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Business

The way to make solar profits in Japan is to be a foreign company

Trina Solar is building three new solar power farms like this one in Japan.

TOKYO -- Armed with economies of scale and experience gained in global markets, China's Trina Solar and other solar panel producers are making their presence felt in Japan, where domestic players scoff at an increasingly unattractive market.

Trina Solar, the world's biggest solar panel maker, is to develop mega-solar farms in Yamagata, Fukushima and Miyagi prefectures. It is aiming to raise its total installed capacity, including its existing Japanese plants, tenfold to 100 megawatts by the end of the year.

Canadian Solar, No. 3 in the field, has installed capacity of about 20MW in Japan and is building three more plants with a total capacity of 83MW. No. 5 Hanwha Q Cells of South Korea operates solar plants with 37MW of total capacity.

As the global industry expands, Japanese solar panel players are contracting. Their panel shipments fell year on year for a fifth consecutive quarter in the first three months of this year. They are discouraged. They see fewer available sites fit for solar power farms. And the rates they are guaranteed have declined in recent years.

That guaranteed rate was 40 yen (nearly 40 cents) per 1 kilowatt-hour for a facility with installed capacity of 10kW or more -- at least it was when Japan's feed-in tariff program began in 2012. In 2015, the rate was in a range from 27 yen to 29 yen. This year it is 24 yen.

Talk about a lack of pricing power.

Despite the situation, large foreign players are finding opportunities in Japan. One reason is they have access to cheaper materials. Another is their integrated approach to setting up solar farms. After their panels start converting the sun's rays, the companies hang around to sell the power. This way, one industry insider said, the providers can recoup their investments even if the rate guarantee falls to 20 yen.

Trina Solar first entered Japan in 2010 but is only now moving into full-blown expansion mode.

Its plant in Yamagata will have a capacity of 25MW, the one in Fukushima will be able to generate 15.5MW of electricity and the Miyagi farm will have capacity of 24MW.

As the world's top solar company -- it shipped 5.74 gigawatts worth of panels in 2015, according to U.S. research firm IHS -- Trina Solar can leverage its economy of scale to lower its costs.

And its experience -- Trina Solar has set up farms in Chile, North America and Germany -- has given it the ability to optimize a solar farm's output by paying attention to the geographic contours of each site. The company also has a knack for maintenance and preventing equipment failures.

For its three new Japan farms, Trina Solar will import its own panels and outsource production to some Japanese producers.

The company typically chooses mountainous areas for its farms. It says its policy is to cut down as few trees and make as few landscape alterations as possible.

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