The companies will invest 260 million euros ($360 million) in Andasol 2, a 195-hectare (480-acre) solar facility that they are calling "the largest solar power plant in the world."

Siemens and several other German firms are providing much of the technology. ACS/Cobra of Spain is handling most of the construction work. Solar Millennium and the Portuguese energy group EDP plan to develop a third power plant in the area.

The new phase will produce enough energy to supply 200,000 people with solar electricity when it starts in 2009.

Europe's solar powered future

Each of the plants generates 650 megawatts of electricity, which reduces the carbon dioxide emissions by 150,000 tons per year. By 2050, a full 15 percent of Europe's energy will come from solar power plants in North Africa and the Middle East, Solar Millennium said.

Solar energy plants in Mediterranean countries "can generate substantially more cost-efficient amounts of climate-friendly energy than solar power plants in Germany," Christian Beltle, Solar Millennium's chairman, said in a statement.

Spain switching to renewable energy

The current Socialist government campaigned to abandon the country's nuclear program, which currently accounts for 23 percent of Spain's electricity production.

Spanish environmentalists urged their government last month to switch completely to renewable energy by 2050. Spain is a European leader in using renewable energy. In Europe, it is second only to Germany in using wind power.

In March, the European Union set a goal a 20-percent cut in greenhouse gas emissions by 2020 compared with 1990 levels, but Germany's goal is to have cuts of up to 40 percent.