A 150-megawatt solar thermal power plant has been secured for Port Augusta in South Australia, State Premier Jay Weatherill has announced.

Construction of the $650 million plant will start in 2018.

Aurora facts: 150-megawatt solar thermal power with eight hours of storage

150-megawatt solar thermal power with eight hours of storage Plant will deliver 495 gigawatt hours of power annually, or 5 per cent of SA's energy needs

Plant will deliver 495 gigawatt hours of power annually, or 5 per cent of SA's energy needs Equivalent to powering more than 90,000 homes

Equivalent to powering more than 90,000 homes Located 30 kilometres north of Port Augusta

Located 30 kilometres north of Port Augusta Company says it is "completely emission free"

Mr Weatherill said the Aurora Solar Energy Project would be ready to go in 2020 and would supply 100 per cent of the State Government's needs.

The Government will pay a maximum of $78 per megawatt hour.

Mr Weatherill said the solar thermal plant was "the biggest of its kind in the world".

"Importantly, this project will deliver more than 700 jobs, with requirements for local workers," he said.

Loading

In September 2016, the Government launched a tender process to procure 75 per cent of its long-term power supply.

It said it wanted to attract a new competitor onto the market and put downward pressure on electricity prices.

The Government contract with United States operator Solar Reserve will last for 20 years, and was the "lowest cost option" of shortlisted bids for the project.

The maximum Government load is 125MW, meaning the plant will be able to supply other customers.

"This, in addition to our state-owned gas plant, and the world's largest lithium ion battery, will help to make our energy grid more secure," Mr Weatherill said.

Solar thermal uses heliostats, or mirrors, to concentrate sunlight onto a tower that heats molten salt. ( Facebook: Solar Reserve )

Project built on $110 million federal loan

Solar Reserve chief executive officer Kevin Smith toured the region in September last year, and said at the time it would need at least $100 million in federal grants or loans to proceed.

Loading

Earlier this year, the Federal Government confirmed it would grant $110 million in a concessional equity loan to support a solar thermal project at Port Augusta.

The loan — first flagged in the lead-up to the federal election — was guaranteed in a deal struck between the Government and independent senator Nick Xenophon to get his support for company tax cuts legislation.

Senator Xenophon said the project would transform the energy market in SA and be a "flagship project for the entire nation".

"This will make a difference in the South Australia energy market. It will secure the grid and mean more baseload power than intermittent power," he said.

He said it would lead to more stable energy in the market, which would lead to lower power prices.

Port Augusta City Council Mayor Sam Johnson said the announcement left him with "a little tear in the eye".

"It's just an outstanding result and the amount of people that should be thanked, I mean, I could be here for hours thanking them all," he said.

Mirrors to direct sunlight onto tower

Solar thermal uses heliostats, or mirrors, to concentrate sunlight onto a tower that heats molten salt.

Solar Reserve chief executive Kevin Smith called Port Augusta the perfect site while touring it in September. ( ABC News: Nick Harmsen )

The heat created is then used to generate steam.

Solar Reserve said the plant will be able to provide between eight and 10 hours of storage and had no requirement for gas or oil generated electricity as a backup.

It is expected to employ 50 full-time workers on an ongoing basis once it is operational.

The company said the power station will operate in a similar fashion to a coal or gas station, meaning many of the jobs would "require the same skill sets".

Mr Smith said he looked forward to supporting "federal and state renewable energy targets".