The Tempe, Arizona-based maker of photovoltaic cells said government subsidies of the sort provided in Germany are helping to make the solar industry competitive.

The solar photovoltaic industry has plenty of supporters, but wider uptake of the technology has long been hampered by cost.

High costs have not just prevented consumers and companies plastering more homes and offices with solar cells. They also have bolstered the claim that large quantities of fossil fuels and nuclear power will be necessary in the future in part because solar panels do not provide value for money.

On Tuesday, First Solar, a global photovoltaic cell maker based in Tempe, Arizona, said it had reached an “industry milestone” by reducing its production costs to the point where making solar cells that produce one watt of power costs $1.

In a statement — seen by Green Inc. on Tuesday — First Solar, which has produced modules for solar installations in several countries in Europe, said it had brought costs down to $1 from $3 over the past four years through economies of scale by increasing its production capacity by 50 times, and by passing-on those savings to customers and consumers.

First Solar’s chief executive, Mike Ahearn, tipped his hat to countries like Germany that have offered generous tariffs to producers of solar electricity.

“Without forward-looking government programs supporting solar electricity, we would not have been able to invest in the capacity expansion which gives us the scale to bring costs down,” Mr. Ahearn said in the statement.

Much of that investment has come by way of so-called feed-in tariffs, which allow solar operators, large and small, to earn a higher price for each unit of energy they produce for a grid than utilities reliant on electricity from dirtier sources like coal. The higher tariffs help operators to cover the comparatively higher cost of production.

My colleague Kate Galbraith has written about how states and cities in the United States, including Gainesville, Fla., are exploring the use of such tariffs.

“The Company’s long-term financial model suggests manufacturing cost targets of 65 cents to 70 cents by 2012 and it believes reductions below these levels are possible over time,” Mr. Ahearn said.

The implication of what Mr. Ahearn is saying seems to be this: Continue government support for the industry, now, and solar power will be able to match peak-hour pricing by from coal and natural gas by 2012 – meaning that the industry would not need subsidies anymore.

That certainly makes it sound like solar is close to enabling clean, renewable electricity at competitive prices. What do you think?

Link to the New York Times' Green Inc. blog post: http://greeninc.blogs.nytimes.com/2009/02/24/first-solar-claims-1-a-watt-industry-milestone/