Kyocera Solar will use the bulk of the 37 megawatts of solar panels it produces at its San Diego manufacturing facility to supply a 127-megawatt utility-scale installation in southwest Arizona.

The manufacturer began shipping solar panels this week.

“I think they liked the idea that we were a local California manufacturer,” said Tom Dyer, senior vice president of government affairs for Kyocera. “It wasn’t a requirement, but it probably helped.”

The power produced at the Arlington Valley Solar Energy II project is expected to be transmitted back to California from Arizona. San Diego Gas & Electric signed the power purchase agreement with LS Power Group.

Kyocera is one of several solar panel manufacturers supplying photovoltaic panels for the project.

The 34 megawatts of solar panels that Kyocera will supply from its San Diego facility  to the Arizona solar installation will deplete most of the most of the manufacturing plant’s capacity.

“It will be a strain,” Dyer said. “We had to maneuver things around to make sure we can still serve our other customers, but it will work out.”

Kyocera has a solar manufacturing capacity of more than 300 megawatts in North America, including its plant in Tiajuana, Mexico. With plants in the Czech Republic, China and Japan, the company has 600 to 800 megawatts of manufacturing capacity globally.

Kyocera, which began as a Japanese ceramics business in 1959, established a solar business in the United States during the 1970s oil crisis.

It has been growing rapidly in recent years.

It built the San Diego plant in 2004 with 24 megawatts of capacity and added the 250-megawatt plant in Mexico in 2008. In June of 2010, the company increased the capacity of the San Diego plant to 36 megawatts.

Dyer said there is a chance the company will expand is California production facility to keep up with domestic demand.

The Arlington Valley project will cover 1,160 acres in Arizona and is expected to be up and running by late 2013. When completed, the installation will be one of the largest in the country and will be the biggest solar plant in LS Power’s portfolio.

Image courtesy of Kyocera