Japan's home rooftops are emerging as the next hot spot in what for years has been one of the biggest solar markets in the world, marking a move beyond the utility-scale projects in rich industrial nations that have fueled most of the industry's growth.

Because of the change, Japan may not remain the No. 2 solar market behind China beyond next year, according to Bloomberg New Energy Finance forecasts. Developing nations such as China, Brazil, Egypt and India will pick up the slack as photovoltaics move beyond a toy of rich industrial nations into a competitive power source for places where it is costly to import fossil fuels.

The government is encouraging more energy-efficient buildings that combine solar panels with some form of storage and other devices like fuel cells. That change also underscores what happens when authorities curtail incentives that have spawned sprawling projects, each covering acres of countryside.