Australia will build the world's biggest solar power plant amid warnings of blackouts within five years unless it can increase electricity generation to meet growing demand for air conditioners.

With climate change becoming a major issue in Australia as a severe drought eats into economic growth and cities impose water restrictions, the government has begun to support alternative forms of energy.

Besides the new A$420 million (US$318 million) solar power plant, the government also announced on Wednesday a A$360 million (US$273) pilot project to produce cleaner energy through brown coal drying and carbon capture and storage.

Australia, one of the world's biggest producers of greenhouse gases per capita, refuses to sign the Kyoto Protocol aimed at lowering greenhouse gases which cause global warming.

It is the world's largest coal exporter and relies on coal-fired power stations for its power supplies, supplemented with gas-fired plants.

Environmentalists welcomed news of the solar power plant but were disappointed the government continued to fund coal power.

Australia's national power administrator has warned of blackouts and soaring electricity prices unless power generation was increased.

Demand for power in Australia's most populous state, New South Wales, may outstrip supply by 2010 or 2011, fuelled mainly by air- conditioning which is now a standard feature in new homes and which causes demand peaks during summer months, it said.

The smaller states of Victoria, South Australia and Queensland could experience power blackouts much earlier, starting from 2008, said the National Electricity Market Management Company (NEMMC).

In its annual power report, NEMMC said Australia's eastern states, home to the bulk of the 20 million population, had enough electricity for a forecast scorching summer starting in December.

Australia is in the grip of the worst drought in 100 years and has experienced severe early season bushfires and record unseasonal temperatures as an El Nino develops, bringing hotter, drier conditions.

Treasurer Peter Costello said the new solar concentrator with a capacity of 154 megawatts would be built in Victoria state, and would reach full capacity by 2013.