Pacific Gas deal will nearly double USA's solar power

Electric utilities are warming to solar power in a shift that promises to turbocharge a technology that has been hindered by high prices and slow consumer adoption.

Pacific Gas and Electric pcgin California announced last week it will buy 800 megawatts of solar-generated electricity from two companies, enough to light 239,000 homes. Within three years, PG&E will buy its solar energy from OptiSolar and SunPower, which plan to build the world's two largest solar farms in California as part of the deal.

It would nearly double the USA's entire solar-panel capacity. Driving the trend are solar's falling costs and state alternative-energy mandates.

Solar power has grown but still makes up well under 1% of U.S. power generation. More than 90% of solar panels have been installed on rooftops by maverick consumers and businesses. Utilities' embrace of solar energy will help push it to about 10% of power generation by 2025, predicts Ron Pernick, principal of research firm Clean Edge.

"Just a handful of utilities doing something big changes the scale of the entire market," says Julia Hamm of the Solar Electric Power Association.

Solar power typically has cost about twice as much as electricity from fossil-fuel-fired plants. But PG&E Vice President Fong Wan says prices in last week's deal approach electricity from natural-gas-fired plants. "The cost has come down to a point where we're comfortable doing it," he says.

Prices for solar-generated electricity have been falling, thanks largely to increasing manufacturing capacity and technological improvements, SunPower's Julie Blunden says. Other recent deals:

•Building farms. Florida Power & Light and Sempra Generation, a power wholesaler, each plan to build solar farms of up to 25 megawatts in Florida and Nevada, respectively.

•Purchasing power. CPS Energy in San Antonio, Duke Energy in North Carolina and Florida Municipal Power Agency say they'll buy solar power from suppliers willing to invest in new generation. That avoids upfront construction costs for utilities.

•Installing panels. Utilities are putting panels that feed into the grid on neighborhood roofs. That sidesteps the need for costly transmission lines. Southern California Edison last week began placing panels on 100 warehouses in the Los Angeles area. Duke Energy, Long Island Power Authority and Portland General Electric in Oregon plan similar initiatives.

With costs for traditional power plants rising and solar falling, "We see a convergence coming," Duke executive Owen Smith says.