In 2010, the U.S. Department of Energy made a goal of reaching an installed price of $1 per watt for solar energy, which would make it highly competitive with electricity generated from fossil fuels. The goal was to reduce the cost of large-scale solar systems from projections of around $3.50 per watt in 2010 to the $1 mark by 2020.

A reduction in cost of 71% in a decade seemed like a stretch five years ago, but industry leader First Solar (NASDAQ:FSLR) says it will hit $1 per watt in 2017, three years ahead of schedule. First Solar is one of the most popular solar stocks among hedge funds.

What’s driving solar costs to beat fossil fuels

According to First Solar’s CEO Jim Hughes, cost reductions over the past few years has led to an increase in utility interest in solar both domestically and internationally. Just today, First Solar announced a new solar project in Dubai that will get 5.84 cents per kWh for electricity. That’s competitive with fossil fuels anywhere in the world and, for some perspective, that’s less than half of what the average residential U.S. household pays for electricity.

And there are new investing options for investors as well. First Solar just launched 8point3 Energy (NASDAQ:CAFD) with SunPower (NASDAQ:SPWR) to own and operate solar projects, taking some of the manufacturing risk out for investors. If cost reductions materialize for both companies the growth for 8point3 should be tremendous.

The projected progress of solar energy shouldn’t be lost on energy investors. If First Solar, and its competitors, can reach $1 per watt installed by 2017 there will be a flood of new demand and a boom in new technologies like energy storage and demand response. The project being built in Dubai shows that even a fossil fuel centric country can switch to solar. The shift will change the future of everything from natural gas to oil to the auto industry.

First Solar doesn’t make promises it can’t keep

The U.S. Department of Energy’s goal of hitting $1 per watt in 2020 was a stretch at the time, but First Solar has typically hit its targets when it comes to cost and efficiency. So, $1 per watt by 2017 is likely within reach and that bodes well for the solar industry going forward.

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