If there is one thing that has become abundantly clear to both solar manufacturers and investors over the past year or so, it is this: The cost of solar-panel production must be reduced. In a nutshell, this is what it will take for the industry to survive and thrive.

This was a discussion point at the MIT Energy conference, held last weekend in Boston. As an MIT assistant professor of mechanical engineering noted, one way to lower costs is to reduce the thickness of the silicon wafers used in panels. Sounds great, but how are solar manufacturers supposed to do that?

New technology can cut costs by 50%
Enter the ion cannon, produced by startup company Twin Creeks Technologies of Mississippi. The company says it can cut manufacturing costs in half from the current $0.80 per watt by slicing silicon wafers much thinner and reducing the amount of wasted silicon dust.

Currently, silicon wafers are sliced from cylinders or blocks for inclusion in solar panels. The industry standard is usually 200 micrometers thick, since anything thinner can't withstand the manufacturing process. Experts have said that wafers as thin as 20 micrometers could do the job just as efficiently, however.

The equipment designed by Twin Creeks can make those thin wafers by processing chunks of silicon through its Hyperion 3 ion cannon, which embeds hydrogen ions into the material. The discs are then heated, causing hydrogen bubbles that break off very slim slices. To bolster their strength, the wafers are attached to a metal backing. The company says its methods can be integrated into current production methods.

For solar companies that are experiencing ever-shrinking profit margins on their solar panels, this technology sounds as if it would be a real boon. Which companies could most benefit from this technology?

Of the solar-panel manufacturers that rely heavily on silicon as the basis of their panel production, Suntech (NAS: STP) and SunPower (NAS: SPWR) come to mind, for a couple of reasons. Suntech is already striving to achieve a manufacturing cost of $0.65 per watt, in addition to upgrading production lines to increase efficiency. SunPower, whose super-efficient panels were used on the winning entry in last year's Department of Energy Solar Decathalon, has begun production of cells that it says deliver 24% efficiency. The company is also looking to reduce costs during production and expects to do so by 15% by the end of this year.

Another producer that looks like a good bet is JA Solar (NAS: JASO) , for slightly different reasons. Despite disappointing results for Q3, the largest of the solar manufacturers has a very healthy balance sheet, which puts it in a stronger financial position than some of its competitors. The company also boasts a premium price on its most efficient modules, so I can just imagine how this new technology would swell its margins. Interestingly, part of the bad news for Q3 was the loss of value on its inefficient production equipment -- which may signal a shopping spree in the near future.

Fool's take
These three companies seem like especially good candidates for using this technology, because of their commitment to reducing manufacturing costs, their increasing efficiency, and their plans to retool current equipment or their need to buy new. As the CEO of Twin Creeks notes, however, the machinery is expensive, and it may not yet be able to keep up with current production levels. Chances are good that solar companies will not rush to try this technique, so it may take a year or two before the technology gets a real-world test.

Despite the headwinds, this technology represents a new direction for solar, as well as a chance to address the ultimate problem, which is solar panel production costs. The companies that buy into this technology just might be the first ones to make alternative energy something that finally gives oil and gas companies some real competition.

Energy is necessary for a thriving economy, whether it is well-established or just starting to emerge as a new player. Find out how you can make your play in this lucrative sector by ordering this free report now.

At the time this article was published Fool contributor Amanda Alix owns no shares in the companies mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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