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STA response to the Expiry Reviews and Partial Interim Review of the anti-dumping and countervailing measures on solar PV from China

Response on behalf of the Solar Trade Association

About us

The Solar Trade Association is a representative association of manufacturers, importers, users and other related businesses active in the solar PV market in the United Kingdom.

Since 1978, the Solar Trade Association (STA) has worked to promote the benefits of solar energy and to make its adoption easy and profitable for domestic and commercial users.

A not-for-profit association, we are funded entirely by our membership, which includes installers, manufacturers, distributors, large scale developers, investors and law firms.

Our mission is to empower the UK solar transformation. We are paving the way for solar to deliver the maximum possible share of UK energy by 2030 by enabling a bigger and better solar industry. We represent both solar heat and power, and have a proven track record of winning breakthroughs for solar PV and solar thermal.

Respondent details Respondent Name: Sonia Dunlop, Communications and

Public Affairs Manager

Email Address: consultations@solar-trade.org.uk

Contact Address: 53 Chandos Place, London WC2N 4HS

Contact Telephone: 0203 637 2945

Organisation Name: Solar Trade Association

Would you like this response to remain confidential? No – this is the version Open for inspection by interested parties

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Preliminary remarks

This free format submission relates to the following three reviews:

- Notice of initiation of an expiry review of the anti-dumping measures applicable to imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People's Republic of China (2015/C 405/08)

- Notice of initiation of an expiry review of the countervailing measures applicable to imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People's Republic of China (2015/C 405/09)

- Notice of initiation of a partial interim review of the anti-dumping and countervailing measures applicable to imports of crystalline silicon photovoltaic modules and key components (i.e. cells) originating in or consigned from the People's Republic of China (2015/C 405/10)

We urge the European Commission to note, when considering responses to this call for evidence and its final decision on these three reviews, that the UK is the biggest solar PV market in the EU in terms of annual deployment, and has been since 2014. In 2015 the UK accounted for approximately 40% of EU-wide solar PV deployment1, and so the views of the UK solar industry should be given the appropriate weighting when considering the EU-wide industry.

As part of our preliminary remarks, the Solar Trade Association would also like to have it noted that the process for responding to all aspects of these reviews was very technical, and therefore many member companies and importers, and especially those that are SMEs, were unable to submit the required information by the various deadlines. We therefore request that our response is considered representative of the views of the UK solar PV sector.

Where we refer below to ‘anti-dumping measures’, we are referring to the full suite of anti-dumping and countervailing measures in place as well as the associated Minimum Import Price (MIP) price undertaking. We have shortened this to ‘anti-dumping measures’ in the interests of brevity.

Attached to the Limited version of this submission are anonymised scans of invoices and extracts of the websites of two different UK distributors provided to us by our members, showing that, in Q4 of 2015, it was possible to buy solar modules manufactured in Europe at a lower price than solar modules imported under MIP from China. For both categories, a standard 270Wp module is within the £110-£116 price range. For a 250Wp all black module, the prices are within the £119-£125 range.

Summary

The Solar Trade Association believes that maintaining anti-dumping measures on Chinese solar PV modules and cells is against the Union interest, and specifically against the UK’s interests.

1 Solar Power Europe “Global Market Outlook 2015” available here:

http://helapco.gr/pdf/Global_Market_Outlook_2015_-2019_lr_v23.pdf. The detailed version of the report is only available to members of Solar Power Europe, but is available on request by contacting their team here.

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We believe that world market prices for modules and cells should be reinstated in Europe to ensure that the EU solar industry has access to the best quality solar modules at the best possible price.

Our arguments can be summarised as follows:

The EU and UK solar PV industry is predominantly a downstream industry and a net importer of solar PV, and is therefore penalised by the anti-dumping measures and the artificially inflated higher PV panel and cell prices.

Anti-dumping measures undermine over 99% of UK solar jobs while allegedly protecting less than 1%. Furthermore, almost all of the less than 1% of jobs in the upstream and manufacturing sector of the industry are dependent on the import of cells.2

The measures are adding 7% extra or £397 (€5223) to the cost of a typical domestic solar PV installation in the UK and 13% to a typical large-scale installation – extra cost that is slowing the technology’s progress to competing subsidy-free.

Higher costs within the EU require higher government subsidies to encourage deployment, and meet the EU’s 2020 and 2030 renewable energy targets. These additional costs in subsidy schemes are then passed on to the end consumer.

The Solar Trade Association recognises the reasons why trade defence instruments exist and why in some cases it is in the interests of the European Union to impose measures. However we believe that the evidence below sets out why this is not the case for the solar PV sector in Europe because of its nature as a net importer downstream industry.

Specific points

General Union interest arguments

Anti-dumping measures are not in the interests of users, importers, distributors, consumers, upstream suppliers of materials and equipment or indeed, we believe, the UK government.

The EU and UK solar PV sector as a whole has suffered considerably from the imposition of anti-dumping measures except for one vertically integrated Union producer (located elsewhere in Europe).

The UK, like the EU as a whole, is a net buyer of solar PV. It is therefore penalised by artificially high PV module and cell prices. We estimate that maximum UK solar PV manufacturing capacity in 2014 was 100MW, which represents 8.2% of the total amount of the 1,213MW of solar PV deployed in the UK in 20144. This manufacturing is largely in the niche, building integrated and premium end of the market. There are no solar PV cell manufacturers in the UK.

It is important for the European Commission to recognise that, as shown by the Centre for Economics and Business Research, 68.1% of the overall lifetime content of a large-scale solar PV installation accrues to the UK5. The installation of rooftop solar PV is even more labour-intensive. The situation in

2 Based on an STA survey of the small number of businesses manufacturing solar PV products in the UK.

3 All exchange rates in this document were correct as of Friday 22 January 2016.

4 https://www.gov.uk/government/statistics/solar-photovoltaics-deployment

5 http://www.cebr.com/reports/solar-powered-growth-in-the-uk/

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the UK is representative of that across Europe, with the downstream solar sector creating a huge amount of value and jobs in the EU.

In addition to our own submission, we would like to refer you to the letter of 17 November 20156 from the UK Secretary of State for Energy and Climate Change Amber Rudd MP to European Commissioner Cecilia Malmstrom, setting out very clearly the case for removing anti-dumping measures, and why the measures are not in the Union interest.

The UK’s Minister of State for Energy and Climate Change Andrea Leadsom MP also told the UK Parliament on 7 January 20167 that:

“The MIP is an unwelcome drain on the UK solar industry. My right hon. Friend the Secretary of State [Amber Rudd MP] made that point in her letter to the Trade Commissioner in November. I also agree that it would be fairer and simpler to remove the MIP while the current expiry review is under way. Unfortunately, however, the decision to launch an expiry review is one for the Commission, not for member states. Anti-dumping and anti-subsidy regulations require the Commission to maintain existing trade defence measures while the expiry review takes place, so it could be some months yet.”

and later in the same debate:

“It is a real concern that, in spite of the fact that the cost of solar panels has dropped so dramatically, the cost in Europe remains higher than elsewhere in the world as a result of the import tariffs. As I mentioned earlier, my right hon. friend the Secretary of State wrote to the Trade Commissioner explaining how very bad this is for the ongoing success of the UK industry. We will do everything we can to try to ensure the tariffs are removed as soon as possible.”

Lower prices do not necessarily indicate dumping

It is in the interests of the EU to have lower solar PV prices. And just like other semiconductor industries such as the computer microchip industry and digital electronics, it is normal for prices to reduce over time. It is also normal for global manufacturers to sub-contract to low-cost countries – that is how the cost of many consumer electronics like flat screen TVs has fallen so sharply over the last few years. Consequently, lower prices in the semiconductor industries do not mean there has been dumping.

We believe that dumping will not occur when anti-dumping measures are removed. This is because domestic Chinese demand for solar PV has gone up in recent years, as well as the growing market for solar PV in Asia. For example, India has plans to deploy 100GW by 2020. China is using more and more of its solar PV production itself. In 2015, according to the latest available statistics, China installed 15GW of solar. Furthermore it is estimated that the top 15 Chinese solar manufacturers produced 30-

6 https://ec.europa.eu/carol/index-

iframe.cfm?fuseaction=download&documentId=090166e5a3bf2e71&title=151117_SoS%20to%20Malstrom%20re%20MIP.pdf 7 http://www.publications.parliament.uk/pa/cm201516/cmhansrd/cm160107/debtext/160107-

0001.htm#16010722000009

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35GW8. Therefore half of domestic Chinese production is being used in China itself – which compares to the 90% overcapacity recorded in 2012 at the time that these measures were put in place. This, together with significant worldwide growth in demand for solar PV, means that China no longer has significant spare manufacturing capacity, and this economic environment further reduces any potential risk of dumping when anti-dumping measures are removed.

The evidence above shows that the case for not imposing anti-dumping tariffs is significantly stronger now than it was in 2013.

The UK solar PV sector: a downstream industry

The UK government estimates that there are 3,190 operational solar PV sector firms in the UK. Of these, we have identified eight businesses that are in the upstream sector. The rest can be classified as midstream (such as importers and distributors of solar equipment) and downstream businesses (the installers - the part of the supply chain closest to the end user). The upstream sectors, together with examples of such companies in the UK where available, are:

Upstream businesses that export equipment used in the manufacture of solar PV overseas. These businesses can be described as ‘upstream of upstream’. An example is DEK/ASM Assembly Systems Weymouth Ltd.

UK-based manufacturers that qualify as Union producers under the European Commission’s definition.

Businesses that design solar PV products in the UK, and then manufacture their products overseas, retaining the intellectual property in the UK. An example is Solarcentury.

Manufacturers based in the UK that import cells or solar laminates from overseas for assembly in the EU. Examples are Viridian Solar.

Impact on jobs and employment

In the UK in 2015, it was estimated that there were approximately 34,400 direct and indirect jobs in solar PV and its supply chain, of which 20,300 are considered to be direct employment9. Out of these direct jobs our latest estimate is that an absolute maximum of 130 jobs across less than five companies relate to the Union production of PV solar modules. That equates to less than 1% of all direct solar PV jobs in the UK.

We estimate that anti-dumping measures are therefore undermining more than 99% of solar jobs while allegedly protecting less than 1% of those jobs, almost all of them dependent on imports of cells from outside the EU to make their products. We therefore believe these measures are completely out of proportion with any injury that has been caused and not in the Union interest.

Across the EU, consultants EY estimates that 110,000 people are employed in the solar industry, and 86% of those jobs are linked to downstream activities of the value chain. Downstream activities of the

8 These estimates were provided to the Solar Trade Association by the Becquerel Institute,

http://becquerelinstitute.org/about-the-pv-market-alliance/. 9 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/416240/bis-15-206-size-and-

performance-of-uk-low-carbon-economy.pdf

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value chain are more labour intensive than upstream activities. EY has also estimated that if trade defence measures were removed 54,000 new jobs would be created in the EU solar industry.10

Impact on end users

We estimate that the measures add 7% extra to the cost of a typical domestic solar installation in the UK, or in other words £397 (€522) extra to a typical domestic solar PV system of just over £6,000 (€7,899). If you exclude labour and other costs and consider only the cost of the modules the measures are adding 22.23%.

This shows that anti-dumping measures are forcing homeowners to pay an artificially high price for their systems, and is therefore reducing paybacks and returns on investment for end users. Lower investment returns reduces demand and uptake of solar PV, resulting in less business and lower profits for UK and EU solar businesses.

Impact of MIP on typical domestic solar PV installation in UK (2016 costs)

With MIP Without MIP (world prices)

Number of panels 14 14

Panel Size (Wp) 270 270

Capacity (kWp) 3.78 3.78

Cost per W (£) £ 0.45 £ 0.35

Costs (£)

Panels £ 1,701 £ 1,323

VAT @ 5% £ 1,786 £ 1,389

Other costs £ 4,084 £ 4,084

VAT @ 5% £ 4,288 £ 4,288

Total £ 6,075 £ 5,678

With regards large-scale solar installations, the STA estimates that the capex of a typical 10MW solar farm in the UK would be 13% cheaper without anti-dumping measures:

10 EY, “Solar photovoltaics, jobs and added value in Europe”, November 2015

http://www.solarpowereurope.org/insights/jobs-and-growth-study/

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Impact of MIP on typical solar farm installation in UK (2016 costs)

With MIP Without MIP (world prices)

Capacity (MWp)

10 10

Cost per W (£) £ 0.43 £ 0.31

Costs (£)

Panels £431k £308k

Other costs £534k £534k

Total Capex £965k £842k

This shows that anti-dumping measures severely affecting the financing of large-scale solar PV projects in the UK and the EU as a whole. Higher costs are also affecting the profitability of operations of solar businesses in the UK and across the Union.

These estimates tally with the UK Government’s estimates11, which suggest an indicative 10-14% extra on solar installation prices in the UK due to anti-dumping measures.

We urge the European Commission to note that the support schemes for solar PV were radically cut in December 2015. The Feed-in Tariff for small-scale solar PV has been cut by up to 65%12, and the Renewables Obligation for large-scale projects was in effect ended with the removal of grandfathering as of 22 July 2015, and is closing to solar as a whole as of 1 April 201613. This means that solar companies in the UK are now operating in a much more challenging environment, and the additional cost of the anti-dumping measures is making margins even tighter than before.

Impact of anti-dumping measures on subsidy schemes

Solar PV at present is a technology that requires Government support in the form of a subsidy. In the UK subsidy schemes are paid for via a ‘levy’ or added cost on both industrial and residential energy bills, called the Levy Control Framework.

The UK has deployed ~7GW of solar in the two and a half years (May 2013 - December 2015) since the implementation of anti-dumping measures – deployment that was largely driven by the Feed-in Tariff

11 Letter from Secretary of State Amber Rudd to the House of Commons Energy and Climate Change Committee:

http://www.parliament.uk/documents/commons-committees/energy-and-climate-change/Correspondence-from-DECC-on-Outcomes-of-COP21.pdf 12

https://www.gov.uk/government/consultations/consultation-on-a-review-of-the-feed-in-tariff-scheme 13

https://www.gov.uk/government/news/controlling-the-cost-of-renewable-energy

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and Renewables Obligation support schemes. This equates to more than £8.5bn (€11.2bn) of investment in solar, which would have been ~10% lower14 if anti-dumping measures had not been in place.

Had the anti-dumping measures not been in place over that time period we estimate that the UK Government (and therefore the UK bill payer) would be paying £700million (€921million) less in subsidy over the 20 year life span of the projects supported.

The goal of EU and member state policy on renewable energy is, of course, to support renewable technologies to the point that they can compete subsidy-free. Artificially increasing the price of solar PV simply means that it will take longer for solar to become subsidy-free in the UK, and that the UK households and businesses will have to continue subsidising the technology for longer than would otherwise be the case.

Price convergence and undercutting

The Solar Trade Association has provided the Commission with evidence that last year in the UK it was possible to buy solar modules produced in the Union cheaper than MIP modules imported from China.

Attached to the Limited version of this submission are anonymised scans of invoices and extracts the websites of two different UK distributors showing that, in Q4 of 2015, it was possible to buy solar modules manufactured in Europe at a lower price than solar modules imported under MIP from China. For a standard 270Wp module, the prices are within the £110-£116 range. For a 250Wp all black module, the prices range from £119-£125.

This can also be seen in the following graph from pvXchange.com:

14 The Solar Trade Association estimates that a typical domestic solar installation would be 7% lower without MIP, and

a typical large-scale solar installation would be 13% lower without MIP. See the section on the impact of end users.

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This trend is also evidenced in the following graph, which covers a longer time period:

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Source: PVInsider, pvXchange15.

The aim of anti-dumping measures is to prevent injury to Union producers. However, if Union producers are now able to produce and sell at prices below the Minimum Import Price for their Chinese competitors, the measures go beyond mere anti-dumping and actually shield Union producers from normal price competition, and prevent EU end users from accessing the cheapest prices.

We believe that this price convergence shows that the case for removing anti-dumping measures is stronger now than when the measures were originally imposed in 2013.

The evidence above also shows that MIP is currently set at too high a rate and therefore we encourage the European Commission, in parallel to the Expiry Reviews, to look at reducing the MIP price in its regular reviews and adaptations of MIP based on market price developments.16

15 http://analysis.pv-insider.com/europes-module-import-verdict-test-price-convergence-china

16 http://trade.ec.europa.eu/doclib/docs/2015/july/tradoc_153587.pdf

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Furthermore, exchange rate fluctuations have had a disproportionately negative impact on the UK solar PV market. In 2015, whilst the British Pound has strengthened vs the Euro, the Euro has weakened against the US Dollar. This meant that the MIP price was increased in 2015 due to the weaker Euro, and yet from the UK’s perspective buying European non-MIP panels became cheaper due to the stronger British Pound. This is a double blow for UK end users wishing to purchase Chinese MIP panels as it is more expensive for them to purchase Chinese MIP panels, and cheaper to buy European panels, despite Union production not being able to meet European demand. The resulting loss of market share for the Chinese MIP manufacturers creates an even bigger disincentive for Chinese manufactures from exporting to Europe. A disincentive to export to Europe is bad for competition, bad for price reduction and innovation, and delays the path to reach zero subsidy solar in the EU.

In addition to distorting the solar PV market in the EU in terms of price, the measures also distort the solar PV market in terms of administrative costs and red tape. MIP panels have a series of administrative requirements attached to them that impede normal business:

EU businesses that have imported MIP products into the EU are then banned from working with that same Chinese manufacturer in markets outside the EU. This is the most damaging of the restrictions.

EU importers of MIP products, who of course have not had sight of the (unpublished) MIP undertaking, have to operate with a risk of delayed goods and subsequent penalties, tariffs and fines even if they purchased product in good faith and believed all paperwork to be genuine. The onus is on importers to verify supply chains all over the world, adding additional costs to businesses, especially SMEs.

Distributers, installers and consumers find the measures complex and burdensome from an administrative point of view. There is evidence that for the same price point (MIP = non-MIP), non-MIP panels are chosen to avoid the risk, uncertainty and red-tape that comes with the measures The circumvention investigation and the risk of retroactive duties on non-MIP imports has dissuaded many investors from purchasing panels and cells overseas in general. Even though through due diligence importers should be able to reduce the risk of falling foul of the regulations to almost zero, an as yet unknown risk remains and that risk and uncertainty damages investor confidence.

EU importers of MIP products face much longer processing times for orders.

European demand for solar PV and Union manufacturing capacity

There is not enough solar PV manufacturing capacity in Europe to meet European demand. In 2015 the EU deployed approximately 7GW of solar PV, but only manufactured just over 3GW17. It is mass production that creates both the high levels of quality and economies of scale that leads to ‘value for money’ modules and cells. The EU does not have this kind of mass production, with factories with production capacities in MW rather than GW. Only two Union producers of solar PV have annual capacities of more than 500MW.

A number of our larger member companies here in the UK, who have high volume demand for modules, have told us that although they tried to buy their modules from within the EU, the Union producers could not supply them in the quantities they needed. They therefore decided to purchase

17 Estimates based on a Solar Power Europe survey and market announcements.

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from outside the EU instead. It is also important to note that Union producers have not increased their production capacity over the last two and a half years in order to be able to meet European demand.

Interim review on cells

The Solar Trade Association believes that anti-dumping measures should be removed on both cells and modules. Removing anti-dumping measures on cells would be a step in the right direction, but would not be a satisfactory conclusion to the anti-dumping case as a whole.

As stated above, the UK has no cell manufacturing. This corroborates the European Commission’s statement in the Notice of initiation of an interim review that “a significant number of cell producers have closed production”. The small number of producers in the UK industry, again as stated in the Notice, depend on the availability of alternative supply sources from China and Taiwan.

Circumvention

The Solar Trade Association agrees that if circumvention of measures has been found to occur, the necessary steps should be taken to penalise those companies that have broken the rules.

However the STA considers that the retroactive extension of anti-dumping measures to Malaysia and Taiwan will burden a number of UK companies with excessively high costs. Although it is always up to importers to carry out the necessary due diligence, many firms in the UK solar sector are small and medium size enterprises and so do not have the same resources as their larger counterparts.

The STA is concerned about the potential for ‘mission creep’ as gradually anti-dumping measures are extended to more and more Asian countries, completely disrupting the operation of a free market in solar PV in Asia and Europe.

If measures are extended to Taiwan and Malaysia, the UK will be disproportionately negatively impacted from retroactive anti-dumping duties from May 2015. This is because, as indicated above, the UK has been the biggest solar PV market in the EU since 2014.

Impact on decarbonisation and other public policy goals

The STA would like to point out that the solar PV industry is not just a standard industry. Maximising solar deployment in the EU is fundamental to achieving the EU’s public policy goal of 20% renewable energy by 2020 and at least 27% by 2030. That in turn is fundamental to achieving the Paris Agreement goal of “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels”.

It is in the interests of the UK, the Union and the world to achieve this safe 1.5 °C level. It is therefore not in the ‘Union interest’ to artificially increase prices of solar PV in the EU, as this reduces the amount of solar deployed in the EU, as explained in the section above regarding the impact on end users. We believe there is a strong argument for this public policy goal to be considered in the ‘Union interest’ considerations. Indeed, paragraphs 257-259 of Commission Regulation (EU) No 513/2013

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imposing the provisional anti-dumping duty showed that the impact on policy goals has to be taken into consideration18.

Furthermore, the liberalisation of trade in environmental goods and services is also a key public policy goal for the EU, and anti-dumping measures on solar PV run contrary to that effort.

Conclusion

The Solar Trade Association recognises the reasons why trade defence instruments exist and why it can, in some cases and in some sectors, be in the interests of the European Union to impose trade defence measures. In sectors where the EU has a major manufacturing sector and where manufacturing makes a large part of the EU sector this may be the case. However we believe that the evidence above sets out why this is not the case for the solar PV sector in Europe, because of its nature as a net importer downstream industry.

Indeed, as the biggest solar PV market in the EU, anti-dumping measures as a whole have a disproportionate impact on the UK as compared to other member states. The UK Government has made clear, in the letter of 17 November 201519 from the UK Secretary of State for Energy and Climate Change Amber Rudd MP to European Commissioner Cecilia Malmstrom, its opposition to anti-dumping measures. We urge the European Commission to end anti-dumping, countervailing and MIP measures on Chinese solar PV as soon as possible.

18 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:152:0005:0047:EN:PDF

19 https://ec.europa.eu/carol/index-

iframe.cfm?fuseaction=download&documentId=090166e5a3bf2e71&title=151117_SoS%20to%20Malstrom%20re%20MIP.pdf