Sempra Energy's (SRE) merchant generation unit is looking to build up to 500 megawatts of new solar-power plants over the next few years, the unit's top executive said Wednesday.

The San Diego-based company owns a 10-megawatt solar farm in Boulder City, Nev., that was built by solar-panel maker First Solar Inc. (FSLR). First Solar is set to build a second, 48-megawatt solar farm for Sempra near the existing solar farm. Sempra has sold the output from both plants to PG&E Corp. (PCG) utility Pacific Gas & Electric Co.

Next, Sempra Generation aims to develop as much as 500 megawatts of solar-power plants that use solar panels and/or solar-thermal technology, on more than 4,000 acres of land the company controls near Phoenix, Michael Allman, the unit's president and chief executive, said in an interview.

"We're testing the market to see who would be the best supplier," Allman said, adding he expects to choose a supplier by the end of the year and it won't necessarily be First Solar.

The company is also focused on landing one or more power purchase agreements with one or more utilities for the output within the same time period, Allman said.

After choosing a supplier and finding a customer for the power, the project could be developed fairly quickly, Allman said. Sempra has a long-term lease on the land, which is adjacent to the company's 1,250-megawatt natural gas-fired Mesquite power plant, the existing transmission infrastructure is sufficient to ship the solar power to markets in Arizona and California, and the solar farm will need only local development permits, which are generally easier and faster to get than state and federal land-use licenses, he said.

If the company can secure orders for 500 megawatts, it could build that amount as soon as 2012, Allman said. The timing will depend on how quickly the company can sign one or more utility power purchase agreements, and how quickly the supplier could deliver the equipment needed to build the solar farm, Allman said.

Demand for solar, wind and other renewable power is strong in California, Nevada and other western states, where utilities are required to use renewable sources for a portion of the power they sell.

California Gov. Arnold Schwarzenegger earlier this month ordered state agencies to set rules requiring the state's utilities to use renewable sources for a third of their retail power by 2020, up from 20% they're currently required to line up by 2010.

Shares of Sempra closed Wednesday 35 cents lower, at $49.81.

-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.co