The so-called SunShot program by the U.S. government aims to spur U.S. innovations to reduce the cost of solar energy. The Energy Department said it's invested $60 million in an incubator program meant to help new solar power concepts at small businesses.
The Energy Department said $10 million in cash awards were available for the first three teams that can demonstrate non-hardware costs for small-scale solar systems for homes and businesses can be as low as $1 per watt.
The department said that target represents a 65 percent decrease from costs associated with permitting, licensing and connecting solar power systems to the electricity grid.
U.S. Energy Secretary Steven Chu described the contest as a "race to the rooftops."
"This aggressive target is an important step that will help bring us significantly closer to reaching the SunShot goal of cost-competitive solar energy by the end of the decade," he said in a statement.
Efforts to advance solar power in the United States are controversial. Leaders in the House of Representatives have taken issue with a $535 million federal loan guarantee offered to solar panel company Solyndra, which filed for bankruptcy protection in 2010.
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