Kauai Island Utility Cooperative said Tuesday it signed a contract to build the largest utility-scale solar and battery system in the state.

KIUC and AES Distributed Energy Inc., a subsidiary of Arlington, Va.-based The AES Corp., said the project includes a 28-megawatt solar photovoltaic and 20-megawatt, five-hour-duration energy storage system.

KIUC said the system is planned to be located on former sugar land between Lawai and Koloa on Kauai’s south shore. AES DE will own and operate the project.

When construction is complete, the facility will be the largest solar-plus-utility-scale-battery system in Hawaii and have the capacity to power roughly 8,500 homes. The solar array needs to be approved by the state Public Utilities Commission before construction can begin. If the project receives state and local regulatory approvals, KIUC expects it to be finished by late 2018.

KIUC President and Chief Executive Officer David Bissell said the facility will provide 11 percent of Kauai’s electrical generation and boost KIUC’s renewable sourced generation to make up more than 50 percent of the energy portfolio.

Bissell said energy from the facility will cost 11 cents per kilowatt-hour.

“The project delivers power to the island’s electrical grid at significantly less than the current cost of oil-fired power and should help stabilize and even reduce electric rates to KIUC’s members,” he said in a statement.

Bissell said the project will reduce KIUC’s annual fossil fuel use by more than 3.7 million gallons.