utilities, however, have been one bright spot for solar projects because, effective late last year, they can now claim a 30 percent tax credit for building solar installations.
"If we attempted to do it without the benefit of the investment tax credit, the alternative that we would serve up to our customers would be substantially more expensive," Chief Executive Peter Darbee told reporters at a news conference.
The program will add about 32 cents a month to the average residential utility bill, the company said.
Darbee said he hoped PG&E, with its $35 billion balance sheet, could serve as a "green knight" for smaller renewable projects starved of capital in the current credit market.
PG&E's move comes a day after power plant owner NRG Energy entered the solar arena for the first time with a deal to invest $10 million in solar thermal start-up eSolar Inc and create up to 500 MW of solar power in the U.S. Southwest.
The 250 MW that PG&E's utility will not own will be built and owned by independent developers. Most projects will be between one and 20 MW, mounted on the ground or rooftops in northern and central California.
PG&E plans to pay $246 per megawatt-hour for the power, though that may vary, the San Francisco-based company said. Northern California power now trades at about one-seventh that price.
Overall, the project will generate enough electricity to power about 150,000 homes.
