Spain and Korea could be the next markets to rocket thesolarindustry into further growth, the CEO of SunPower said at a conference Wednesday.

In a keynote for the Dow Jones VentureWire Alternative Energy Innovations conference in Redwood City, Calif., Thomas Werner said both countries have been very strong markets, and are expected to reach their "caps" -- the targets set to mark the end of their current level of solar incentives -- next year.

The Spanish government is considering upping its cap and decreasing its incentives (see Is Spain Shining Too Brightly?).

Werner also promoted a tax credit being considered in the United States, which he said also could be a big market.

"The total incentive bill for solar over eight years is $1 billion, which is what the oil industry will get in subsidies in a matter of months," Werner said.

If the U.S. tax credit passes and the Spanish and Korean caps are raised, he said he thinks the solar industry can grow 40 percent per year for the next few years.

SunPower has strong sales in Germany and California, but the company's strategy is to diversify, Werner said.

"We … have to be ready to move when the market moves," he said. "Diversification is incredibly important. There are solar companies that failed because they bet on just one market. We can't be overexposed, we believe, to one geography or one market."

Aside from different countries, SunPower is tapping into a variety of markets, including residential, commercial and power-plant markets, he said.

The last area is new for SunPower, which considers its 15-megawatt installation at an Air Force base in Nevada and an 18-megawatt installation in Spain large enough to qualify as power-plant scale for photovoltaic (solar-electric) systems.

Larger plants that lower the cost of power are attractive to utilities, but plants in the gigawatt size probably are out of reach for photovoltaic systems today, he said in response to a question.

Some industry insiders say that concentrating-solar projects make more sense at multimegawatt sizes (see Solar Desert Debate Heats Up). But, after the keynote, Werner said photovoltaics can compete with concentrating solar at those sizes.

"The math is compelling; you bet," he said.

Werner said the solar industry has to cut costs by about half to reach the mainstream markets. (SunPower has set a goal of cutting 50 percent of its costs by 2012.)

While some technology advances are needed, the industry doesn't need breakthroughs to reach that goal, but can get there with a series of smaller improvements, he said.

After all, about half the cost of a U.S. solar-power system is the installation, he said. "That can’t go on, so there's lots of room for innovation there."

He said there are "significant opportunities" to reduce the cost within the solar cell, too, but that he expects silicon costs will come down, taking care of some of that cost.

Silicon makes up 20 percent of the cost of solar-power systems, but silicon manufacturers use 90-percent margins, he said.

"That's going to end," he said. "Capitalism's going to work. You can't have 90-percent margins and not have new entrants."

Werner said SunPower, which bought solar integrator PowerLight last year, is interested in acquiring more companies involved in "the outbound channel."

"Technology acquisitions might be more challenging, especially in thin-film," he said, adding he still would be interested in looking at concentrator technologies and would consider a thin-film technology "if the costs made sense."

Comments about new entrants aside, Werner said SunPower isn't looking at an acquisition in silicon just yet.

Silicon plants "traditionally have a low return on investment and operate like a chemical factory, so for those reasons, we said 'no,'" he said after the keynote. But as conditions change, the company might look at the possibility again after 2010, he said.

Werner sees the bulk of cost reductions coming from "incremental" improvements across the whole supply chain, such as orienting the panel to the sun differently.

Still, he said, cutting costs probably won't mean the price for solar-power systems will plummet quickly, such as in electronics, because the lower costs will be offsetting declining government subsidies.