Oahu’s first utility-scale photovoltaic project is expected to begin delivering solar power to homes and businesses on the island next year, Hawaiian Electric Co. said Thursday.

SunPower Corp. plans to break ground on the 5-megawatt project called Kalaeloa Solar II this year and complete it within five months, officials from the company said. The facility will be built on a parcel of land near Kapolei that SunPower is leasing from the Department of Hawaiian Home Lands.

The state Public Utilities Commission recently approved a power purchase agreement that allows HECO to buy electricity from SunPower over a 20-year period. The agreement marks the first time the PUC has approved a utility-scale photovoltaic project on Oahu. HECO is awaiting approval from the PUC for several other PPAs it has signed with companies seeking to build solar energy projects in West Oahu.

HECO will buy the power from SunPower at an average cost of 21.8 cents a kilowatt-hour over the 20-year life of the agreement. When HECO buys electricity from an independent producer such as SunPower, it passes the cost straight through to ratepayers with no markup. The rate HECO will pay SunPower compares favorably with the overall residential rate on Oahu, which hit a record 33.1 cents a kilowatt-hour in October.

The project will generate an average of 11,415 megawatt-hours of electricity a year for 20 years, according to SunPower Corp., which is based in San Jose, Calif. That’s sufficient to provide the energy needs of 1,600 Oahu homes using an average of 600 kilowatt-hours a month.

"We welcome this approval of our continuing effort to add as much renewable energy as possible to our island grid," said Robbie Alm, HECO executive vice president.

"Hawaii is a national leader in adding solar watts per person to our grids, and this project will help reduce our use of imported oil and increase our solar leadership," Alm said.

The facility will use high-efficiency photovoltaic modules on a tracking system that allows the panels to follow the sun through the day, said Jim Pape, president of SunPower’s residential and business commercial group. The project will feature nearly 18,000 panels, according to HECO’s power purchase agreement application.

The state’s first utility-scale solar project was a 1.2-megawatt facility built in 2009 on Lanai by Castle & Cooke.