Solar panel prices in the U.S. are set to drop by US$0.20 per watt in 2011, according to SolarCity CEO Lyndon Rive. Such a fall would bring the average panel price down to US$1.40 per watt – 12.5% below the predicted price for 2011.

Prices for solar panels have declined by around 75% in the past 10 years and now contribute less than half the total installation cost of an average rooftop system. Rive told Reuters this latest drop would help SolarCity reach its 2011 cost-cutting target of 5 to 8%: "It's hard to carve out 20 cents anywhere in this business."

Despite a spate of recently-announced feed-in tariff cuts, most major solar panel manufacturers are raising their output this year in an attempt to increase market share. However, this could result in a surplus of panels on the market, thus tightening margins at companies such as Trina Solar and First Solar.

Another thorn in the industry’s side is the decision of several U.S. states to place a cap on the number of projects and subsidy amount each company can claim. "It doesn't help anyone but the small guy, and he's going to go away when the subsidy does," Rive said. “Driving down the costs of solar often means that companies must take advantage of economies of scale that are achieved by growing a company's size. Unless you plan to [subsidise] this thing forever, you have to let them compete, and see who wins."