Leading global wind power producer Iberdrola laid the inaugural solar panel in its first photovoltaic plant in Spain this week, a decisive step into a local market it has long shunned.

Stretching across 1,000 hectares, the 500 megawatt (MW) plant will produce enough electricity for a quarter of a million households, making it the biggest under construction in Europe according to IHS Markit data.

Technological advances have pushed down the cost of solar and wind power generation and political will to reduce carbon emissions is prompting utility companies across Europe to change their business models.

Iberdrola already makes more than 40% of its energy from renewables but it stayed on the sidelines during a solar installation boom in Spain a decade ago.

Xabier Viteri, head of Iberdrola's renewables business, told Reuters the cost to build a plant is now a tenth of what it was then. "This energy is now very competitive and in some cases it can even reduce the cost of generation."

Last year, Iberdrola sold a stake in a solar thermal plant in south-central Spain, leaving it with no solar capacity in its home country.

Named Nunez de Balboa after a 14th-century Spanish explorer, the new plant is part of a broader drive to harness more energy from the sun, including in Mexico where it has built its biggest solar plant to date.

"We plan to do something more in the U.S., something more in Mexico and we also hope to be able to start something soon in Brazil," Viteri said.

Solar will account for a little more than a third of the new renewable capacity the company plans to build globally by 2022, Viteri said, and almost all its new facilities in Spain.

Despite being one of Europe's sunniest countries, especially in its southern regions, mainland Spain only has around 7 GW of solar capacity, compared with around 46 GW in Germany.

Investors are now returning in force to Spanish solar power some six years after the government cut subsidies to balance a prodigious tariff deficit built up during an installation boom.

Several other large photovoltaic projects are being built in the country, including one of 493 MW and one complex which will form a 700 MW cluster in Aragon.