As companies produce more solar panels, some analysts are predicting the market -- which has been constrained by a shortage of solar-grade silicon for the last few years -- will loosen up, leading to a relative glut of panels and a price plummet (see Solar Sector Heading for a Shakeout, Perspectives: Too Much PV in 2008? and Solar Margins About to Shrink?).

In a research note last week, Lazard Capital analyst Sanjay Shrestha said it will be "crucial" for companies to focus on cost reduction to succeed in the market. And at a Greentech Media panel last week, Travis Bradford, president of the Prometheus Institute and a Greentech Media partner, said traditional solar-panel manufacturers will need to lower costs so they are able to profitably sell panels for $2 per watt, while thin-film manufacturers will need to reach prices of $1.50 per watt. 

And companies are even harder pressed to lower costs after Severin Borenstein, a professor at the University of California at Berkeley and director of the UC Energy Institute, last week concluded that solar costs -- at least using today’s technology -- far outweigh the benefits (see Earth2Tech post and Borenstein’s paper).

While he expects the value of solar power to increase when customers begin paying different prices for using electricity at different times, Borenstein said that the total unsubsidized cost of solar installations today are three to four times greater than the value of the electricity they will produce. Carbon-dioxide prices of $150 to $500 per ton -- not the anticipated $20 per ton -- would be needed to make up those costs, he wrote.

"We are throwing money away by installing the current solar PV technology, which is a loser," he said.

To do that, companies are increasing the size of their manufacturing operations and their projects.

The industry also is working to lower the nonpanel costs of solar power.

Among many examples, SatCon Technology Corp. (NSDQ: SATC) last week launched inverters for commercial and utility-scale solar-electric systems that it also claims are more efficient, as well as longer lasting, than competitors’.

And another inverter company, 1-Solar, is days away from closing $5 million in its first round of financing, according to Earth2Tech. The Rohnert Park, Calif.-based startup claims its technology converts direct current into usable alternating current more efficiently than today’s inverters and also lasts two to three times as long.

San Luis Obispo, Calif.-based solar installer REC Solar also last week launched a new commercial and residential rack system that it says simplifies installation and lowers the cost.

And Akeena Solar (NSDQ: AKNS) raised its forecast for the full year of 2007 on Tuesday, announcing that it expects to double revenue in 2008, after more than doubling its revenue to $32.2 million in 2007, thanks to its solar-panel installation technology. The technology, called Andalay, builds the rack, wiring and grounding into the solar panel itself, speeding installation and lowering installation costs, CEO Barry Cinnamon said.

As the solar industry looks to lower costs, it isn’t ignoring the supply of solar-grade silicon (click here to continue to the next section).