The future of solar energy may be small -- small scale, that is.

The climate change and energy policy bill winding its way through the U.S. Congress shows a new federal eagerness to build a renewable energy future, but what specifically to build where is still up for debate.

Massive solar arrays of mirrors and photovoltaic panels harnessing desert sun on otherwise-worthless land are the cliches of clean energy, but environmentalists and homeowners suing to preserve species and backyard views may be the reality.

Such opposition to big solar plants in the desert and power lines that would link them to cities could tip the scales toward a profusion of smaller rooftop solar projects as politics upsets conventional wisdom about how the United States could respond to global warming.

That could be a boon for solar panel makers like First Solar Inc (FSLR.O: Quote, Profile, Research, Stock Buzz), the first installer of a big rooftop project in southern California.

You'd be amazed at the number of people who come out against solar projects, said Bob Fishman, the chief executive of solar thermal power company Ausra Inc. 'Not-in-my-backyard' rejection of solar projects rivals opposition to fossil fuel plants he built in a previous job, he said.

Nobody wants to give up electricity, but nobody wants to see it get made, he said.

Trend-setting California may be the test case for the United States. It has the most aggressive renewable ambitions of any state in terms of raw energy production. A target of 20 percent renewables may be raised to a 2020 goal of 33 percent.

We really may be in a paradigm shift, said Judith Ikle, program manager for procurement of renewables and climate mitigation at the state's Public Utilities Commission, which has just finished an analysis of how to build a state-wide system that gets a third of its power from renewable sources.

California expects most of its new renewable power to come from big solar thermal desert plants, which use mirrors to focus the sun's heat and drive a generator.

But the PUC also considered a distributed generation model of putting solar panels on rooftops all over the state, commenting that political roadblocks for transmission and big plants could make it more attractive and that it could be a cost-competitive solution if solar panels, now one of the most expensive renewables, continue a price dive.

It would also create more jobs than building big plants, and solar panels are relatively quick to install.

Distributed generation has a lot of potential. A lot of potential. But the price has to come down, there are potential issues of grid integration that we need to better understand, said Jaclyn Marks, a utilities commission analyst and an author of the recent report.

Edison International's (EIX.N: Quote, Profile, Research, Stock Buzz) Southern California Edison has begun the roll out of just such a rooftop solar system. Beginning with a pilot project by First Solar, the effort will expand to 4 square miles of panels on 300 rooftops, generating 500 megawatts, enough for about 325,000 homes -- when the sun is shining.

It's more power where it's needed more rapidly, said spokesman Gil Alexander, describing the project.

But while solar panel prices are dropping, the project doesn't compete with big solar plants in cost, even when you consider new transmission costs, and he was wary of calling a major trend yet.

Under the climate change bill now in Congress, U.S. hurdles look likely to mirror California's in some ways. The bill does not provide federal muscle to clear transmission corridors.

They're not really serious about the transmission, said Jim Rogers, chief executive of Duke Energy Corp (DUK.N: Quote, Profile, Research, Stock Buzz). In a vote of confidence for rooftop solar, he said big solar power stations faced a double negative of providing power only in the daytime, while also requiring new power lines.

Nobody's really said the emperor's has no clothes on, but you're getting the worst of both, he said.

Germany is already testing the idea of small-scale solar. Driven by hefty government subsidies, rooftop solar accounted for 90 percent of German solar energy last year.

But there is a long way to go -- solar still only produced 0.7 percent of total energy used there last year. (Additional reporting by Braden Reddall, Nichola Groom and Christoph Steitz; Editing by Lisa Shumaker)