Sunny outlook for solar power plant

The US government has given the green light to a huge solar power plant in California's Mojave desert that has links to the Abu Dhabi Government's International Petroleum Investment Corporation (IPIC).

The Blythe solar thermal power plant will generate up to 1,000 megawatts of electricity after four stages of construction, 10 times more than a similar project being developed inland at Abu Dhabi that was billed as the world's largest.

It will serve as a key test of whether solar power can become an economically viable alternative to fossil fuels as the technology achieves larger economies of scale, solar experts said.

Blythe will use a vast array of mirrors covering over 2,800 hectares to focus the heat of the sun and create steam to turn a conventional generator.

The project will be made financially viable with support from the US government and the state of California, said Josef Eichhammer, the president of Solar Trust of America, which is developing the plant through a wholly owned subsidiary.

The US government has approved five similar projects for construction on its lands this month.

"There is enormous potential for additional solar thermal power plants and the Blythe project is just the beginning," Mr Eichhammer said in a statement.

Solar Trust is a joint venture 30 per cent owned by Ferrostaal, an industrial contractor in which IPIC holds a 70 per cent stake.

Solar Millennium, a German company that is one of the world's largest providers of solar thermal power plants, owns the other 70 per cent of Solar Trust.

Blythe and other large solar thermal plants will be a key test of whether the technology can achieve lower generation costs, said Ian Muir, the manager of carbon strategy at PFC Energy in Washington.

"Scale is the key here. They're going to find out whether there are any major roadblocks," Mr Muir said. "We're still estimating an average cost of 25 (US) cents per kilowatt-hour for solar thermal, which is far higher than anyone [in the US] pays for electricity."

The difference is made up by state and federal tax credits and other subsidies. A new coal power plant would produce electricity at a lifetime average cost of between 7 and 9 cents per kilowatt-hour, including capital costs.

California's main electricity utility has already signed agreements to buy up to 500mw from the first two stages of the project by 2014. Completion dates for the second two stages have not been set.

The financing split for the project has not been finalised, but US federal loan guarantees would cover 70 to 80 per cent, while 20 to 30 per cent would be raised from private equity firms, said Alexander Jacobsen, a Solar Millennium spokesman.

"The development started as Solar Millennium 100 per cent but since then it's become part of Solar Trust, a joint-venture with Ferrostaal," Mr Jacobsen said.

Solar Trust has two additional solar thermal plants separate from Blythe in the US regulatory pipeline, each with capacity of 250mw, he said.

IPIC bought 70 per cent of Ferrostaal in January last year from Germany's MAN to complement Abu Dhabi's industrialisation efforts.

The two have formed a separate joint-venture company, IPIC Ferrostaal, to build manufacturing plants and power stations across the Middle East.