An agreement was signed late last week, and Enviromission said construction of the solar tower near Mildura, was expected to begin early next year.

EnviroMission chief executive Roger Davey said a one kilometre high tower using thermal draughts to generate power was originally proposed, but the new plan was for a smaller structure.

If the original design had been constructed, it would become the world's tallest structure of its kind and would be visible from 100 kilometres away. The transparent solar collector at its base would be seven kilometres across.

"Some time ago, we were looking at a 200 megawatt plant, a very tall tower, a very large collector area," Davey said.

"We have improved the technology now to the point where independent assessors have looked and said it is possible that we are going to be able to build smaller plants with far greater output."

The Solar Tower power station was designed to provide enough electricity to power around 200,000 households.

EnviroMission said the energy output from the tower would represent an annual saving of more than 900,000 tonnes of greenhouse CO2 gases from entering the environment.

The latest design is for a 50mw demonstration Solar Tower power station.

Under the agreement, Baulderstone has exclusive rights to develop pre-engineering and the final design for the construction and will provide technical and operation support to EnviroMission.

Baulderstong joined the project in December last year after EnviroMission terminated a similar heads of agreement with Leighton Contractors,ts.

The partners said they are now hoping to secure funding under the Federal Government's Low Emission Technology Demonstration Fund for the project.