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Once upon a time, solar panels were far too expensive to be mainstream. They were more commonly found on space stations, satellites, and calculators than on the roofs of ordinary family homes.

While solar panels still aren’t pervasive, they have steadily won over people who recognize the financial and environmental benefits of investing in renewable energy. Annual installation of solar panels in the United States jumped from 852 megawatts in 2010 to 15,007 megawatts in 2016, according to the Solar Energy Industries Association and GTM Research.

The falling price of solar panels has played a major role in that growth.

Since 2010, the average wholesale price for solar panels dove 80 percent to about $0.35 per watt, says Hugh Bromley, an analyst with Bloomberg New Energy Finance.

The story behind that decline is filled with ambitious entrepreneurs who jockeyed to develop low-cost technology and intense competition that led to international trade disputes and dozens of bankruptcies. At the same time, wrong bets by investors delivered zero returns on billions of dollars in investments.

Through these changes emerged an industry that has turned solar panels into a commodity produced in large-scale factories.

“The main reason why we have low prices today is because the fragmented industry has consolidated around a single tech,” says Bromley. “That technology is produced by hundreds of firms around the world, so they are able to tap into the same economies of scale and R&D investments.”

The Tech Race

The heart of the winning solar technology is built on silicon, an abundant mineral that is also used to make chips that run computers, cellphones, and other electronic equipment. Because silicon is abundant and cheap—it’s found in sand—it has come to dominate the solar market.

Though other materials such as selenium were initially used in labs to create solar cells, the first solar cell that was able to produce enough electricity for practical use materialized at Bell Labs in 1954. In the 1950s and 1960s, with the support of government agencies such as NASA, solar cells were mostly made for powering satellites.

In the 1970s, Exxon helped promote the off-grid use of solar cells by using them to run lights and horns on offshore oil rigs. Solar energy began to run equipment such as lighthouses and railroad crossings. During the same decade, the oil crisis made solar power more appealing, which attracted more government and private funding to develop and sell solar panels. The first solar power plant, at one megawatt, was built in California by Arco Solar in 1982.

Oil became cheap again in the 1980s, putting what would turn out to be a temporary brake on the growth of the solar market. Research to improve the ability of solar cells to convert sunlight into electricity didn’t stop, however, particularly in academic labs. But consumers probably witnessed solar cells at work in calculators or running equipment or entire homes in places not connected to an electric grid.

Fast-forward to the 2000s, when a turning point came as California suffered a series of blackouts after energy traders manipulated the market to create a power shortage and inflate electricity pricing, and the federal government created tax credits and other incentives to promote renewable energy.

Around 2004, the solar market began to heat up in Germany and then elsewhere, including the United States. That kicked off a competition for silicon between the emerging solar panel makers and chip companies. The result: a silicon shortage that lasted several years. At one point, the price for the sought-after material yo-yoed from $200 per kilogram in 2007 to $500 per kilogram the following year.

The skyrocketing price for silicon represented a big opportunity for venture capital investors, who pumped billions of dollars into new tech companies to develop cheaper alternatives for making solar cells. This push happened worldwide, but Silicon Valley in particular became a hub for startup companies flush with cash and led by executives who baked idealism into their missions. They set out to make money and do something good for the planet.

Solyndra showed off its thin films encased in tubes at Intersolar 2011, before the company went bankrupt. Photo: Ucilia Wang

Some of the high-flying Silicon Valley startups at the time included Nanosolar, SoloPower, and AVA Solar. In 2010, SoloPower and AVA Solar each raised more than $100 million, and Nanosolar raked in $300 million. Some of the biggest venture capital firms pumped money into solar, including Benchmark Capital, Mohr Davidow Ventures, Kleiner Perkins Caufield & Byers, Rockport Capital, and New Enterprise Associates.

The U.S. government also threw a lot of support behind solar companies as part of its broader effort to boost job growth and promote low-carbon technology. It created programs to give grants for research and loan guarantees to help solar companies secure loans for building solar panel factories and solar power plants.

What many of these newcomers had in common was the use of new materials to create “thin-film” solar cells, so called because the materials used would form thinner cells than what silicon could achieve. They used materials like cadmium-telluride or copper-indium-gallium-selenide.

Meanwhile, other startup companies investigated very different solar technologies, including the use of mirrors to concentrate sunlight onto solar cells to boost electricity production.

But two things happened that helped destroy the dreams of these entrepreneurs and investors. Makers of silicon expanded their production, ended the shortage, and significantly lowered the price of silicon well before many of the solar tech startups figured out how to manufacturer their technologies cheaply. On top of that, a global financial crisis shook up the young solar market.

By 2012, dozens of companies had filed for bankruptcy or sold for pennies.

The Big Crash

The U.S. solar market was just starting up 10 years ago when the financial market crisis, marked by the bankruptcy of Lehman Brothers in 2008, changed the dynamics of the global solar industry, says Bromley.

SolFocus, which went out of business, developed a system that used curved mirrors to concentrate sunlight onto solar cells. Photo: Ucilia Wang

At the time, Chinese companies were racing past German, Japanese, and U.S. firms in expanding production lines for making silicon solar panels. They would dominate the list of top 10 manufacturers worldwide shortly after.

The financial market turmoil made it difficult for power project developers to borrow money, leading to a crunch in demand for solar panels, a price war among solar panel makers, and layoffs and factory shutdowns by companies such as BP Solar, a subsidiary of the oil and gas giant BP — all before the end of 2009.

The money trouble and subsequent recession hit American and European companies harder than the Chinese, says Bromley. When the United States and other countries began implementing legislation to stimulate economic growth, including an extension of a key federal tax credit for renewable energy, Chinese manufacturers built up giant fleets of factories and stood ready to offer solar panels at lower prices than many of their competitors. That’s despite many U.S. and German manufacturers having also added production lines or drawing plans to do so.

All this expansion would lead to an oversupply of solar panels by 2011 and growing resentment toward Chinese companies. Wholesale prices for solar panels tumbled 50 percent in 2011 alone. General Electric (GE), which once harbored an ambition to be a major solar panel maker, shelved its solar manufacturing plans in 2012.

“The financial crisis caused established brands who otherwise had expected to own solar, such as GE and BP, to retreat,” says Bromley.

German manufacturer SolarWorld became one of the most outspoken critics, calling for regulations to protect the German market, which was the biggest in the world in 2009. “What we want is fairness,” said Frank Asbeck, CEO of SolarWorld, at the time.

In 2011, as the global market was beset by a glut of solar panels, SolarWorld would go on to lead a trade complaint, filed in the United States, against Chinese solar companies. The company won a decision in 2012 to impose tariffs on silicon solar cells from China.

The complaint contended that Chinese companies were receiving unfair subsidies from their government and undercutting competitors by selling products at prices below production costs.

But by then, Chinese companies had cemented their hold on the market. By 2014, six of the top 10 solar panel makers hailed from China. Just as important, many of the businesses that built or financed large solar power plants — or installed solar panels on building rooftops — were benefiting from the cheaper equipment. They were no fans of the trade complaint.

There’s ongoing research into using perovskite to build solar cells that can be made in different colors and levels of transparency. Photo: Oxford Photovoltaics

Today, the five largest manufacturers in the world are Jinko Solar, Canadian Solar, Trina Solar, Hanwha Q Cells, and JA Solar, according to Bromley. Except for Hanwha, located in Korea, all are based in China. (Market analysts consider Canadian Solar a Chinese company because of the location of its manufacturing base.)

“One of the relentless truths for 10 years is that a standalone silicon module, wrapped in tempered glass, is pretty cheap, and it’s a machine that works well,” says Danny Kennedy, who co-founded the residential solar company Sungevity and is now the managing director of the energy startup investor California Clean Energy Fund.

The legal fight isn’t over. SolarWorld recently joined another manufacturer, Suniva, in a new petition to impose tariffs on solar cells imported into the United States, though the impact of this latest effort is too early to tell.

Nothing New Under the Sun?

The solar market needed cheaper panels to grow, and it got its wish. The average cost to install solar energy systems has fallen about 70 percent since the beginning of the decade, according to the Solar Energy Industries Association.

“It’s like getting a Groupon for 70 percent off, and we know Groupon drives traffic and volume,” says Bryan Christensen, chief operating officer of installation company Vivint Solar.

Tesla sees a future in roofing materials embedded with solar cells. Photo: Tesla

Solar companies largely expect silicon solar technology to keep its tight hold on the market for many years to come. The collapse of the collective effort to develop alternative technologies earlier this decade taught investors some sobering lessons, including the longer-than-expected amount of time and money required to incubate and launch a new technology. They have not returned.

Innovation hasn’t died. Research labs and companies are still working with new materials for more efficient solar cells.

Then there’s Tesla, which bought installer SolarCity last year and recently began selling roofing materials embedded with solar cells. The solar roof concept isn’t new — a company owned by Dow Chemical was among those that gave it a go, but it never found a great market reception.

Tesla and its CEO, Elon Musk, excel at marketing, though market analysts and other solar companies say they aren’t sure if Musk & Co. can take the solar roof concept out of a niche market. At the very least, Musk is generating buzz about solar energy, and that helps lift the profile of the entire industry, says Christensen, who also notes that technology in any field rarely stays static.

“When it comes to innovation, we often end up being wrong when we think we know what the answer is,” says Christensen. “There’s always someone working on the next best thing.”