solar-panel-1One of the key takeaways from last week’s Intersolar North America conference in San Francisco was that solar panel makers are seeing a much needed uptick in demand as prices for their equipment continue to decline.

Unfortunately, that demand hasn’t made it across the Atlantic to the U.S. quite yet. Europe is leading, with advantageous government incentives securely in place in Germany, Italy and Spain. China too is ramping up its efforts, which should have a major impact on worldwide trends in the coming months.

China, the rising star in the solar space, is benefiting not only from dropping materials costs but also basement-low labor and manufacturing costs. Europe can’t quite compete in this area. In Europe, silicon panels cost about $2.25 per watt, and analysts see the figure dropping to $2 or lower by the end of the year, reports VentureWire. In China, the price point could sink as low at $1.75 per watt.

There is some concern that the market slowdown that typically dominates the fourth and first sectors in the solar industry will break the momentum, but there seems to be plenty of work to go around for now. Most European and Chinese solar companies see the U.S. as the next growth market and source of demand — especially once the stimulus package does its duty in the fall. In preparation, several of these companies are already setting up shop in North America.

China recently passed its own economic stimulus legislation, earmarking upwards of $30 billion to foster renewable sources of energy, with solar prime among them. Australia has set aside $1.35 billion to finance solar projects, and South Korea has $2.3 billion for renewables. All of these plans could keep demand for solar materials and equipment on the upswing through the slow seasons and into next year.

This doesn’t mean solar will be the new cleantech cash cow, however. With polysilicon prices dropping to $60-$80 from $80-$100 per kilogram, Barron’s predicts that prices will fall between 15 and 25 percent between 2009 and 2010. The same publication has also reserved its optimism when it comes to increased demand, arguing that liquidity and credit availability must rebound to a greater degree before demand can catch up with the glut of solar products on the market.