The world's largest solar plant is planned for the Mongolian desert of China

Arizona-based First Solar Inc. and Ordos City in China signed an agreement Tuesday to build what will be a 2-gigawatt solar installation.

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The Ordos City project will generate 2,000 megawatts of electricity, enough to power 3 million Chinese homes, with a field of panels stretching for 25 square miles.

It will start as a 30-megawatt demonstration unit with construction beginning in June 2010 and additional phases to come online in 2014 and 2019.

“This major commitment to solar power is a direct result of the progressive energy policies being adopted in China to create a sustainable, long-term market for solar and a low carbon future for China,” First Solar chief executive officer Mike Ahearn said in a news release. “It represents an encouraging step forward toward the mass-scale deployment of solar power worldwide to help mitigate climate change concerns.”

China announced in July that its renewable energy is expected to represent 10 percent of the country’s energy resources by 2010 and 15 percent by 2020.

While financial terms of the deal have not yet been reached, First Solar will operate the plant under China’s feed-in tariff, which guarantees prices paid for renewable power.

“This type of forward-looking government policy is necessary to create a strong solar market and facilitate the construction of a project of this size, which in turn continues to drive the cost of solar electricity closer to ‘grid parity’ — where it is competitive with traditional energy sources,” First Solar said in the release.

Ahearn said that in the United States, a solar plant of this size would cost $5 billion to $6 billion, but it is cheaper to build in China. He did not specify the cost of the Ordos City project.

The project is part of an 11,950-megawatt renewable-energy park planned for Ordos City in Inner Mongolia.

Plans for the park include wind farms to generate 6,950 megawatts, photovoltaic power plants to provide 3,900 megawatts and solar thermal farms to supply 720 megawatts, The New York Times reports.

Noting that China is home to Suntech, the world’s third-largest solar module maker, it is “quite significant” that China is “importing a U.S. world leader to the marketplace,” said Nathaniel Bullard, a solar analyst at London-based New Energy Finance, the Times reports. “This is going to help ensure technological leadership and not just manufacturing leadership.”

China is the world’s largest consumer of coal, which accounts for nearly 80 percent of the country’s electricity generation.

Statistics from the China Renewable Energy Society suggest that at least two-thirds of China gets more than 2,200 hours of sunshine per year, making China’s potential solar energy resources equivalent to 1.7 trillion tons of coal.

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