A California utility company has signed a deal to build the world's two biggest solar power plants in central California with solar panels covering 32.5 sq km and producing 800 MW of electricity.

Pacific Gas & Electric will use the massive solar facilities to help it meet state requirements to generate 20 percent of its electricity from renewable sources by 2010, according to the deal announced on Friday.

The company has signed a contract with two Silicon Valley firms to build the plants near San Luis Obispo, a city near the central California coast approximately equidistant from the state's main population clusters around San Francisco and Los Angeles.

Optisolar will build a 550 MW solar farm using thin-film photovoltaic panels while SunPower Corp, will build another 250 MW plant on former farm land, both sites in San Luis Obispo.

The projects will produce 1.65 billion kilowatt hours of electricity annually - which is enough electricity to power 239,000 average California homes each year.

The utility will rely on existing transmission lines rather than building them from scratch to deliver electricity to customers from the solar ranches in central California, PG&E said.

The project is so large that it will double the entire installed base of solar power generation in the US, SunPower said. Currently, the world's largest solar facility is a 23 MW solar farm in Spain.

Germany is building a 40 MW plant, and a 154 MW power station is under construction in Australia.

"This commitment not only moves us forward in meeting our renewable goal, it's also a significant step forward in the renewable energy sector," said Jack Keenan, chief executive and senior vice president of PG&E.

"Utility-scale deployment of PV (photovoltaic) technology may well become cost competitive with other forms of renewable energy generation, such as solar thermal and wind," Keenan said.

"What you are seeing here is the foundation of an industry that can deliver electricity cleanly, cheaply, and reliably than the fossil fuel alternatives," said Adam Browning, executive of the Vote Solar Initiative.

"This is a very large, great leap forward in economies of scale. This is the wave of the future," he added.