There's a new player in solar today, with the announcement that Arlington, Va.-based power company AES (NYSE: AES) and New York private equity firm Riverstone Holdings have teamed up to pour $1 billion into utility-scale photovoltaic projects.

The new venture, to be called AES Solar, will be funded by $500 million from each partner over the next five years.

The two partners said the joint venture would become a developer, owner and operator of utility-scale solar installations ranging from fewer than two megawatts to more than 50 MW in size.

AES and Riverstone did not disclose where they plan to put up the solar power plants, but said the venture would initially focus on developments and projects in countries "offering the most attractive tariffs."

But the companies, which would not comment beyond what was in a press release, said they plan to expand into other countries, and said they have a goal of "grid parity" for solar – being competitive with conventional fuels.

"We'll be a significant player in the developing solar power market," said Paul Hanrahan, president and CEO of AES in the company's recent fourth quarter conference call.

The power company said last month that it plans to invest up to $10 billion over the next 5 to 10 years in alternative energy, including wind generation and liquefied natural gas, as well as greenhouse gas capturing technology.

Hanrahan said the expansion would be driven by growth in Asia, and particularly in China, where AES plans to set up a global center for engineering and procurement, which would design and plan the company's global projects.

This looks to be the first move into the solar photovoltaic sector by both companies, but they each already have significant stakes in renewable power.

AES operates more than 1,000 megawatts of wind facilities in the U.S. and has another 4,000 MW of wind projects in various stages of development around the world.

Last September, AES said it planned to expand its Buffalo Gap wind farm in Texas, raising capacity to 524 MW, a boost of 170 MW (see AES expanding Buffalo Gap wind farm).

Construction on the Buffalo Gap expansion is set to be complete in the middle of this year, making the site one of the largest wind farms in the U.S.

With a total of 43,000 MW of generating capacity, AES said it gets about 20 percent of that from renewable resources, including hydro, wind and biomass.

"We expect to have 2,600 additional megawatts of wind generation by 2012," said Hanrahan.

Riverstone has stakes in geothermal, biofuel, biomass, solar thermal, and oilfield services.

One of Riverstone's portfolio companies, Houston-based biodiesel firm Green Earth Fuels, formed a joint venture last November with Seattle, Wash., biotech company Targeted Growth (see Targeted Growth, Green Fuels form biodiesel venture).

The camelina oil-based biodiesel venture, called Sustainable Oils, is targeting up to 100 million gallons of biodiesel by 2010, with most of the initial camelina to be grown in Montana.

Another recent solar power team up is the solar thermal power pairing of Abu Dhabi's Masdar Initiative and Spain's Sener Grupo de Ingeniería (see Masdar, Sener in $1.2B solar thermal venture).

The two companies plan to build and operate concentrating solar power plants across the world's sunbelt regions.

The new venture, called Torresol Energy, will tackle its first set of projects in Spain, with plans for three solar thermal plants with a combined value of $1.2 billion.

Masdar, the Abu Dhabi government's umbrella group for all of its renewable projects, went big with cleantech in January when it announced a $15 billion commitment to renewable energy in the emirate (see Abu Dhabi, the next cleantech hub?).

Europe could be an attractive destination for the AES Solar photovoltaic venture, especially over the U.S.

Tax incentives for renewable energy in the States, set to expire at the end of this year, have yet to be renewed.

As for the tariff situation, a new California tariff offers users of small renewable energy systems the opportunity to sell power back to the utilities, but doesn't offer a good deal for solar (see Who's lining up for California's feed-in tariffs?).

Under the program, homeowners and businesses who want the solar tariff can't use other, pre-existing incentive programs in the state, significantly lowering the value of the tariff.

AES and Riverstone said their new solar venture would be managed by a seven member board of directors, with three directors each to be appointed by the venture partners.

Robert Hemphill, former AES exec. VP of global development, will serve as president and CEO of AES Solar. Hemphill will also take the seventh spot on the board of directors.