"We should do this because it makes economic sense and because it makes environmental sense," said Mitch Jackson, FedEx's environmental director, who said the company would also soon increase the number of gasoline-electric hybrid vehicles it operates to save gasoline.

The Oakland solar project will provide about 25 percent of FedEx's annual power at the hub, where 1,700 people work.

FedEx would not say how much the system will cost to build, but said up to 50 percent of the cost will be funded by state money administered through utility Pacific Gas and Electric.

The project will convert light from the sun into electricity through nearly 5,800 solar panels built by Sharp (6753.T: Quote, Profile, Research) . The panels will be installed by private company PowerLight, which this summer said it was helping to build the world's largest solar energy system in Germany which will be 10 megawatts.

This fall, FedEx will increase the number of its hybrids to 18 on the road and two for experimental use. The vehicles get up to 50 percent better fuel efficiency.

While FedEx has some 70,000 vehicles in its express and medium duty fleets, the company hopes to make hybrids one of its "standard" vehicles, said Jackson. FedEx is working with green group Environmental Defense and Eaton Corp. (ETN.N: Quote, Profile, Research) , the manufacturer of its hybrid trucks, to bring the vehicles closer to mass production and thereby lower their cost.

"We are working diligently to make these vehicles viable not only for us, but for other fleets as well, we want other companies out there to adopt this technology and share in this environmental benefit " said Jackson.