NEW YORK (Reuters) - General Electric Co GE.N expects its nascent solar-energy business to hit the $1 billion annual revenue mark over the next three years or so, with its key challenge to make the green energy source less costly, the head of the unit said on Monday.

John Krenicki, president and chief executive of GE Energy, speaks at the Reuters Global Energy Summit in New York June 2, 2008. REUTERS/Brendan McDermid

“I’m very optimistic about solar. I think it will be a billion-dollar business for GE sooner rather than later,” said John Krenicki, president and chief executive of GE Energy, which has businesses ranging from gas turbines to nuclear power to windmills.

Asked about how long it would take the solar arm to hit that mark, Krenicki told the Reuters Global Energy Summit: “In a three-year time horizon, which is kind of our planning period right now.”

The unit, which sells photovoltaic cells that can be used to convert the sun’s rays into electricity, currently has over $100 million in revenues.

Rocketing energy prices -- U.S. oil futures CLc1 last month topped $130 a barrel for the first time -- and concern about climate change have spurred global interest in alternative sources of energy, including solar and wind. Still, a big hurdle for many green energy sources is the high cost.

That is the biggest concern GE’s solar business is facing, Krenicki said.

“If you think about the solar that’s on the market today, it’s six, seven times more expensive than wind,” Krenicki said. “Solar requires material science breakthroughs, which is something that GE is good at.”

GE, the second-largest U.S. company by market capitalization, entered the solar-energy business in 2004 when it acquired AstroPower, a maker of traditional photovoltaic cells and last year expanded into thin-film solar cells when it bought a minority stake in PrimeStar Solar.

That acquisition may prove to be a key step as the thin-film technology does not depend on silicon. Tight supplies of silicon have slowed the solar industry’s growth.

“Thin film has a great chance to be the lowest cost scalable form of solar power generation,” Krenicki said.

The Fairfield, Connecticut-based conglomerate is not counting on further acquisitions to hit its $1 billion target for solar, Krenicki said.

“If someone has technology that we don’t have, then that would be of interest,” he said. “But right now I think we have what we need, and we’d apply the wind business model, which is we’ll do it organically once we’ve done the initial investments.”

The solar sector has caught Wall Street's attention, with shares of major solar cell companies, including First Solar Inc FSLR.O, SunPower Corp SPWR.O, Suntech Power Holdings Co Ltd STP.N and Evergreen Solar Inc ESLR.O rocketing up last year, only to cool in the first months of 2008 amid concerns their valuations had swelled too quickly.

“We’re not going to dabble in the solar business,” Krenicki said. “We will put the pedal to the accelerator once it is very clear what our competitive advantage is.”

GE’s wind business is on track to hit the $6 billion revenue mark this year. GE entered that business in 2002, buying the wind turbine assets of the former Enron.

Krenicki noted that GE now has orders for its electricity-generating wind turbines through 2011 and plans to continue to boost production capacity.

“We have pretty good visibility out about three years, and are building up our supply chain in that time period and beyond,” he said.

GE's competitors in the energy industry include German conglomerate Siemens AG SIEGn.DE, Swiss engineering group ABB Ltd ABBN.VX and French industrial and power group Alstom Holdings SA ALSO.PA.

(Editing by Gerald E. McCormick/Jeffrey Benkoe)