First Solar has signed a deal with the Chinese government to start construction next year of what would become the world’s largest solar power plant.

The USA-based energy firm has signed a Memorandum of Understanding (MOU) to build a 2 GW solar facility in Ordos City, Inner Mongolia, and says that the project will play an important part in bringing the cost of solar electricity closer to grid parity.

Under the terms of the MOU, the power plant would be built in four phases between 2010 and 2019 and when complete could supply power to three million Chinese homes. First Solar is also considering the possibility of constructing a manufacturing facility in China, the firm said in a statement.

“This major commitment to solar power is a direct result of the progressive energy policies being adopted in China to create a sustainable, long-term market for solar and a low carbon future for China,” First Solar CEO Mike Ahearn said at the signing ceremony held in Arizona, USA. “We’re proud to be announcing this precedent-setting project today. It represents an encouraging step forward toward the mass-scale deployment of solar power worldwide to help mitigate climate change concerns.”

The project will operate under a feed-in-tariff which will guarantee the pricing of electricity produced by the power plant over a long-term period.

The first phase of the project will be a 30 MW demonstration project, construction of which will begin by 1 June 2010. This will be followed by three more phases of 100 MW, 870 MW and 1000 MW, the last of which will be completed by 2019.

China’s current installed capacity of solar power plants totals around 90 MW. The country recently revised its target for solar power installations from 1.8 GW by 2020 to 2 GW by 2011 and 10-20 GW by 2020.