A massive 20 megawatt solar power tower was launched in Spain last Monday. The solar plant, operated by Abengoa, is capable of supplying 10,000 Spanish homes with their power needs.

Built in the southern Spanish province of Seville, the solar power plant is the largest in operation and uses 1,255 mirrors to redirect the sun’s energy to the peak of a 165 meter high tower filled with water. Power is generated by the water boiling which in turn causes a turbine to produce electricity.

Abengoa has plans to build a second 20 megawatt plant soon and already has a 10 megawatt plant producing energy. Their goal is to produce 300 megawatts through such solar energy towers by 2013 by adding another five 50 megawatt plants.

The massive 50 megawatt plants will use parabolic troughs to further concentrate the solar energy.

Spain produces more than 3,000 megawatts of  electricity through solar energy and was ranked as the world’s second largest producer of solar power last year

Spain made a massive push into the solar power industry last year. The Spanish solar energy market saw a 100% increase over 2007 with growth of 2,661 new megawatts of power. This inflated the global solar market such that last year the cost of solar panels was extremely high.

But with the a purchasing cap set at only 500 megawatts in Spain for this year, you can expect that plenty of solar panel manufacturers are going to be stuck with an oversupply issue. Couple that with the harsh realities of the current economic climate and it spells danger for those companies.

The upside, at least in the short term, is for those looking to buy solar panels in 2009. Prices along supply chains are reportedly being dropped by 20-40 percent.