Chinese solar companies are eyeing neighboring markets for business opportunities as Japan switches to solar power to cut its dependence on nuclear energy.

On June 18, the Japanese government announced a new feed-in tariff, which took effect on Sunday.

The tariff requires the Japanese power grid to pay solar companies 53 cents per kWh for the solar energy they feed into the system for the next 20 years.

The tariff is triple that of China's and almost double that of Germany.

The tariff could spur at least $9.6 billion of investment in new solar installations and generate up to 3.2 gW of capacity, about the output of three nuclear plants, Bloomberg New Energy Finance forecasts.

On Sunday, the No 3 reactor of Ohi nuclear plant, northwest of Tokyo, returned to operation amid a deep division in public opinion.

Despite the lucrative tariff, Japan will not be an easy market for Chinese solar makers, industry players said.

Suntech, the world's largest panel maker, only has a 4 percent market share in Japan compared to its 20 percent market share in the US, according to the company.

"We are expecting the Japanese market to grow by around 50 percent in 2012 to more than 2 gW of new system installations," said Kuniko Misawa, general manager of Marketing at Suntech Power Japan.

"Japanese customers are focused not just on cost, but also long-term reliability and Japanese solar companies have traditionally been some of the strongest in the solar industry and they have well-established brands and sales channels," said Misawa.

"Building sales channels and cultivating market acceptance of products in Japan is a difficult and slow process. However, it can be done if you have quality products and a clear strategy."

Sources from the Yingli Green Energy Holdings Company who declined to be named said the Japanese market is relatively closed, with Sharp Solar, Kyocera Solar and Mitsubishi Solar Energy Ltd as the dominant players.

Suntech moved into the Japanese market in 2006 by acquiring MSK Corp, a manufacturer of solar equipment.

The successful foreign players will have to either build a partnership or joint venture with a Japanese company or set up a significant presence inside the country, according to Shayle Kann, managing director of GTM Research Solar Practice, a US-based leading industry research firm.

At least five Chinese solar panel manufacturers, including Hebei-based Yingli Green Energy, Jiangsu-based Hareon Solar Technology Co and Trina Solar, had offices in Japan from the beginning of this year.

Meanwhile, Chaori Solar Energy Science and Technology Co and Sky Solar Holdings Co plan to develop 100 mW of solar projects with an investment of 7.5 billion yen ($93.9 million) in Japan this year.

Other companies entered the even market earlier.

Chinese-owned Canadian Solar Inc opened a subsidiary in Japan in 2009, when the country adopted a feed-in tariff ensuring private homes that used photovoltaic systems would receive payments for power they generated. The company also plans to build and operate solar farms in Japan.

To develop solar projects in Japan developers will have to get certificates from the Japan Photovoltaic Energy Association and Japan Electrical Safety & Environment Technology Laboratories. So far only seven Chinese companies have been given the green light, including Canadian Solar, Suntech, Trina and Yingli.

The Japanese market was up 30 percent year-on-year, reaching 1.2 gW in 2011, according to a report by Solarbuzz, a market research and consulting firm specializing in the solar energy supply chain.

Last year Japan ranked sixth worldwide for solar installations, with solar power providing about 1.6 percent of its electricity.

"In the short term, we have high expectations for the Japanese market given the high feed-in tariff levels and the government's commitment to PV," said Kann.

"However, we believe the current feed-in tariff mechanism will result in an application boom, and the government will be forced to decide whether to constrain the market beginning in 2013."

Contact the writer at [email protected]