Spain’s solar power industry flat-lined last year. The government not only drastically cut heavily subsidized feed-in tariffs, but it also capped the capacity that would benefit from them. “Disastrous,” the country’s solar umbrella group called it.

Dozens of companies went under as public support eroded globally, triggering a slump that is expected to last until 2013. Amid the carnage though, Abengoa, a small Spanish engineering company appears to stand out. (Abengoa’s shares trade in the US under the ticker ABGOY.PK.) Last month, the company was granted a $1.45 billion loan guarantee by the Department of Energy to build one of the world’s largest solar power plants in Arizona.

“After years of watching companies build things and create jobs overseas, it’s good news that we’ve attracted a company to our shores to build a plant and create jobs right here in America,” said President Barack Obama when he announced the decision last month. Abengoa’s Solana plant, about 60 miles from Phoenix, will add 250 megawatts of capacity by 2013 using parabolic trough concentrating solar power technology. Also known as CSP and as solar thermal power, sunbeams are directed to a tower in which a liquid or molten salt is heated to then produce steam that turns electricity-generating turbines.

Some 1,600 jobs will be created to build the plant and 70 percent of the components will be built in the US as part of the conditional credit terms. The electricity will supply 70,000 homes. The guarantee is the largest granted by the US Department of Energy to a renewable energy project and the third-largest of about 15 projects that have received conditional approval. The two bigger loan guarantees are for nuclear plants.

Abengoa’s entry into the solar business started just four years ago, although it has been developing and selling components for over 25 years. But while others bet on photovoltaic solar power, Abengoa put most of its chips on CSP.

“We did two things different,” said Santiago Seage, president of Abengoa Solar, in an interview this week. “In 2006 we expanded internationally, even though the Spanish market then was more attractive. That helped us because as some markets suffered, we were able to continue growing,” The company with a capitalization of less than $2.4 billion, has expanded its solar business aggressively globally, especially in the US, but also in North Africa and the Middle East.

More importantly, Abengoa developed CSP utility-scale plants that can provide more reliable power supplies, even when it’s dark. “We invested in CSP before others, got a head start, and consolidated our business in this segment,” Seage said.

The CSP market is expected to grow 10-fold by 2014 to at almost 11 GW of installed capacity driven largely by Spain and the US, but also by newcomers Australia, China and Northern Africa, according a recent iSuppli study. Even if only a fraction of that amount is completed, the solar power bonanza heavily favors CSP over photovoltaic, a market strained by a supply glut, global competition, and its technological limitations when it comes to offering a stable supply.

Like other renewable sources, one of the two big drawbacks of solar, other than price, is its unreliable power supply, which demands huge investment in grid and backup generation capacity because utilities need to guarantee a steady flow of electricity. While still more expensive than other commercial power sources, adding reliability to the power supply, especially during peak evening hours, would be a big advantage of solar power.

The Solana plant, for example, will be able to store a six-hour supply of energy to release when it’s cloudy or dark, giving Abengoa’s client, Arizona Public Service, a stable supply even during its peak hours.

Abengoa’s technology also attracted Pacific Gas and Electric to sign a contract last year for the electricity from a 250 MW CSP parabolic trough plant in the Mojave Deset, less than 100 miles from Los Angeles.

Abengoa also recently powered up three new CSP systems near Seville and two more are planned to reach a total capacity of 250 MW. And it is one of the builders of solar-combined cycle hybrid plant with 150 MW of capacity, 20 of which are solar, in Algeria. It is involved in a similar hybrid project in Morocco. The company has also partnered up with French Total to build the Middle East’s biggest solar power plant with a capacity of 100 MW, also using CSP.

Indeed, while the photovoltaic boom was taking place in Spain, Abengoa completed its PS10, an 11 megawatt CSP in 2007, the world’s first tower-based commercial power plant. One of its big innovations was being able to store enough heat even in the dark to continue generating power for another hour. It later improved on that model with PS20 plant, also near Seville, with a 20 MW capacity.

Abengoa’s decision to position itself in the US has also been critical. Europe is backtracking on public support for solar power, not only in Spain, but more critically in Germany, the world’s biggest solar market, and Italy, among others. But the DOE’s conditional credit programs, originally launched by President George W. Bush, and then strengthened under Obama, are giving companies like Abengoa access to the credit it wouldn’t have otherwise.

“The appetite to finance solar projects has decreased a lot. That is why the federal loan guarantee is so important,” Seage said. The world solar market overheated, which has led to slower growth and shrinking margins, “but this will help in the long run,” Seage said.

Indeed, falling prices and improved technologies appear to offer a bright future. Seage expects solar power to be able to compete with fossil fuels by 2020, if the cost of CO2 emissions is incorporated into the price. About the US market, Seage is optimistic, despite what he sees as excessive red tape when it comes to getting approval of the projects. “In other countries, there is one agency you have to deal with, but in the US it’s at the federal, state and even county and municipal level.”