The decline in costs in the solar industry over the past three years is “nothing short of astounding,” Recurrent Energy CEO Arno Harris said at the June REFF Wall Street Summit in New York.

And despite a slow start for the US solar photovoltaic (PV) market this year, analysts say the year will recover sharply to end with “frantic buying.”

“2011 could very well be a US 1.7 [gigawatt] inventory for the US that flows into 2012,” Paula Mints, principal analyst at Navigant Consulting, said at the recent Intersolar conference in San Francisco.

Indeed, solar power is not far from reaching grid parity, experts say. While its certainly the case that prices for solar photovoltaic (PV) panels have been steadily declining as they are simultaneously becoming more popular, the still-fledgling global industry is leaning heavily on various governments’ loan guarantees and financial incentives.

This year’s end may bring frantic buying of solar panels, because these very subsidies are set to expire.

“The grant in lieu of the [investment tax credit] will expire at the end of the year – that’s going to lead to frantic buying in the US at the end of the year. It’s just the way the markets work and for an industry that has to live and die by incentives you’ve just got to do what you’ve got to do,” Mints said.

But the solar upswing may last further than the year’s end. The Obama administration has been doling out cash for solar power as part of an effort to both stimulate job growth and a still-lagging economy and also to transition American from oil and coal to renewable generation.

At the end of June, the Department of Energy (DOE) announced $4.5 billion in conditional loan guarantee commitments for three solar projects in California, all being built with First Solar panels. Since 2009, DOE has granted 17 loan guarantees for solar projects for a total of $18 billion in loan guarantees for solar manufacturing and generation.

But many industry insiders say that for true grid parity, solar needs to compete with less government assistance.

“Reductions in subsidies are necessary to reduce speculation and to drive progress toward affordable solar electricity generation,” said First Solar CEO Robert Gillette in a first quarter 2011 earnings call.

Generic Brand Solar Panel

Because it is still extremely expensive to construct a solar PV panel, the cells of which are generally made from silicon, some in the solar industry are looking for cheaper and more creative ways to reduce already-falling costs.

HyperSolar is a new solar technology company that is using inexpensive plastic to create an optical layer that magnifies the sun’s power and can therefore replace 66% of the more expensive silicon solar cells in traditional PV panels.

“We believe that by using inexpensive plastic to replace silicon solar cells we can substantially reduce the cost per watt of solar energy,” HyperSolar CEO Tim Young told Breaking Energy. He said that 80% of the cost of PV panels comes from the process of processing raw silicon for solar cells, so finding ways to replace the silicon might allow the solar industry to compete in the market without government subsidies.

“When we prove to the world that we can reduce the cost of solar by 35%,” Young said, “it will no longer be a question of whether to purchase solar, but if we can manufacture these fast enough.”

Domestic vs. Distributed vs. Utility Scale

HyperSolar’s cheaper PV panels are designed specifically for small-scale use, such as domestic or distributed markets. In these cases, a homeowner or company might install rooftop panels to reduce consumption of electricity off of the grid. They lack tracking devices that are typical of solar farm PV panels.

The rooftop model may be the most popular for solar panels, as it allows consumers to see direct cost-savings on electricity bills even though the initial investment in the modules might be quite high. Google recently partnered with SolarCity for a $280 million fund that would help cover the initial purchase of rooftop solar panels for residential consumers.

But the US has also been seeing growth in utility-scale solar farms as well.

Ben Compton, COO and VP of Commercial Operations of one of the world’s largest third-party monitoring systems, meteocontrol, told Breaking Energy that he attended the REFF Wall Street conference in order to meet with the American influencers in the solar PV industry. On June 30, the company announced it would be entering the US market in full force, hoping to catch the eyes of the growing numbers of solar farms.

“We’re bringing the world’s top solar services and industry expertise to North America, which is primed to be the next major market for solar energy,” Compton said in the company’s statement.