Recent studies dealing with the potential of Renewable Energy Sources (RES) for desalination along the Mediterranean Coast and in the Middle East choose to use RES to generate electricity first, and then use this electricity to power desalination. The present work eliminates the phase of electricity generation by using solar thermal energy directly for distillation by evaporation. Saving the thermal to mechanical conversion losses allows the proposed Multi Effect Distillation (MED) process to compete economically with Reverse Osmosis (RO) process of significantly lower energy consumption. The new opportunity to revive direct thermal evaporation, arises from a new collector technology developed by Solel Solar Systems, that is coupled to the familiar MED process modified by IDE Technologies to match the solar steam characteristics. Solel has applied its unique technique of selective coating to demonstrate a very efficient solar radiation collection, achieving high temperatures with relatively low installation costs. While the generated steam is not sufficient for efficient generation of electrical power to be used for RO — its quality far exceeds the minimum necessary for the existing methods of steam powered desalination by evaporation. Our analysis shows that a combination of a large number of effects of evaporation, together with high pressure saturated steam available for recycling, yields a dramatic improvement in the production rate of water desalination, accompanied by relatively modest increase in the desalination installation cost. For the specific case analyzed in detail, replacing the commonly used low temperature MED with the new combination, increases the Economic Ratio (ER) from 7 to 16 — a factor of 2.3, while the installation costs grew by only 60%. This implies that the distillate production costs are significantly lower with the new proposed combination. The cost increase is mainly due to the higher costs for the expansion of the desalination system, with relatively low additional costs for producing the high temperature solar steam. A basic assumption, drawn from economic considerations and technological constraints, is that the desalination system would operate continuously, while the solar system, which is limited to daytime operation, would feed a steam generator combined with a storage tank. Therefore utilization of solar energy requires either large and expensive heat storage capacity or fossil fuel backup — a hybrid plant. The effects of storage and fuel cost are presented. The paper refers to three levels of desalination capacity: 1) A small 1000m3/d plant, typical for plants serving small settlements or industries at rural locations, isolated from fresh water and grid power sources. Applying the present model distillate cost for such a solar powered plant along the Red Sea coast is about $1.2/m3 for solar-only plant with large capacity steam storage, and $1.1/m3 for hybrid plant using $0.18/kg diesel oil when solar-steam is not available. Where brackish water are available for mixing, these costs decline approximately by 30%; 2) The medium size 10,000m3/d plant is of the scale actually required for the town of Eilat. Here the Solar-MED plant would produce distillate at $0.92/m3 and by blending with brackish water available on site, the cost would decline to $0.74/m3; 3) On the other extreme we evaluated a large 100,000m3/d plant, on the scale of a national water supply plant. Here the distillate cost is about $0.69/m3 for hybrid plant (including land cost) at an available site close to the southern end of Israel's Mediterranean shore. These preliminary results suggest a competitive distillate cost as compared to grid-powered RO, when electricity cost is about ¢6.5/kWh. To conclude: Solar-powered desalination is conceivable in Israel at a reasonable cost, and has even broader economic potential along the Red Sea and similar sites.