The solar industry dramatically has cut costs in the past six years through economies of scale: with the market flooded with equipment, prices plummeted.

In the coming years, though, technology will play a bigger role in bringing down costs, a shift that will bring more powerful rooftop solar panels to market. That ultimately could be good news for businesses and cities seeking cost-effective ways to boost renewable energy.

Earlier this week, SolarCity stunned solar industry watchers by announcing plans to acquire startup Silevo and build a giant factory in upstate New York to manufacture panels with Silevo’s solar cell technology. Having a vertically integrated business model will ensure that SolarCity will have enough panels to fuel its planned growth and give it access to cutting-edge cell technology, executives said.

The move underscores the growing importance of solar manufacturing innovations, particularly any technique that can crank out more wattage from a panel. The rapid ramp-up of Chinese manufacturers commoditized solar panels but, as the industry seeks new ways to reduce prices, cell efficiency is one of the best levers in the near to medium term, said Shyam Mehta, a solar analyst at GTM Research. That’s particularly true in rooftop solar systems, where much of the growth is expected to come from in the years ahead.

“The value of high-efficiency panels is much higher in the rooftop markets compared to utility-scale solar because you can pack more power from a given rooftop and that also brings down all your balance-of-system costs of labor, wiring and racking,” Mehta said. “Even if the panel costs more because it’s efficient, the math works out.”SolarCity executives said that Silevo’s silicon cells can convert 21 percent of the sun’s energy into electricity, a few more percent than industry-standard silicon panels. It’s possible to get to 24 percent efficiency with the technology.

That would mean that a typical rooftop installation would need 25 percent fewer panels — and accompanying mounting hardware and labor. For businesses or other institutions considering installing solar panels, more efficient panels will generate more energy over the course of the year, lowering utility bills and improving lease terms.

It’s not just SolarCity looking for some sort of technical edge. The brutal price wars in solar put dozens of solar manufacturers out of business and led to tariffs on Chinese products. But now, the excess of solar photovoltaic (PV) panels in the market largely has been absorbed and solar companies are starting to invest again in technologies.

“We appear to be hitting the part of the PV industry cycle where investment in manufacturing is possible again,” said Jenny Chase, solar analyst at Bloomberg New Energy Finance. “There will be much more interest in U.S. venture-funded solar manufacturing companies in next few years as the cycle turns.”

Earlier this week, thin-film solar startup Siva announced it raised $15 million to build a pilot production line. Other big players already have placed bets on next-generation technologies: First Solar last year bought high-efficiency silicon cell maker TetraSun and SunPower is part owner of Solexel, a Silicon Valley-based startup. A handful of other solar companies are pursuing different techniques to lower efficiency and reduce the amount of silicon used in solar cells to save costs.

The big Chinese manufacturers, meanwhile, are expected to implement new manufacturing techniques from their equipment providers to improve efficiency and trim costs as well, said Mehta. The industry continues to wring costs from financing solar systems as well, but “the outlook for technology investments is the strongest it’s been in almost half a decade,” he said.

The challenge for all emerging technologies is scale; often promising manufacturing techniques run into technical challenges going into high-volume production or they can’t find the money to finance new factories. For its part, SolarCity intends to build a factory capable of turning out one gigawatt worth of Silevo solar panels in two years, a huge jump from the 32 megawatts the company is making now.

Ten years ago, there was a wave of investment in solar technologies but many of those companies, including the infamous Solyndra, failed due to the punishing price war and difficulty of scaling up manufacturing companies. It’s unlikely that prices will drop as quickly in the next five years as they did in the last five years, analysts say. But for solar to match the price of grid power in more places, the technical innovations that have been brewing in labs these past few years need to be made at scale.

Top image of solar cell via Silevo