* Solar plant uses salts, generating 20-25 pct more energy
* Technology seen as option in North Africa, Middle East
* Italy seeks to relaunch itself in CSP sector
PRIOLO GARGALLO, Sicily, July 14 (Reuters) - Italy's largest utility Enel (ENEI.MI) on Wednesday opened a long-delayed solar plant boasting new technology that could help Italy partially catch up with more advanced solar markets like Spain.
Sun-drenched Italy, Europe's No.3 solar market, is trying to relaunch itself in the concentrated solar power (CSP) sector -- which uses sunlight and mirrors to generate power -- after working on the technology in the 1970s but subsequently shelving pilot projects.
In the meantime, countries like the United States, Israel and Spain have leapfrogged ahead to establish CSP plants.
Unlike conventional CSP plants that use synthetic oil, Enel's "Archimede" plant in the industrialised Sicilian seaside town of Priolo Gargallo uses molten salts as fluid in the system, allowing for much higher temperatures to be generated and the heat stored for a longer time.
The plant, the first CSP start-up in Italy, has capacity of 5 megawatts and will produce 9 million kilowatt hours a year -- enough to satisfy the electricity demand for about 4,000 homes.
The newer technology allows 20 to 25 percent more energy to be produced than it would otherwise - albeit at a higher cost at the moment, said Enel research chief Sauro Pasini.
"Whether it will displace current technology we don't know, but we expect it to be competitive with other technologies," said Pasini, adding it should help Italy recover lost ground on the solar front. "Instead of starting with the same technology, we wanted to go one step ahead."
There has been speculation that Libya -- which has been buying up stakes in Italian companies and seeking greater collaboration with firms here -- was interested in replicating the Archimede plant in the North African desert.
For now, costs remain a major hurdle. Enel CEO Fulvio Conti said the company had invested about 60 million euros ($76.25 million) in the project, which has costs about 10 times higher than that of an adjacent gas-fired plant.
"This is a prototype that has a high level of costs -- it's the first of its kind," Conti told reporters. "We're confident of being able to create a mechanism to reduce costs. That will allow us to use this technology in the sunny countries in North Africa and the Middle East."
The project, conceived about 10 years ago, is named after a scientist from the nearby town of Syracuse, Archimedes, who according to legend used giant mirrors to capture the sun's rays and focus them on attacking Roman ships in 212 BC.
CSP technology essentially uses large mirrors to concentrate the sun's rays onto tubes filled with liquid, which converts water into steam and drives turbines to produce electricity. A top Italian industry official last year said as many as four experimental CSP plants are being planned in the country.