LOS ANGELES (Reuters) - Abound Solar, a U.S. solar startup whose top rival is low-cost industry leader First Solar Inc, starts production at its first factory on Tuesday, promising that it will lead the way to making solar competitive with power from dirtier sources.

Abound, a private company that was known as AVA Solar until last month, will make cadmium telluride solar panels at its first full-scale plant in Longmont, Colorado, where it will eventually produce 200 megawatts of solar modules annually.

Using cadmium telluride as its key raw material puts Abound in direct competition with First Solar, the Wall Street darling whose low-cost technology has been snapping up solar power deals with U.S. utilities including Sempra Energy and Edison International.

Traditional solar panel makers use polysilicon as their main raw material, making the panels more efficient in transforming sunlight to electricity, but also more costly.

Abound Solar’s management said it would easily compete with Tempe, Arizona-based First Solar, the solar equivalent of an industry behemoth.

“We think we have a slight technological advantage over First Solar,” Chief Executive Pascal Noronha said in an interview. “And by the way I think very highly of First Solar.”

Abound’s manufacturing process, Noronha said, is completely automated and continuous, allowing the company to convert sheets of glass into solar panels in less than two hours without human labor.

“We have a manufacturing process that is about as continuous as making beer cans, and therefore makes us the lowest cost manufacturer of photovoltaic modules,” Noronha said.

First Solar said in February that it had reduced its manufacturing costs to 98 cents a watt. Fort Collins, Colorado-based Abound, Noronha said, would be producing at that level within three months, slashing costs further as production increases.

“By cutting the cost, within a year or two I think we will be leading the race to grid parity,” Noronha said.

By the end of this year, Abound’s Colorado facility will reach a production capacity of about 65 MW. It will reach 200 MW by the middle of next year.

Most of the company’s solar panels will be sold to companies in Germany, initially, though Noronha said he expects the United States and India to be its two biggest markets starting fairly soon.

The new facility will ultimately employ about 300 people, and the company plans to build its second plant in the United States as well.

“We really want to make an impact here in the U.S.,” Noronha said.

Abound is currently applying for a U.S. Department of Energy loan “in the few hundred million range,” Noronha said.

Depending on market conditions, the company could weigh an initial public offering within the next year or so, though Noronha said Abound was not constrained when it comes to financing.

Abound is backed by private equity firm Invus LP, venture capital firms DCM and Technology Partners, investment firm GLG Partners Inc, Hill Carmen Ventures founder John Hill and Advanced Energy Industries Inc founder Doug Schatz.