The Australian Renewable Energy Agency (ARENA) says the Barcaldine solar farm in central western Queensland will provide about 10 per cent of the country's large-scale solar electricity.
ARENA is providing $22.8 million support towards the project's construction and the Clean Energy Finance Corporation has committed $20 million in debt finance.
ARENA CEO Ivor Frischknecht said it would be huge.
"To give you a sense, this is a 20 megawatt solar farm which is by far the biggest in Queensland to date and Australia-wide there's a total of about 240 megawatts either under construction or installed, so that gives you a sense of scale," he said.
Mr Frischknecht said the Barcaldine Solar Project would be watched with interest.
"Well it's a test case in multiple ways," he said.
"Firstly just in the volume of projects, so if you have more projects the costs will come down.
"The other part that's very interesting here is because it's a regional area that does have some electricity reliability and voltage stability issues, this renewable project will help that."
He said the potential for added battery storage to create additional network benefits would also be explored.
"This could allow the solar plant to work in tandem with the existing gas plant during a line outage, operating as an 'island' network independent to the main grid," he said.
"This project will serve as a test case showing how the network benefits from distributed renewable energy can improve network efficiency, and potentially enable solar plants to access an extra revenue stream through network support payments."
Federal Environment Minister Greg Hunt said the solar farm would draw on single-axis tracking technology to help generate power for the region.
"The solar panels are designed to tilt in the direction of the sun as it crosses the sky, maximising the effectiveness and efficiency of each of the 79,000 solar modules," he said.
"Enough energy to power 5,300 households will be fed into the local grid to be used by homes and businesses in the Barcaldine area."
He said Government funding for projects like this would provide valuable knowledge about cost-effective ways to improve network efficiency and help drive down costs of large-scale solar.
The federal LNP Member for Maranoa, Bruce Scott, said the new solar farm would generate power and jobs in the region.
"The Barcaldine Regional Community Solar Farm will be located close to a transmission substation and gas power station on the Capricorn Highway, five kilometres east of Barcaldine," Mr Scott said.
"It will be ideally positioned to take advantage of the region's sunny climate and in close proximity to local labour.
"In addition to feeding renewable energy into the existing power infrastructure to help meet the region's current energy needs, the project is expected to boost skills and employment with up to 175 jobs generated during the construction phase."
The project is due for completion in April 2017.