By Kendra Marr
Washington Post Staff Writer
Wednesday, March 26, 2008

AES, a worldwide power-plant developer based in Arlington, announced yesterday that it will partner with private-equity firm Riverstone Holdings to invest up to $1 billion in solar energy projects around the world.

The joint venture, AES Solar, plans to create solar-energy farms by covering fields with rows of photovoltaic panels to convert sunlight into electricity.

AES said it hopes to create fields capable of generating 2 to 50 megawatts, which means that some would have to cover hundreds of acres. Six or seven acres of solar panels currently generate about 1 megawatt, enough to power 250 typical American homes.

The electricity produced by the farms would feed through substations to high-voltage lines, which are connected to the main power grid.

Solar panels are "not just for rooftops anymore," said Rhone Resch, president of the Solar Energy Industries Association. "We're seeing solar farms on landfills, vacant areas and land that may be restricted from public use. Solar farms are going to turn wasted space into useful space."

AES Solar said the first farms will be built in Europe and Asia, where special tariffs require utilities to buy renewable electricity above market rates, said Robin Pence, an AES spokeswoman.

In some countries -- particularly Germany, South Korea, Italy and Spain -- power companies make an average 10 percent-plus annual return on renewable energy because of long-standing subsidies, said Jesse W. Pichel, a senior research analyst at Piper Jaffray.

The United States does not have an equivalent policy. At the end of this year, wind and solar power tax credits will expire unless Congress extends them.

Germany installs eight times as many photovoltaic panels as the United States because of incentives to stimulate demand, according to a 2006 solar industry study.

"If we ever get our act together, the U.S. could potentially be the biggest market for renewables," Pichel said. "The U.S. is blessed with a lot of wind and a lot of sun."

Solar power is slightly more expensive than wind power, Pichel said. But as technology improves and the cost of silicon decreases, the cost of solar modules should be halved by 2011, he said.

As costs decline, AES and Riverstone said they will seek to expand into other countries with similar market incentives.

This is AES's first foray into photovoltaic panels. Renewable energy -- including wind, hydroelectric and biomass energy facilities -- accounts for 20 percent of its 43,000 megawatt generation capacity worldwide.

"Solar is a natural extension of our business," Paul T. Hanrahan, president and chief executive of AES, said in a written statement.

AES and Riverstone, a New York firm that focuses on energy and power, will each provide up to $500 million to invest in the projects.

The joint venture will be managed by a seven-member board of directors. AES and Riverstone will appoint three directors each. The seventh member is Robert F. Hemphill Jr., who will be president and chief executive of the venture. Hemphill joined AES in 1981 and has held a series of senior positions.