Two of the nation's renewable energy agencies are planning a massive investment in solar power which could see the construction of up to 10 large-scale power plants.

The Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC) announced a combined $350 million investment.

Despite Australia's sunny climate, the nation lags behind comparable countries when it comes to the number and operation of large-scale solar power plants.

Both organisations said the new investment would drive down the cost of solar development and create more innovation in the sector.

"The goal is to reduce the cost of the supply chain in particular," ARENA chief executive Ivor Frischknecht said.

"The cables and brackets and frames and posts and construction costs and financing costs — all of those costs are local costs.

Key points: ARENA and CEFC announce $350 million investment

"Only a small fraction is the cost of the panels that are imported. All of those local costs are very high still because we have very few solar farms here, we only have four."

ARENA's $100 million grant program will seek bids from groups or organisations interested in building large-scale solar projects, greater than five megawatts of generation capacity.

"We're talking anywhere from five megawatts and upwards," Mr Frischknecht said.

"What that means in physical terms is several hectares typically.

"Solar can be large, even at a relatively small scale, so when put in context of say a wind farm or a coal-fired power station, you can actually have commercially competitive solar that's relatively small."

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ARENA hopes that by 2020, large-scale solar will be cost-competitive with renewable wind power.

"The challenge is that we have existing fossil fuel power plants that are fully depreciated – that means they've been fully paid for, and you can't compete against that and it will be very, it will be awhile before we can," Mr Frischknecht said.

"However, if you wanted to build a brand new, coal-fired power station it already is competitive, both wind and solar, similar in price or cheaper."

He said the projects stemming from the grants should be completed by 2017, and will double the existing capacity of large-scale solar in Australia, to about 400 megawatts.

Large-scale solar energy is still small when compared to solar panels on homes. There is already 4,000 megawatts installed around the country, which is a figure likely to grow.

But Mr Frischknecht said large-scale solar is still essential.

"It is a different way of producing energy and it's highly complementary with household solar," he said.

"Large-scale is much more controllable, much more reliable, can be more easily forecast and so it can be more easily integrated into our energy system."

Australia heading for power generation infrastructure overhaul

The $100 million from ARENA will be complemented by $250 million from the Clean Energy Finance Corporation.

The way the ARENA grant and CEFC loan system works is that a group would apply and then be awarded a grant, raise some of its own private capital, and then receive a loan from the CEFC for the rest.

CEFC's chief investment officer, Ted Dow, said the loans would help secure cheaper capital than that available from other loan providers, like the banks.

"The long-term benefit will be that we'll drive down the costs of these technologies much, much faster than we would in the absence of any program," he said.

"What consumers are facing long-term is a complete overhaul of the power generation infrastructure in Australia.

"We've got about a third of our power stations today, coal-fired-generation power stations, which produce something like 85 per cent of our power.

"About a third of them today are well past their useful service lives.

"In about another five to 10 years, two thirds will be well past their useful service lives, so there's a complete overhaul coming of Australia's power generation back bone.

"The cheapest way to replace that today will be to drive down the costs of solar, wind and other renewable technologies."