updated 2/2/2007 1:33:49 PM ET 2007-02-02T18:33:49

Scientists from the University of California and the University of Illinois are partnering in a national initiative to develop new, clean sources of energy, backed by $500 million from oil company BP PLC.

"This is great news for California and this is great news for America," said Gov. Arnold Schwarzenegger, who announced the creation of the Energy Biosciences Institute in Berkeley on Thursday. Illinois Gov. Rod Blagojevich was in Berkeley for the announcement.

The teams from UC Berkeley and UI Urbana-Champaign, a leader in crop biology, also will be working with researchers from Lawrence Berkeley National Laboratory, set in the hills above the Berkeley campus.

The new institute will be the first public-private research lab dedicated to renewable fuels and clean energy, said Robert Malone, chairman and president of BP America. He called the partnership a groundbreaking effort that "we believe will have an immense positive impact on our world."

UC Berkeley is looking to combine its expertise in engineering and life sciences to find ways to develop new fuel sources and to make solar energy more powerful and less expensive.

The University of Illinois will focus on growing plants that can be used to produce alternative fuels, Chancellor Richard Herman said. The school, expected to see up to $100 million of the research money, has committed 12,000 square feet of space and expects the work to occupy dozens of faculty, staff and students over the next decade, he said.

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