BOSTON—Back in 1995, when the global market for solar panels was small, the U.S. shipped more than 40 percent of the world's photovoltaic modules, which produce electricity from light. Today the number is closer to 4 percent.

As China, Taiwan, Europe and Japan have dramatically stepped up production of photovoltaics, American companies have not kept pace with a growing industry. But the U.S. Department of Energy (DOE) is not throwing in the towel. The DOE's SunShot initiative aims to revive the U.S. solar industry to create green jobs, and drive down prices in the process so that solar can compete with fossil-fuel energy sources.

"The first premise is the fact that we want to have subsidy-free solar electricity," SunShot director Ramamoorthy Ramesh said here this week at a meeting of the American Physical Society. SunShot, he said, aims to drop the price of solar power by about 75 percent by 2020, bringing down the purchase and installation costs of solar arrays to about $1 per watt. "These are very lofty goals," Ramesh acknowledged. "It's very difficult to do this."

From the name on down, SunShot is meant to evoke the moon shots of the 1960s and 1970s, and like the Apollo program it stems from a presidential directive to solve difficult problems in science and technology. (With about $300 million a year in federal funding, however, SunShot is small potatoes compared to the Apollo program.)

One major challenge is boosting the efficiency of solar collection: most varieties of photovoltaic cells in production work at only about half their theoretically attainable efficiency levels. SunShot, Ramesh said, is targeting an efficiency of 23 percent for thin film photovoltaics based on cadmium telluride, close to their theoretical maximum of 29 percent. "We call that now the Michael Jordan program," he said, in homage to the legendary basketball player's jersey number (23) in his first stint with the Chicago Bulls. The initiative also invests in nascent solar companies, acting as an incubator for small businesses and entrepreneurs looking to bring disruptive new technologies to market.

But physics and engineering alone cannot bring solar energy to the masses. Expenditures such as installation and permitting, known in the industry as balance-of-system costs, run nearly as much as the photovoltaic modules themselves. The problem is compounded by the numerous nested jurisdictions in the U.S., where a potential solar buyer may have to contend with overlapping local and state laws—along with paperwork from each—that affect the solar installation. Interfacing with the local utility adds an extra layer of complexity. My colleague George Musser has written extensively about the head-spinning bureaucratic complications he has encountered in installing solar panels on his New Jersey roof.

According to Ramesh that is not the case in Germany, far and away the world leader in solar power adoption. In 2009 that nation had six times as much installed solar capacity as the U.S. does. "In Germany it's a single set of papers, four or five pages," Ramesh said. "It's a very quick process." If solar energy is to reach the dollar-a-watt level in the U.S., the balance-of-system costs will have to shrink to a fraction of their present-day levels. That means not only technological advances that make solar panels easier to install and connect to the grid but also broad procedural changes across government agencies. "It's a very tough beast to kill," Ramesh acknowledged.