In August, U.S. solar panel maker First Solar signed a contract with the Los Angeles Department of Water and Power to build the solar array.
The project, slated to start construction in 2010 and be completed in 2011, required approval by the Los Angeles City Council and the city's mayor.
The DWP, the nation's largest municipal utility, decided to drop the project on concerns about its costs.
The move deals a blow to Los Angeles Mayor Antonio Villaraigosa's pledge to eliminate the use of electricity from coal by 2020 and to get 40 percent of its energy from renewable resources by 2020.
First Solar, which makes thin film solar power panels, has more than 1 gigawatt of projects in its pipeline.