BP Solar will join forces with SolarEdge to test new products designed to help solar modules operate more efficiently in harvesting the sun's rays, the companies said on Wednesday.

BP Solar, a unit of oil giant BP Plc, will integrate into its solar modules SolarEdge's electronics that are designed to reduce the losses in solar arrays. Those losses can cut their power output by as much as 20 percent.

Solar companies have been steadily reducing the costs of their cells and panels, and many companies expect the systems to be able to produce power at or below the current retail prices in many parts of the world in the next two to three years.

Experts say that reaching that grid parity threshold would stimulate demand for solar energy by reducing the need for the billions of dollars in government subsidies that currently are used to help fund the roll-out of the power systems.

Solar panels typically turn between 10 to 15 percent of the sun's light into electricity, but that output can be reduced by partial shading of the arrays and other glitches in the electronic equipment that transports power between the panels.

SolarEdge, which is based near Tel Aviv, Israel, and has raised nearly $35 million in venture capital funding, produces equipment that can help eliminate inefficiencies in the solar module arrays.

The company's products also make the solar systems safer, according to Chief Executive Officer Guy Sella, and can be used to provide data to customers on cells or modules that are damaged and not producing power at their capacity.

SolarEdge expects to have orders for equipment that generate more than 12 megawatts of electricity by the end of 2009, and as much as 80 MW in 2010.

The company expects to be cash-flow positive in the fourth quarter of 2010, and could launch an initial public offering of shares in the second half of 2011, he said.

(Reporting by Matt Daily; Editing by Phil Berlowitz)

Israel Electronics BP plc Renewable energy