NEW YORK ( TheStreet) -- This year we expect that more than 20 GWatts of solar cells will be installed, up from 14 GWatts in 2010.

Moreover, the Chinese solar cell manufacturers produce more than 50% of the worldwide cells and export more than 90%. Five of the top 10 solar panel makers in the world are from China. With the Chinese renowned for low-cost manufacturing, can the non-Chinese solar manufacturers compete against the likes of Suntech Power ( STP), Yingli Green Energy ( YGE), Trina Solar ( TSL), Solarfun ( SOLF) and Canadian Solar ( CSIQ)?

There is a constant struggle by solar manufacturers to keep production costs down and increase solar cell efficiency. First Solar ( FSLR) has been an industry leader in this regard with its CdSe thin film solar cells.

Amorphous silicon manufacturers continue to promote themselves as low-cost manufacturers, while at the same time pulling out all stops to get efficiency above 10% to remain competitive. U.S.-based SunPower ( SPWRA) is moving to produce cells at a competitive cost to the Chinese of $1.08 per watt in the fourth quarter. The drive to lower cost is aided by a large manufacturing plant in Malaysia.

A recent release by SolarPA, which advertises on its home page ( solarpa-inc.com) that it uses "nanotechnology to make solar cells better," notes that it can achieve relative increases on solar cell efficiency by up to 10% using a nanocoating that is applied to a completed solar cell.

Yes, we know that a 50 MW plant becomes a 55 MW plant with a 10% efficiency gain, but an interesting point is that the technology can move binned marginal efficiency cells above a company's minimum level to become useable. This is critical.

Every day solar cell manufacturers make low-efficiency cells, some days are worse than others, because the manufacturing process, although highly automated, is subject to outside forces, such as the quality and defects of the solar cells and variations in materials and processing parameters.

One estimate I've seen is that as much as 20% of annual production results in marginally efficient cells. If a 50-MW plant makes 10 MW of marginal cells at a production cost of $1 per watt, that's $10 million that could be lost. Increasing the efficiency of these cells by up to 10% at a cost of a few cents per watt is a huge factor in cost effectiveness.

Another graph on the SolarPA site notes that relative efficiency of solar cells increases up to 18.5% over uncoated cells at grazing incidence (30 degrees) of sunlight.

We all know that because the sun moves across the sky and the angle of incidence does not remain at 90% (perpendicular to the cell), giant solar farms use expensive tracking devices to reposition the solar panels in the direction of the sun.

What about residential and commercial rooftops that don't use these tracking systems? Cells coated with SolarPA's nanomaterial (dubbed NanoCoat) perform with efficiencies up to 18.5% better in early morning and late afternoon, as well as up to 10% better at noon.

SolarPA is also partnering with two equipment manufacturers to (1) eliminate the need for a texture etch and (2) eliminate the need for a plasma deposited silicon nitride antireflective coating (ARC).

This puts the company on a collision course with Natcore Technology ( NAT.V), which is also developing a liquid-based ARC that will replace the traditional ARC.

Interestingly, both companies will impact Air Products ( APD), which generates huge income from sales of silane gas used in traditional ARC coatings.

No Disclosures
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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