State regulators have cleared the Kauai Island Utility Cooperative to build a $42.2 million solar energy facility that would be the state’s largest.

KIUC will develop the 12-megawatt facility on 67 acres the utility is leasing from Grove Farm Inc. near Koloa on Kauai’s South Shore. KIUC hired California-based SolarCity to build the project, which will provide an estimated 6 percent of the island’s energy needs.

The utility estimates the cost of the electricity produced by the solar facility will be 16.5 cents per kilowatt hour over the 25-year life of the project, well below what KIUC pays to generate power at its oil-burning generators. The solar energy generated by the Koloa project will replace an estimated 1.7 million gallons of imported oil that KIUC burns each year for electrical generation.

KIUC estimates residential customers using 500 kilowatt hours a month will save $2.88 a month by 2015 and $4.52 a month by 2020 as a result of the solar project. KIUC customers paid 41.5 cents a kilowatt hour for electricity in June, one of the highest rates in the state.