The solar industry is moving into a low-cost future overshadowed by technology changes, but is still growing quickly.

The solar industry weathered a somewhat cloudy year, rife with the political consequences of the Solyndra bankruptcy, rapidly falling prices for photovoltaic (PV) modules, and the impending expiration of the federal cash grant that has existed in lieu of a similarly lucrative but harder to obtain investment tax credit.

“Solar the one of the toughest areas in the broader clean tech environment,” Ravi Viswanathan, a general partner at NEA told Breaking Energy. He called solar a “capital intensive industry” that is running dry of liquidity.

The future of solar, he said, will be seen by the innovators who managed to survive “the shakeout and weather the storm.”

Despite the setbacks, the solar industry has continued to grow, with the Solar Energy Industries Association (SEIA) reporting a 69% growth rate of grid-connected PV installations in the second quarter of the year over the same period in 2010. Complete numbers for 2011 may show an even greater uptick in US installations as international markets slow.

Dramatically reduced solar panel prices have been blamed for the Solyndra bankruptcy. At the same time, Chinese companies have been selling more panels in the US as they try to sell what has become an overstock of panels in manufacturing facilities there.

Reaching Far And Wide

But even as falling prices force the solar industry to consolidate, many say it will help the sector grow and reach a broader customer base. In fact, a coalition of solar companies formed in November to protect the free trade of solar panels, claiming that low prices would only help the industry expand. Read more: Coalition Forms To Protect Low Solar Panel Prices.

“The market today has to do everything in its power to reduce the cost of power. The cost of the incentives are reducing. The entire industry is depending on the cost of technology to come down. If that trend reverses that will be catastrophic for the industry. We need the cost to continue to come down,” Lyndon Rive, CEO of SolarCity, told Breaking Energy.

SolarCity partnered with Google this year to create a $280 million fund for a homeowner leasing program. It is one of many companies that have announced new residential and commercial solar leasing programs this year intended to allow property owners to install panels at no upfront cost. Dominion Virginia Power announced its own project to install solar panels on community centers and public rooftops.

Rive said his California-based company was thriving despite the heightened competition and the bad press from Solyndra, which was highlighted when the company’s DOE loan guarantee to fall through the cracks just before it was set to be finalized. In 2011, the company hired over 500 people, expanded its business to the East Coast and Hawaii and doubled its service areas. SolarCity also signed an agreement with Walmart and is slowly covering dozens of the chain’s megastores with solar panels.

NEA’s Viswanathan said that once solar reaches grid parity the spike in demand may even drive prices back up enough to reintroduce healthy capital into the industry.

Making Solar A Clean Word Again

“We’ve had a challenge with quite frankly bad reporting, bad media reporting. Reporters making really outrageous statements, like the solar industry is not growing, there are no jobs in solar,” Rive said.

He said that since Solyndra, the industry has been trying “to communicate the truth and communicate that the solar industry is doing well and growing.” He added that the competition–there are now about 5,000 solar companies in the US–has not necessarily been harmful.

“The competition is good. It drives better innovation, better services and in the end who wins is the customer,” he said. Because the solar industry is relatively infantile still in the US, he said “no one is really stepping on each others’ toes yet.” Instead, competition is boosting advertising and education campaigns and helping to broaden general customer awareness.

“We have yet to reach 1% penetration,” he said.

Silicon vs. CIGS

As it grows, the solar industry is beginning to split between silicon-based models and CIGS models. And even though copper indium gallium selenide (CIGS) technology came about in part because it was far cheaper than silicon, silicon’s price has been dropping dramatically in recent months, making the two models cost-competitive.

Dr. Michael Gamble is among the industry experts who blame the Solyndra bankruptcy on the relatively expensive CIGS technology the company used in its thin film modules. An expert in nuclear and nanotechnology, Gamble said he thought CIGS technology was most useful in nontraditional applications because it is not inherently brittle like silicon.

The US military for example, is using CIGS technology, developed by Konarka, to build army tents with solar fabric. The army calls them “solar blankets” as the cover the tents and can provide enough electricity for basic air-conditioning, lighting and power systems. Read more here: Safe and Secure: The US Military Takes A Stand On Energy Efficiency.

Viswanathan said NEA has invested in both CIGS and silicon technology and has not chosen a winner.

“The winners will be the ones who get to grid parity fastest,” he said. But, “this isn’t a mature industry where there will be one winner.” Solar is “such an under penetrated sector” that there is room for multiple kinds of successful technologies, he said.

Ultimately, the costs of both technologies is dropping as solar is adopted more widely. And that phenomenon, is “nothing short of astounding,” Recurrent Energy CEO Arno Harris said at the June REFF Wall Street Summit in New York.