Most of Algeria lies in the Sahara desert, a region that has attracted interest from major European companies that want to tap into its huge solar power potential and its proximity to energy-hungry markets in Europe.
Algeria's state-owned utility Sonelgaz will invest $100 million in the plant and will launch a bidding round for contractors by the end of this year, Algeria's official APS news agency quoted Sonelgaz CEO Noureddine Bouterfa as saying.
The agency said the factory, which is scheduled to open in 2012, will each year produce photovoltaic cells with a generating capacity of 50 megawatts, equivalent to about one tenth the capacity of a small nuclear power plant.
A consortium of 12 companies including Siemens, E.ON and Deutsche Bank is planning a 400 billion euro (US$597.3 billion) project, known as Desertec, to generate solar power in North Africa and export it to Europe.
Algerian Energy and Mines Minister Chakib Khelil has expressed reservations about the project, saying earlier this year: "We don't want foreign companies exploiting solar energy from our land."
Neighboring Morocco this month announced a $9 billion solar power project of its own which is slated to produce 2,000 megawatts of electricity by 2020. Officials though have released few details of how the project will be funded.