The company behind what is expected to one day be the world's largest solar power plant on Thursday said the California project will use photovoltaic technology instead of solar thermal power because of the dramatic drop in the price of solar panels.

Germany's Solar Millennium AG (S2MG.DE) said it will convert the first 500 megawatts of its 1,000 MW Blythe solar power plant in the Mojave desert to PV. It will decide what technology to use for the second half of the project at a later date. The company did not name a PV panel supplier for the project.

Solar Millennium responds quickly and pragmatically to market conditions, and at the moment the California market favors PV technology, Solar Millennium Chief Executive Christoph Wolff said in a statement.

The move is the latest in a string of such conversions this year by solar thermal power plant developers in California.

So far this year, at least four projects, representing about 1,850 MW of generation, have elected to change most or all of their technology to PV, which turns sunlight into electricity, from concentrating solar power, or CSP, which uses heat to create steam that powers a generator.

The price of PV panels has plummeted in the five years since California mandated that the state's utilities source 20 percent of their power from renewable sources by 2010, sparking a building spree of solar and wind projects. Since 2008, the price of PV solar modules has fallen by more than half, including about a 25 percent drop this year alone.

The switch will also enable the project to get up and running in smaller phases than the 250 MW chunks required by the CSP technology, the company said in a separate statement released by its U.S. unit, Solar Trust of America.

Because it is switching to a more ubiquitous technology, the company plans to finance the project in the commercial bank market rather than with a loan guarantee from the U.S. Department of Energy. The loan guarantee program was developed to fund new technologies that have had trouble securing financing from traditional lenders.

The company's first North American project was offered a $2.1 billion conditional loan guarantee from the federal government in April. That offer had yet to close.

Looks likely that they wouldn't have been able to close it because they couldn't find a partner to provide sponsor equity, GTM Research analyst Brett Prior said.

Solar Millennium said it still sees strong demand for concentrating solar power, also known as solar thermal power, in markets such as Africa, the Middle East, India, China and Southern Europe.

Our long-term strategy remains unchanged, Wolff said.

The Blythe power plant is being developed by Solar Trust of America, a joint venture between Solar Millennium and Ferrostaal AG.

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