GE’s decision, revealed last week, to stop construction of what would have been the largest thin-film solar-panel factory in the United States suggests that solar companies with new technologies can’t hope to enter the market merely by having low manufacturing costs.

GE and dozens of other manufacturers, including the now-defunct startups Solyndra and Abound Solar, had bet on thin-film technology because—even though it produces less power than conventional silicon panels—it promised to be cheaper to make. The only barrier, or so these companies thought, was scaling up production enough to achieve the right economies of scale.

But thin-film solar has failed to deliver on its promise. The price of silicon solar panels has fallen, and solar-panel efficiency has become more important—both as a way of helping solar manufacturers stand out from competitors, and as a way to lower the overall costs of solar power, which include installation costs.

GE said last week that it had taken a hard look at its thin-film solar technology and decided that it simply wasn’t efficient enough to compete. So it’s putting its factory in Aurora, Colorado, on hold and taking the technology back to the lab until it can make it substantially more efficient. GE’s decision could dissuade others from following the same strategy.

“You can’t rely on low-cost manufacturing alone,” says Danielle Merfeld, head of renewables at GE Power and Water. “You also need high-performing panels.”

Even First Solar, which had inspired GE and others to get into thin-film technology, is struggling. First Solar brought its technology to market at a time of high demand—driven by subsidies in Germany and elsewhere—which meant it could charge high prices as it scaled up production.

First Solar became one of the world’s largest solar-panel manufacturers, and still has lower costs than its competitors. It went public at the end of 2006, and within two years its stock price increased tenfold. But amid falling solar prices, its stock has dropped precipitously to about half of its price when the company went public.

The situation is getting worse: some conventional silicon solar manufacturers are now trying to differentiate themselves by offering higher-efficiency solar panels, raising the bar for thin-film and other technologies.

GE still hopes that an improved understanding of materials and other advances could improve the efficiencies of its thin-film solar panels significantly—from about 13 percent to over 15 percent, which is above the average for silicon solar panels. It’s given itself 18 months to achieve this, keeping in mind that the incumbents are fast improving the efficiency of their own panels.

Some solar startups are trying different strategies. One promising approach, by Alta Devices, is to make thin-film solar cells of a type that are far more efficient than silicon ones—though that will depend on developing a low-cost means of manufacturing. Another option is to offer technology that augments conventional silicon panels, a strategy taken by Innovalight (now part of DuPont) and Twin Creeks Technologies.