The solar energy business has cooled considerably since the early 1970s when scarce oil at high prices sparked intense research into alternative energy sources.

When the energy tax credits created by the Carter administration expired in 1985, companies dependent on sales of solar heaters for homes and hot water all but disappeared.

Many of the companies that managed to survive have been swallowed by big oil companies, the only outfits that can afford the long-term research costs. The solar industry spends $250 million more worldwide each year than it takes in, according to industry analysts.

The remains of the solar energy industry have regrouped and focused their efforts on photovoltaics, or the generation of electricity, rather than heat, from sunlight.

The two largest U.S. producers of photovoltaics are engaged in a patent dispute over the latest solar cell technology. Last April, Solarex of Rockville -- since 1983 a wholly owned subsidiary of Standard Oil of Indiana (Amoco) -- sued in Delaware federal court to prevent its major competitor -- California-based ARCO Solar Inc., owned by Atlantic Richfield Co. -- from manufacturing thin-film silicon cells, an inexpensive alternative to conventional crystalline silicon modules.

The primary commercial uses for solar electricity are in remote telecommunication relay stations and water pumps in places where hooking up power lines is impractical or impossible. The U.S. Coast Guard recently purchased several thousand solar power plants for navigation buoys.

Some California electric companies have experimented with photovoltaics as a supplemental generating source. The technology matches well with utility requirements, providing the most output at the hottest part of the day, when air conditioners put the greatest strain on power supplies.

Solar electricity, at about 35 cents per kilowatt hour, is far too expensive for most applications in the industrialized world. The average cost of electricity is 6 cents per kilowatt hour. Solar supporters estimate that they can match that price in five to 10 years, but the solar industry is notorious for promising the moon.

"The science of these materials is really in its infancy, which is a reason for optimism," said Chris Flavin of the World Watch Institute, a Washington group. He said thin-film cells, though less efficient than crystalline silicon are much cheaper and easier to make, and could revolutionize the industry.

Bob Johnson, an analyst at Strategies Unlimited who studies the solar industry, estimates worldwide revenue from all forms of photovoltaics at about $130 million, and $300 million from systems that use the cells. Domestic revenue account for about one-third of these figures.

Worldwide shipments of solar electric panels totaled 21 megawatts last year, up from 18.7 megawatts in 1985, according to Johnson.

Shipments have shown "modest growth" of 10 to 20 percent annually in recent years, Johnson said, but Energy Department budget cuts under the Reagan administration have offset much larger growth in private sector demand. In 1983, government purchases for demonstration projects accounted for more than half of photovoltaic production, compared with only 2 percent last year.

Research continues despite huge losses, as U.S. manufacturers follow a marketing strategy that is unconventional by American standards. "It's really the Japanese that have shown that when you get a new product, you have to build confidence in it," according to an Energy Department official familiar with renewable energy.

To do this, he said, many U.S. firms have been selling solar electric products at prices that at best defray research costs. What these firms gain is market experience, commercial contacts and product acceptance.

With research factored in, said Johnson, prices of photovoltaic products "have little or no relation to actual production costs." John Corsi, president of Solarex, said, "We're profitable at a manufacturing level, but we're not making enough margin to cover R&D."

Manufacturers have increasingly turned their marketing efforts toward Third World countries, many of which lie within the equatorial sunbelt and are therefore well positioned to take full advantage of solar energy. International development agencies have turned to solar power as an economical alternative for electrification, refrigeration for remote medical clinics and water pumping projects.

The French have "several thousand systems in place" in French Polynesia. Most are small, household-sized and agriculturally oriented, according to Flavin.

Analysts said photovoltaic power will not gain wider acceptance in industrialized countries until manufacturers can achieve economies of scale. Today, a system that provides 20 kilowatts costs about twice as much as a 10 kilowatt system. That's good for small villages that can save by buying only what they need, but it prevents photovoltaics from being cost competitive on commercial power grids and other large scale application