Report

Dober Partners SPRL Review of Prognos' Study published in the course of the EU antidumping and anti-subsidy investigations on imports of photovoltaic products from China

Auftrag:

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"PwC" refers to PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprfungsgesellschaft, which is a member firm of PricewaterhouseCoopers International Limited (PwCIL). Each member firm of PwCIL is a separate legal entity.

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Content
A. B. C.

Page

Summary ............................................................................................................................... 7 Background ......................................................................................................................... 10 Implausibility of Prognos' results ......................................................................................... 12 I. II. III. Higher job losses than total number of jobs................................................................. 12 The unexplained increase of the number of allegedly lost jobs .................................... 13 The US experience: Anti-dumping tariffs and job growth ............................................ 14 1. 2. 3. The US proceedings ........................................................................................... 14 The forecasted effects by the Brattle Group ........................................................ 15 The actual developments ................................................................................... 15

D.

Major flaws with regard to methodology and content .......................................................... 17 I. II. Demand estimation .................................................................................................... 17 Inadequate assessment of future development for technology markets along the value chain ................................................................................................................. 20 1. 2. III. Future development of market for machinery of production equipment ............. 20 Future development of polysilcon market .......................................................... 21

Professional standards for economic evidence ............................................................ 22 1. 2. 3. Reporting ........................................................................................................... 23 Robustness ......................................................................................................... 24 Data sources ...................................................................................................... 24

E.

Relevant aspects for a holistic assessment of the impact of tariffs on photovoltaic products .............................................................................................................................. 25

F.

Literature ............................................................................................................................ 28

Annex .......................................................................................................................................... 31

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Tables

Page

Table 1 - Estimated net job losses in Germany according to the Prognos study Table 2 - Estimated installations and employment according to Prognos scenarios Table 3 - Capacities in the polysilicon market Table 4 - Capacity and actual production of the European PV manufacturers in 2012 Table 5 - Estimated job losses in Germany in 2013 for the baseline scenario (without tariffs)

12 13 21 26 32

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List of Abbreviations
AD AFASE BMU anti-dumping Alliance for Affordable Solar Energy, Brussels Bundesministerium fr Umwelt, Naturschutz und Reaktorsicherheit (German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety) BMU study BOS Brattle Group study CASE CSPV CVD DG Competition DG Trade EC EEG 2012 BMU (2013) balance of system The Brattle Group (2012) Coalition for Affordable Solar Energy crystalline silicon photovoltaic countervailing duty Directorate General for Competition, European Commission Directorate General for Trade, European Commission European Commission Renewable Energy Sources Act 2012 (Gesetz zur Neuregelung des Rechtsrahmens fr die Frderung der Stromerzeugung aus erneuerbaren Energien) EPIA EU FiT GTM GW IRR LCOE European Photovoltaic Industry Association, Brussels European Union feed-in tariffs Greentech Media, Boston gigawatt internal rate of return levelized cost of energy

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MW Prognos Prognos Study PV ROI SEIA SP TFEU VDMA

megawatt Prognos AG, Basel Prognos (2013) photovoltaic return on investment Solar Energy Industries Association, Washington D.C. solar panel Treaty on the Functioning of the European Union Verbund Deutscher Maschinen- und Anlagenbau e.V. (German Engineering Federation), Frankfurt am Main

Wacker Chemie

Wacker Chemie AG, Munich

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A. Summary
1. On 6th September 2012, the European Commission initiated an investigation of imports from China

to determine whether prices of Chinese manufactured crystalline photovoltaic wafers, cells and modules are being sold at dumped prices. On 8th November 2012, the EC initiated a parallel antisubsidy proceeding. Before deciding on the imposition of any measures, the European Union (EU) will make a number of findings, including an assessment as to whether the imposition of measures would be overall more costly to the EU economy than the benefit provided to the EU by these measures.
2. In the course of the proceedings Prognos prepared a study which aimed to quantify the effects of

potential measures. The Prognos study was presented to the European Commission on 18th February 2013 at a hearing in Brussels. PwC was engaged on 18th April 2013 by Dober Partners, a consultant to EU Pro Sun, to report on the EU solar photovoltaic market and in particular on the claims made in the Prognos study with regard to the consequences of tariffs as a result of the current investigation.
3. In the beginning of our report, we highlight several implausibilities. For instance, Prognos reports

that the imposition of tariffs would result in significant negative employment effects. The magnitude of these effects, however, seems highly questionable, for example when compared with figures in a recent study commissioned by the German Federal Ministry for the Environment Nature Conservation and Nuclear Safety, which calculates the number of direct and indirect jobs related to the photovoltaic sector. In the Prognos study, the job losses in the scenarios of 35% and 60% actually exceed the total number of jobs, without tariffs, that we derived from the study commissioned by the Ministry. This sheds serious doubt on the plausibility and reliability of the results of the Prognos study.
4. Furthermore, it is surprising that Prognos announced considerably fewer job losses in November

2012, when the first results of the Prognos study were presented to the public. It was also announced that further details on the results of the study would be published a couple of days later. Instead, the study was only made available to the public in February 2013. By then, the number of estimated job losses was suddenly several times higher than in November 2012.
5. In order to understand the possible effects of anti-dumping measures and the plausibility of antici-

pated job losses, we discuss the recent experiences in the US. The US imposed tariffs on photovoltaic products in 2012. As in Europe, a study commissioned on the possible effects of tariffs forecasted an alarming crash of demand and job losses in the US. However, after the introduction of tariffs demand increased and more jobs were created. We consider this a useful example to illustrate that

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there are good reasons not to believe alarming studies which are based on vague data and questionable assumptions.
6. After analysing several implausible facts, we then focus on major flaws of the Prognos' report with

regard to methodology and content. A central element of the results of the Prognos study is the expected drop in demand for photovoltaic systems in Europe, which leads to the calculated job losses. However, it remains completely unclear how this crucial element of the analysis was derived, what methodology was applied and what underlying assumptions were made. In addition to an unclear derivation of the elasticity of demand, Prognos overestimates the demand effects because it performed a purely static analysis without taking into account any offsetting factors - like for example price reductions of complementary products, the endogenous character of feed-in tariffs or the reaction of Chinese competitors - which may reduce the impact on demand. Finally, we reveal that the study even seems to contain contradictory evidence.
7. The Prognos study states that European companies have a strong market position along the value

chain for photovoltaic systems in addition to the production of wafers, cells and modules. According to Prognos, employment and value added would also be affected by a decrease in exports of silicon and machinery for production equipment from EU Member States to China as a consequence of lower demand in Europe. The government of the People's Republic of China, in its 12th Five-Year Plan for the Solar Photovoltaic Industry, which covers the period from 2011 to 2015, expressed its main tasks as promoting domestically manufactured equipment and integration technology and also enlarging production of polysilicon in China. Therefore, the assumption that export volumes of production inputs from Europe to China will remain constant in a non-tariff scenario is highly questionable. If exports to China drop anyway, this reduces the negative impact of the imposition of tariffs on employment significantly.
8. In order to assess the intrinsic quality and reliability of the Prognos study as evidence in the ongo-

ing EU anti-dumping and anti-subsidy proceedings, we evaluate it according to the guidelines of the European Commission for the submission of economic evidence in competition proceedings. After a thorough investigation of the study, we conclude that the Prognos study (i) has not been generated and presented in a way that meets adequate technical requirements prevalent in the profession and (ii) is not consistent with other pieces of quantitative and qualitative evidence. Therefore, this study should be dismissed and not taken into consideration by the European Commission, European Courts or Member States.
9. All in all, there are many factors to consider when estimating demand and employment effects of

tariffs in the solar industry, and the Prognos study does not provide a transparent and objective evaluation of those factors. A recovery of the European photovoltaic manufacturers combined with cluster effects along the photovoltaic value chain and other related sectors, as well as medium- and long-term effects on innovation, have the potential to generate a substantial amount of European

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value added and employment, and depend to a large extent on the introduction of tariffs. We are optimistic that these beneficial effects of tariffs more than outweigh limited negative effects on demand, i.e. that the introduction of tariffs has a net positive effect on employment in Europe.

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B.

Background

10. On 6th September 2012, the European Commission (EC) initiated an investigation of imports from

China to determine whether prices of Chinese manufactured crystalline photovoltaic (PV) wafers, cells and modules are being sold at dumped prices. On 8th November 2012, the EC initiated a parallel anti-subsidy proceeding.
11. The proceedings were initiated when a complaint was filed by EU ProSun, an initiative represent-

ing more than 20 European companies producing solar panels and their key components, which calls for anti-dumping and/or countervailing duties1 to be imposed on Chinese imports in order to prevent continued injury to European producers.
12. The Commission has up to nine months (i.e. June 2013 for the anti-dumping proceeding and Au-

gust 2013 for the anti-subsidy proceeding) to issue provisional findings. The decision about definitive measures in both proceedings is due before 5th December 2013.
13. Before deciding on the imposition of any measures, the European Union (EU) will make a number

of findings, including an assessment as to whether the imposition of measures would be overall more costly to the EU economy than the benefit provided to the EU by these measures.
14. In the course of the proceedings the Alliance for Affordable Solar Energy, Brussels, (AFASE)

launched a study conducted by Prognos AG, Basel, (Prognos) which aimed to quantify the effects of potential tariffs (hereafter referred to as "the Prognos study").2 The study was presented to the European Commission on 18th February 2013 at a hearing in Brussels.3
15. PwC was engaged on 18th April 2013 by Dober Partners SPRL, Brussels, a consultant to EU Pro Sun,

to report on the EU solar PV market and in particular on the claims made in the Prognos study with regard to the consequences of tariffs as a result of the current investigation. We performed our work between 18th April 2013 and 4th May 2013. This report is subject to the General Engagement Terms for German Public Auditors and Public Audit Firms as of 1st January 2002 also with respect to third parties.
16. The report is structured as follows: The beginning of our report highlights some implausibilities of

the Prognos' study: first of all, we examine the number of job losses and how Prognos derived its results in this respect. This concerns on the one hand the magnitude of alleged job losses and on
1

For the sake of simplicity, we will refer to anti-dumping and/or countervailing duties on imports of Chinese crystalline photovoltaic wafers, cells and modules in the following simply as "tariffs". Prognos (2013). Prognos Press Release (2013).

2 3

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the other hand the way in which Prognos' results changed over time. We then look at experiences in the US and at the economic consequences of the introduction of tariffs in 2012. In a next step, we focus on the major flaws of the Prognos report with regard to methodology and content. We analyse how the impact of tariffs on demand was estimated and reveal an inadequate assessment of future development for technology markets along the value chain. We furthermore criticise the professional standards for economic evidence applied by Prognos. Finally, we give some qualitative observations as to the development of future photovoltaic markets with and without tariffs.

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C. Implausibility of Prognos' results

I. Higher job losses than total number of jobs

17. Prognos reports significant negative employment effects in the event of tariffs are imposed on EU

imports of Chinese PV products. E.g. for Germany it quantifies negative net employment (direct & indirect) effects between 45,500 and 81,100 jobs in 2013 up to employment losses of 67,400 to 84,700 jobs in 2015. Gross employment effects even reach up to 98,800 lost jobs.4 The estimated net effects are displayed in Table 1. Table 1 - Estimated net job losses in Germany according to the Prognos study
2013 Prognos Scenario 20% tariff Prognos Scenario 35% tariff Prognos Scenario 60% tariff -45,500 -80,300 -81,100 2014 -51,300 -77,100 -78,200 2015 -67,400 -82,200 -84,700

Source: Prognos (2013), pp. 65-66. Rounding differences may occur.

18. The magnitude of the effects seems to be highly questionable, especially when compared with a

recent study (hereinafter referred to as BMU study) commissioned by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (Bundesministerium fr Umwelt, Naturschutz und Reaktorsicherheit, or BMU).5 These calculations estimate that the total of direct and indirect jobs related to the PV sector was 87,800 in 2012.6 In the following we will perform a simple calculation based on existing employment in the solar industry and Prognos' estimates of job losses which clearly demonstrates that Prognos' estimates are untenable.
19. Prognos defines the policy-driven scenario proposed by European Photovoltaic Industry Associa-

tion, Brussels, (EPIA) as its baseline scenario to calculate the impact of duties foreseeing installations of 5 gigawatts (GW) for 2013 through 2015 in Germany.7 However, Prognos reports only job losses; it does not report on the employment level in the baseline scenario, i.e. how many jobs exist in 2013 -2015 assuming installations amount to 5 GW per year without the imposition of duties (policy-driven EPIA scenario). It neither reports on job losses for the baseline scenario, i.e. reduced employment due to the decreased level of installations in 2013 - 2015 compared to 2012. We derive an estimated baseline employment of 65,200 jobs for 2013 - 2015 based on available public
4 5 6

Prognos (2013), p. 61. BMU (2013) BMU (2013), p.7. Prognos (2013), pp. 19, 53.

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data.8 From this baseline employment we subtract the job losses that were estimated by Prognos in the different scenarios. The results are displayed in Table 2. Table 2 - Estimated installations and employment according to Prognos scenarios
2012 GW Baseline Scenario without tariffs Prognos Senario 20% tariff Prognos Senario 35% tariff Prognos Senario 60% tariff 7.6 7.6 7.6 7.6 Jobs 87,800 87,800 87,800 87,800 5.0 3.6 2.5 2.3 2013 GW Jobs 65,200 19,700 -15,101 -15,901 5.0 3.6 2.7 2.5 2014 GW Jobs 65,200 13,900 -11,901 -13,001 5.0 3.1 2.4 2.2 2015 GW Jobs 65,200 -2,201 -17,001 -19,501

Source: PwC based on data from BNetzA (2013), Prognos (2013), BMU (2013). Rounding differences may occur.

20. It is straightforward to see that Prognos' estimations are inconsistent with the data from the BMU

study. The job losses in the scenarios with tariffs of 35% and 60% would lead to an overall negative number of direct and indirect jobs although more than 2 GW would be installed per year.
21. One could argue that the figure for total employment we used for 2012 (87,800) was too low and

that Prognos based its estimation on different data. However, this data stems from an official study commissioned by the BMU. We consider the data reliable due to the fact that the Ministry has no interest in underestimating the employment effect of the solar industry. Surprisingly, one of the coauthors of the study for the BMU also co-authored the Prognos study, so Prognos was certainly aware of the BMU study and the overall size of employment.9 But even though the studies were coauthored by the same person, the Prognos study makes no reference to the official BMU study and its results cannot be reconciled with the official data.10
22. Another example of implausible results are Prognos' estimated job losses for UK. Prognos predicts

net labor force reductions of up to 38,600 in 2015. However, according to published data there are only 10.000 people directly or indirectly employed in the PV industry in UK in 2011.
23. The above-mentioned inconsistencies seriously affect the plausibility and reliability of the Prognos

conclusions.

II.

The unexplained increase of the number of allegedly lost jobs

24. The first results of the Prognos study were presented as early as November 2012.11 On 23rd Novem-

ber 2012 an AFASE spokeswoman reportedly said that further details on the results of the Prognos
8

The figure is based on existing direct and indirect jobs reported by BMU (2013) and adjusted for the reduction of installations (drop from 7.6 GW in 2012 to 5.0 GW in 2013). See the Annex for a detailed explanation how this figure was calculated. Mr. Frank Peter is co-author of BMU (2013) and Prognos (2013). ObservER (2012) p. 126.

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study would be released in the next couple of days.12 In the same document, it is said that AFASE warned that up to 30,000 jobs could be lost due to the imposition of anti-dumping and/or countervailing measures. Additionally, photovoltaik, a German B2B magazine, reported on 21st November 2012 that, according to the Prognos study, 30,000 employment opportunities in Europe could be lost. In addition, one of the co-authors of the Prognos study, Oliver Ehrentraut, is cited as saying that in Germany alone 8,000 jobs could be lost by 2015.13
25. Contrary to information provided by the AFASE in November 2012, the study was only made

available to the public in February 2013 after having been presented at a hearing before the European Commission. By then, figures substantially differed from what was originally released: e.g. in 2013 alone, 115,600 jobs could be lost in the EU, 45,500 thereof in Germany.14
26. This substantial deviation from the previously announced preliminary results, given without fur-

ther explanation, is a remarkable development which casts further doubt on the robustness and reliability of Prognos' results.

III. The US experience: Anti-dumping tariffs and job growth

27. The US imposed tariffs on PV products in 2012. There was also a study commissioned in the US on

the possible effects of tariffs that forecasted alarming job losses. However, after the introduction of tariffs demand increased and more jobs were created. We are aware that there are significant differences between the US and the European PV markets and therefore one has to be cautious regarding direct comparison. However, we think that this is a useful example to illustrate that there are good reasons not to believe alarming studies which are based on vague data and questionable assumptions.

1.

The US proceedings

28. In October 2011, the Coalition for American Solar Manufacturing, led by SolarWorld Industries

America, Inc., Hillsboro, filed an anti-dumping (AD) and countervailing duty (CVD) petition requesting that the United States imposes tariffs on imports of crystalline silicon photovoltaic cells from the People's Republic of China. The petition included crystalline silicon photovoltaic cells, whether or not assembled into modules, and excluded thin film PV products.

11 12 13 14

Photon.Info (2012). Photon.Info (2012). Photovoltaik (2012). Photovoltaik (2013a).

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29. In March 2012, the U.S. Department of Commerce announced tariffs of 3% to 5% in its CVD-

investigation. On 17th May 2012, it published preliminary investigation results in the AD-matter and calculated preliminary AD-tariffs of approximately 31%.15 In October 2012, the US Department of Commerce introduced final AD duties ranging from 18% to 250% on solar energy cells imported from China. The US Department of Commerce also imposed definitive anti-subsidy duties for Chinese imports to the US.16

2.

The forecasted effects by the Brattle Group

30. Similarly to Europe's AFASE commissioning the Prognos study, the Coalition for Affordable Solar

Energy (CASE) in the U.S. commissioned the Brattle Group, Cambridge, to conduct a study estimating the employment impact of the proposed trade restrictions on Chinese crystalline photovoltaic cells and modules.17 According to the study there is an overall employment of slightly over 100,000 direct and indirect jobs in the US solar PV industry.18 The study conducted for the U.S. predicted "substantial price increases for crystalline photovoltaic cells and modules"19 and a corresponding decline in demand by residential, commercial and utility customers. Analysing scenarios with two different tariff levels and two different elasticity levels, the study forecasted substantial job losses of between approximately 9,000 and 33,000 jobs in 2012 and between 15,000 and 50,000 jobs in 2014.20

3.

The actual developments

31. The alarming forecast made by the Brattle Group which was criticised for its questionable assump-

tions and lack of data, did not become reality.21 Instead, the PV market grew beyond expectations in 2012. Whereas the Brattle Group assumed installations of 2.5 GW without imposition of tariffs, actual installations with tariffs in place grew to 3.3 GW.22 According to the Solar Foundation's Solar Job Census 2012, there were more than 119,000 solar workers in the U.S., a 13.2% increase compared to 2011. Furthermore, 86% of the nearly 14,000 new solar employees represented new
15 16 17 18 19 20

Akin Gump Strauss Hauer & Feld LLP (2012). Federal Register (2012), p. 63791ff. The Brattle Group (2012). The Brattle Group (2012), p. 5. The Brattle Group (2012), p. ES-2. The Brattle Group (2012), p. 16. These job losses are to a small extent compensated by job increases, however the overall net effect remains largely negative, e.g. over 40,000 jobs lost (net effect) in 2014 in the scenario with a 50% tariff and high elasticity. These estimates include direct, indirect and induced jobs and are therefore based on a different definition than the figures of employment level (only direct and indirect effects). AURIGA (2012). GTM Research & SEIA (2013).

21 22

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jobs, rather than existing positions that had added solar responsibilities.23 That means that in 2012 alone, more new direct jobs were created than expected by the Brattle Group through 2014.24
32. The Solar Foundation, Washington D.C., also provides that "over the next 12 months, nearly 45%

of solar firms expect to add jobs, while fewer than 4% expect to cut workers, yielding a 17% growth in employment."25 It is added that this would mean "the addition of approximately 20,000 new solar workers."26 In addition, "employers from all of the solar industry subsectors [i.e. indirect employment opportunities] examined in this study expect significant employment growth over the next 12 months, with nearly all of them projecting percentage job growth in the double-digits."27 The installation forecast for the United States from GTM Research, Boston, and SEIA, Washington D.C., foresees the continuous growth of the US solar market with respect to installations until 2016.28
33. As a result of the tariffs imposed, Chinese shipments to the US decreased significantly compared to

the situation without tariffs. In November 2012, imports of Chinese crystalline silicon solar cells and panels fell to their lowest level in at least two years. According to the US Census Bureau's information29, total Chinese imports amounted to USD 50.5m in November 2012, down from USD 75m in October 2012, and less than a fifth of the USD 278m of imports recorded in October 2011. One might expect that this decline would have caused the PV market in the US to shrink substantially. But even though Chinese imports dropped considerably, local production and imports from other countries were able to compensate this effect and lead to the above-mentioned increase in demand and jobs.
34. In sum, evidence from actual market developments in the U.S. shows that the imposition of tariffs

there did not lead to a drop in demand or job losses as forecasted by the Brattle Group study. Although the European and US markets are not identical, we see parallels between the Brattle Group study and the Prognos study regarding the unreliable overestimation of negative employment effects which in the case of the US has already been rebutted by reality.

23 24 25 26 27 28 29

Reference dates are as of August 2011 and September 2012. Cf. The Brattle Group (2012), p. 17. The Solar Foundation (2012), p.5. The Solar Foundation (2012), p.5. The Solar Foundation (2012), p.5. GTM Research & SEIA (2013). United States Census Bureau, U.S. Department of Commerce.

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D. Major flaws with regard to methodology and content

I. Demand estimation

35. A central element of the results of the Prognos study is the expected drop in demand for PV systems

in Europe, which is expected to lead to job losses. However, it remains completely unclear how this crucial element of the analysis was derived, what methodology was applied and what underlying assumptions were made. The study even seems to contain contradictory evidence.
36. Demand estimation generally is a complex exercise and even more so in the market for PV systems.

Demand in this market depends to a large extent on government feed-in tariffs, which are themselves endogenous, i.e. adopted by governments according to the development of market demand on a planned or ad hoc basis. In the case at hand, demand for PV modules depends on the profitability of an investment in PV systems which is mainly driven by electricity production costs, the regulated feed-in-tariffs for electricity and partly by the demand for own consumption. Proper demand estimation requires a thorough market analysis of the demand and supply side and an understanding of the interrelationship among them. Prognos' analysis clearly falls short of this, as will be explained in the following paragraphs.
37. Both the price elasticity applied by Prognos and how it was derived remain unknown. Demand for

modules, cells and wafers is derived from the investment decision of end consumers or investors who invest and install complete PV systems. Purchase decisions made by consumers and investors are based on the expected profitability (e.g. return on investment, or ROI) of the PV system taking into account the investment cost and expected revenues. The elasticity to consider is therefore the drop in investment by consumers and investors if the ROI decreases. The price of the modules, determines a substantial part of the investment costs of a PV system, considerably influences the ROI. Prognos does not present any sensitivity analysis on the basis of a financial model to depict the relation between the amount of investment costs and the ROI. In addition, Prognos does not provide any information as to what elasticity is applied. A proper assessment would have empirically established a relationship between profitability and demand.
38. There is a relationship between higher profits and higher demand, however investors do not stop to

invest completely when ROI decreases. Empirical evidence shows that even with a rather low profitability (e.g. internal rate of return (IRR) of 4%) investments still take place at a reduced scale.30 In this regard it must be taken into account that the extraordinary low interest rate level in recent years has made investment opportunities less attractive, particularly for fixed-income securities. If possible alternative investments generate narrower margins, investors might also accept a lower
30

EuPD Research (2013), slide 85.

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profit margin for a PV investment, which has an impact on elasticity. Prognos does not disclose its assumptions or methodology regarding the elasticity, a fact which makes the resulting demand effects incomprehensible and arbitrary.
39. In addition to the opaque application of elasticity, Prognos overestimates the demand effects be-

cause it performed a purely static analysis of the effects of possible tariffs on demand. However, markets are dynamic, and market participants and governments adjust to changes in tariffs, costs, prices and quantity. Several offsetting factors that reduce the impact on demand but which were not taken into account by Prognos are explained in the following.
40. First, the price of complementary products and services would decrease. As mentioned above, the

overall demand of investors and consumers is for complete PV systems, whereof solar modules are only one part(and diminishing).31 Demand for other products and services for PV systems like inverters, mounting systems, cables and installation services, is an almost perfect complement.32 An increase in the price of solar modules would translate ceteris paribus to an increase in the price of PV systems, leading to lower demand for PV systems and consequently also for the complementary products and services. The suppliers of these complementary products and services would react to the imminent reduced demand and lower their prices to compensate, at least partly. The size of this compensatory effect depends on the price elasticity of the complementary products. Reduced demand will also increase pressure for cost-saving measures for the complementary products and services.
41. Second, the Prognos study does not properly include in its analysis the fact that feed-in tariffs (FiT)

are not exogenous but are dependent on actual demand and installations and adapt dynamically. This is explicitly foreseen in the German FiTs, for which a monthly reduction of tariffs automatically takes place. The size of the reduction explicitly depends on the amount of overall installed capacity of previous periods.33 In other countries, governments also reacted in an ad hoc manner to mar-

31

In a dynamic photovoltaic market the distribution of system costs is constantly changing. It is plausible to assume that during 2013 the portion of module costs might be reduced to half of total system costs. The degree of complementarity can be expressed by the cross-price elasticity. Complementary products have a negative cross-price elasticity, i.e. if the price of good A increases(for example due to a tariff), demand for good B decreases. The German government's Renewable Energy Sources Act (Erneuerbare Energien Gesetz, or EEG) 2012 ( 1, 20a, 20b) defined a target corridor of between 2.5 and 3.5 GW of annual photovoltaic installations. As long as installations remain within this corridor, FiTs in Germany will decline by 1% per month. If this corridor is exceeded, the base rate of 1% may increase up to 2.8% per month depending on the amount of installations in a previous period of 3 months. At the end of 2012, a cumulative photovoltaic capacity of 32.4 GW had been installed in Germany. According to new regulation, a FiT will only be granted up to 52 GW of cumulated capacity.

32

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ket developments, e.g. Italy.34 Consequently, after an overheating of several European markets in 2010/2011, we saw a reduction of the annual installed capacities in Europe in 2012 (in particular reflected in a steep decline in the market in Italy) from approximately 22 GW in 2011 to 17 GW in 2012.35 This decline in 2012 took place in spite of a continuous reduction of both module and system prices, which illustrates that interdependencies exist between price level, demand and level of FiT's. In other words, there is no simple correlation between movements in module prices and the level of demand. The European Photovoltaic Industry Association expects a continuation of this negative trend without tariffs for 2013.36
42. The Prognos study presents decreasing FiTs per year in different tables and figures: however, the

same figures are apparently applied to all scenarios alike. If we assume, as Prognos does, that tariffs will result in a certain decrease in demand in 2013, then we can expect, based on past experience, to see a slower decrease in the FiT compared to the base case. In 2014 the higher FiTs (due to the lower demand induced by the tariffs in 2013) would compensate at least partly for the lower demand due to the tariffs in 2014 and so on. However, Prognos seems to have applied a uniform FiT for all scenarios and ignored this offsetting effect completely.
43. Finally, another offsetting factor is that some Chinese manufacturers of solar modules might adjust

to imposed tariffs and absorb them at least partly. The imposed tariffs in the US provide evidence that Chinese manufactures have to some extent adapted their prices and absorbed the tariffs.37
44. As stated before, it remains unclear how the data provided by Prognos is used to derive the result-

ing demand. We will provide an example of contradictory data to illustrate this point. The data used for Prognos' analysis of the ground mounted installations in Germany suggests that neither own consumption nor FiTs allow for a profitable investment in any scenario.38 However, the base case scenario without tariff which is applied by Prognos still includes between 0.3 and 0.5 GW installations per year, whereas no installations at all are expected for the tariff scenarios. So Prognos
34

In Italy, the so-called Salva Alcoa Degree, issued at the end of 2010 boosted installations until mid of 2011, which led to total new installations in Italy of 9,3 GW in 2011. The introduction of Conto Energia IV dated 12th May 2011 (introduction of caps, obstacle for bigger photovoltaic plants and promotion of European photovoltaic products, see TIS innovation park (2011)) and of Conto Energia V (further strain on maximum installations, see pv magazine (2012)) dated 6th July 2012 led to a decrease of the Italian market to new installations of only 3,3 GW in 2012 (cf. photovoltaik (2013b)). EPIA (2005c), slide 7. By contrast, the total world market remained more or less stable (around 30 GW), which means that the European portion of the world market has declined. Cf: Photovoltaic (2013b). Chinas JinkoSolar even stated it had fully adjusted to the tariffs imposed last year in the US, and expected the US market to account for a considerable portion of its sales growth in 2013. Cf. RECHARGE (2013). Figure 5 of the Prognos study shows that revenues with own consumptions are at between 10.4 and 10,7 Cent/kWh and FiTs are even lower, whereas LCOE China (without tariffs) is between 12.2 and 12.8 Cent/kWh.

35

36 37

38

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suggests that tariffs prevent investment in ground mounted installations although the data used by Prognos clearly indicates that investments are not profitable, even without a tariff. There are more examples throughout the Prognos study.

II.

Inadequate assessment of future development for technology markets along the value chain

45. The Prognos study states that European companies have a strong market position along the value

chain for photovoltaic systems in addition to the production of wafers, cells and modules. According to Prognos, employment and value added would also be affected by the decrease of exports of silicon and machinery for production equipment from EU Member States to China as a consequence of a lower demand.39 To date European companies - and German companies, in particular so far have leading positions in both areas and have recorded considerable volumes of exports to China.40 Prognos based its calculation on the ceteris paribus assumption that these companies will maintain their strong position for exports to China in the future. In the following we will examine this assumption for both markets.

1.

Future development of market for machinery of production equipment

46. On page 52 of its report, Prognos states that "currently Chinese manufacturers import the majority

of the equipment technologies necessary for their production of modules. It is expected that this situation will not change in the future."41 The Prognos study seems to be based on data from 2010. To assess Prognos' hypothesis, we look at the current market and economic situation of equipment providers today and the perspectives in the near future. We will then look at the strategy of the Chinese government regarding this part of the market and the photovoltaic value chain.
47. Sales in the German photovoltaic equipment industry rose from an amount of EUR 300m in 2005

to EUR 2.8bn. in 2011. At the end of 2011, a worldwide module production capacity of around 70 GW served a worldwide demand of approximately 30 GW, which resulted in huge over-capacities in production facilities. In 2012 this led to a crash of the market. According to the German Engineering Federation (Verband Deutscher Maschinen- und Anlagenbau e.V., Frankfurt am Main, or VDMA) German companies saw a 46% decline in sales compared with 2011.42 As a consequence

39 40

Prognos (2013), pp. 51-53, 56. Germany had been the main exporter of photovoltaic machinery to China with a trade value amounting to EUR 955m in 2010. Exports of European silicon to China in 2010 amounts to EUR 445.3m (Prognos (2013),pp. 52-53). Prognos (2013), p. 52. Photon.Info (2013).

41 42

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even industry leaders found themselves in serious trouble and had to undergo fundamental restructuring programs, and even insolvency plans, to survive.
48. Increasing pressure from Chinese companies can be expected in this sector in the future, as well.

The government of the People's Republic of China, in its 12th Five-Year Plan for the Solar Photovoltaic Industry for 2011-2015, listed as its main tasks: To promote technological progress and achieve transformation and upgrading To enhance R&D and the application of domestically manufactured equipment and integration technology
49. If Chinese government's expressed strategy became reality - as it obviously did for the manufactur-

ing of crystalline PV wafers, cells and modules -, Chinese companies would expand their market share dramatically, particularly in China, whereas European companies would lose business to a significant extent. With decreasing exports of production equipment to Chinese companies in a non-tariff-scenario, employment effects from reduced Chinese demand due to tariffs would be lower.

2.

Future development of polysilcon market

50. As for silicon production, which is the basis for the production of photovoltaic modules based on

mono- and polycrystalline modules, this market is dominated by several large players from different countries, in particular the US, South Korea, China and Germany. Table 3 - Capacities in the polysilicon market
Company GCL-Poly Energy Holdings Limited, Shanghai/Hong Kong, China Hemlock Semiconductor Group, Hemlock, U.S. OCI Company, Seoul, South Korea Wacker Chemie AG, Munich, Germany LDK Solar Co., Ltd, Xinyu City, China Capacity (t) 2011 65,000 44,000 42,000 32,000 25,000 Capacity (t) 2012 65,000 50,000 62,000 52,000 25,000

Source: Sonne Wind & Wrme (2012a), p. 65.

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51. Wacker Chemie AG is the major European manufacturer of polysilicon covering approximately

18% of the respective world market in 2012.43 At the end of 2012 the company employed 2,349 people in the polysilicon business segment.44
52. According to Prognos, the EU "continues to export significant volumes of polysilicon to China for

use in domestic photovoltaic production, Chinese polysilicon production notwithstanding".45 The question is whether this will really continue in the future. In the above-mentioned Five-Year-Plan for 2011-2015, an expanding production of polysilicon in China is envisaged as a strategic development target. Currently, two of the five top manufacturers of polysilicon are Chinese companies (GCL Poly Energy Holdings Ltd. and LDK Solar Co. Ltd., see Table 3 above) indicating that the country have already gained a considerable market share within this part of the value chain. We consider it realistic that Chinese polysilicon producers will increase their market share, particularly with Chinese PV manufacturers, and foreclose non-Chinese suppliers.
53. All in all, the assumption that export volumes of production inputs from Germany to China will

remain constant is highly questionable. If exports to China drop, this would impact Prognos' results and lead to lower negative employment effects of tariffs.

III. Professional standards for economic evidence

54. Economic analysis has to comply with generally accepted standards in order to permit an objective

evaluation of results and guarantee consistent as well as high-level information. To assess the intrinsic quality and usability of the Prognos study as evidence in the ongoing EU anti-dumping and anti-subsidy proceedings, we evaluate it according to the guidelines of the European Commission for the submission of economic evidence in competition proceedings.46 Although the guidelines were issued by Directorate General for Competition of the European Commission (DG Competition) for submission of economic evidence in competition proceedings, the requirements and relevant standards for economic submission to the Directorate General for Trade of the European Commission (DG Trade) should be quite similar, even if no official communication from DG Trade exists. Therefore, we briefly describe the Commission's standards for economic submissions and assess whether the Prognos study fulfills them.
55. The Commission's best practice guidelines state:
43

Wacker Chemie reported 38 kilo tons as their own shipment volume of polysilicon in 2012 (WACKER (2013b), p.24) compared to world-wide shipments of approximately 210 kilo tons (WACKER (2013b), p.21). This comparison resulted in a world-wide market share of approximately 18%. WACKER (2013a), p.91. Cf., Prognos, p. 51. European Commission (2011).

44 45 46

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"Economic analysis needs to be framed in such a way that the Commission and the EU Courts can

understand and evaluate its relevance and significance.() In order to determine the relevance and significance of an economic analysis for a particular case, it is first necessary to assess its intrinsic quality from a technical perspective, i.e. whether it has been generated and presented in a way that meets adequate technical requirements prevalent in the profession. () Second, one must assess the congruence and consistency of the economic analysis with other pieces of quantitative and qualitative evidence (such as customer responses, or documentary evidence)."47 "Economic or econometric analysis that does not strictly meet the standards set out in these Best Practices will normally be attached less probative value than otherwise and may not be taken into consideration."48
56. The most fundamental shortcomings of the Prognos study relate to reporting, robustness and data

sources and are explained in the following.

1.

Reporting

"The results of economic and econometric analysis must be presented clearly, taking the reader through each step of the reasoning. All empirical analysis, even descriptive statistics of relevant variables (e.g. price series) should be accompanied by all the documentation needed to allow timely replication, as well as a deep understanding of the methodology of any prior data management efforts. Reports which do not allow for replication and in particular econometric analysis not including the code and data in electronic form will receive less consideration and are consequently unlikely to be given much weight."49
57. The Prognos study fails to adequately document and report the relevant steps of the analysis. The

analysis of the impact on demand - as discussed in chapter D.I - is the core of the study, but how the result is derived is completely opaque and unclear. Another example is the calculation of LCOE which is not documented in the study.

47

European Commission (2011), para. 2-4. European Commission (2011), para. 15. European Commission (2011), para. 33.

48
49

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2.

Robustness

"Economic and econometric analysis should to the greatest possible extent be accompanied by a

thorough robustness analysis, except where its absence is appropriately justified. In any event, any formal economic model or econometric analysis needs to be generally consistent and reasonably predict observed past outcomes and behaviour. Other common robustness checks that may be appropriate include assessing whether empirical results are sensitive to changes in (a) the data, (b) the choice of empirical method, and (c) the precise modelling assumptions. Similarly, the relevance and credibility of an economic model can be significantly enhanced if accompanied by a sensitivity analysis with respect to the key variables."
58. Apart from the three different tariff scenarios analysed, the Prognos study does not report any kind

of robustness check or sensitivity analysis regarding relevant assumptions. For example, there are no tests of how a high vs a low elasticity would impact the results. Furthermore, the observed results regarding job losses are implausible and were not reconciled with existing data as discussed in chapter C.I.

3.

Data sources

"The sources of information should be carefully acknowledged, and the facts properly documented and described without ambiguity."50
59. Prognos uses data derived from interviews as the basis for balance of system costs (BOS).51 BOS

costs play a key role in determining the level of the LCOE which has a significant impact on demand effects and relevant results of the study. Hence it is important to thoroughly describe the underlying data. This includes reporting the sample time, the number of observations/interviews and any data cleaning procedures. However, Prognos does not report any of this relevant information.
60. Furthermore, Prognos stated that it determined module prices based on own experience and in-

formation of specialist market surveys.52 However, no specific market survey is quoted and there is no further explanation which criteria or trends were relevant for the estimation of the module prices.
61. Considering the abovementioned methodological flaws, we conclude that the Prognos study (i) has

not been generated and presented in a way that meets adequate technical requirements prevalent
50 51 52

European Commission (2011), para. 44. Prognos, (2013), p. 9. Prognos (2013), p.7.

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in the profession and (ii) is not consistent with other pieces of quantitative and qualitative evidence. Therefore, this study should be dismissed and not taken into consideration by the European Commission, EC Courts or Member States.

E.

Relevant aspects for a holistic assessment of the impact of tariffs on photovoltaic products

62. The Prognos study focuses on the direct impact of tariffs on demand and - as explained in the pre-

vious sections - overestimates this effect dramatically by ignoring professional standards for economic evidence, the fact that demand is driven significantly by the politically-determined level of the FiTs, and other offsetting effects. On the one hand, it is plausible that tariffs on Chinese imports of photovoltaic products could have a limited impact on demand. On the other hand, the focus of the Prognos study is too narrow and distorts the overall picture. It is outside of the scope of this report to come up with an alternative quantitative assessment taking into account additional factors. However, following is a discussion of some aspects which are essential for a holistic assessment of the impact of EU tariffs on imports of Chinese photovoltaic products on employment and welfare in Europe.
63. To begin with, there is a high probability that the European wafer, cells and modules industry

would disappear almost completely within a relatively short period of time if no tariffs are introduced. In recent times, even strong European players which showed profits until 2011 are now experiencing serious financial difficulties. Moreover, in Germany a strong international industrial player, after a long period of business development, announced its withdrawal from its photovoltaic activities due to the current market conditions which caused the company tremendous losses. Currently, the financing of new production facilities can be regarded as almost impossible.
64. Having said this, the European PV industry nevertheless is still alive. Table 4 depicts the available

capacity and actual production in 2012. The low capacity utilization rate shows that production could be increased easily. That means that in case of tariffs European manufacturers could reasonably be expected to be able to increase their market share quickly and substantially.53

53

Prognos assumed in its study that European production increases would be limited to 15% to 30% p.a. Cf. Prognos (2013), p. 55.

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Table 4 - Capacity and actual production of the European PV manufacturers in 2012

Production capacity (GW) Modules Cells Wafers 9.6 2.9 3.1 Production (GW) 3.5 - 3.8 1.2 - 1.4 1.1 - 1.3 Capacity utilisation rate 36% - 40% 41% - 48% 35% - 42%

Source: Europressedienst (2013). Note: Figures are based on a survey by Europressedienst. Europressedienst included capacities of companies that became insolvent as long as these capacities were still existent. Production figures are still preliminary.

65. Even though we regard it as difficult and outside the scope of this report to predict the possible

future development of production and sales figures for European manufacturers, we consider it reasonable that European manufacturers have a chance for a real recovery if the price level and the pace of price declines becomes more sustainable (i.e. with tariffs in place). This in turn could lead to increases of sales above the figures mentioned by Prognos.
66. Another important factor to consider is that the existence of a European wafer, cells and modules

industry has also substantial medium and long-term impacts on other sectors and the PV value chain due to cluster effects. Examples in other sectors show that R&D, engineering and equipment development usually need a well-functioning manufacturing industry in the region which plays a catalytic role. Without tariffs in place and as a consequence no relevant manufacturers of wafer, cells and modules remaining in Europe, it is likely that this will have negative repercussions on the PV equipment industry with corresponding negative employment effects. Additionally, as mentioned above, firms in the polysilicon and the machinery of production equipment market are likely to lose market share in China, they would thus also benefit from increased demand from European and other non-Chinese PV manufacturers.
67. Another aspect is the increasingly dominant market share of Chinese manufacturers which could

have detrimental effects on innovation in the EU. At the end of 2011, world-wide production of cells amounted roughly to 33 GW and modules to 31 GW, of which 21 GW (64%) respectively 23 GW (74%) originated from Chinese manufacturers, whereas 4,8 GW (16%) respectively 2,1 GW (7%) originated from European manufacturers.54 If European manufacturers disappear almost completely from the market, the dominance of Chinese manufacturers on the European market could even be expected to increase. One possible negative effect of highly concentrated markets is reduced innovation. It is unlikely that Chinese manufacturers would boost innovation in a more concentrated and dominated market where there is less pressure to innovate from competing European manufacturers. A recovery of the European solar manufacturers by contrast could promote innovation also in other sectors, for example storage systems or demand side management for the
54

Sonne Wind & Wrme (2012b), p. 74.

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supply of electricity (so that power might be used in times of high solar radiation). European producers could try to start strategic partnerships in this area55 and add value to their photovoltaic products which may not only help to create new jobs in different areas but also contribute to the solution of problems of the German energy transition. Reduced innovation would create substantial negative welfare effects.
68. All in all, there are many factors to consider when estimating demand and employment effects of

tariffs in the solar industry, and the Prognos study does not provide a transparent and objective evaluation of those factors. A recovery of the European PV manufacturers combined with cluster effects along the PV value chain and other related sectors, as well as medium- and long-term effects on innovation, have the potential to generate a substantial amount of EU value added and employment, and depend to a large extent on the introduction of tariffs. We are optimistic that these beneficial effects of tariffs more than outweigh limited negative effects on demand, i.e. that the introduction of tariffs has a net positive effect on employment in Europe.

Berlin, 04th May 2013 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprfungsgesellschaft

RA Andreas Klasen

ppa. Dr. Wolfgang Nothhelfer

55

The Bosch group, for example, would have been able to combine different products in its portfolio (e.g. refrigerator) with a photovoltaic plant. Furthermore, at the end of 2011, Bosch acquired Voltwerk (manufacturer of inverters) from Conergy, which gave the company the strategic opportunity to combine different parts of the photovoltaic system and thus to create technological synergies. Bosch has now announced to abandon its crystalline photovoltaic activities.

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F.

Literature
Akin Gump Strauss, Hauer & Feld LLP (2012): U.S. Department of Commerce Imposes Preliminary Tariffs on Chinese Solar Cells, http://www.akingump.com/en/newspublications/u-s-department-of-commerce-imposes-preliminary-tariffs-on-chinese-solarcells.html, [03.05.2013]. AURIGA (2012): Solar Photovoltaics: 60,000 Job Losses from Solar Import Tariff is a Manufactured Myth., http://www.americansolarmanufacturing.org/newscoverage/IR_SolarPow_02012012.pdf, [29.04.2013]. Bloomberg (2013): Steams, Jonathan: EU to Register Chinese Solar Panels, HighlightingTariff Threat, http://www.bloomberg.com/news/2013-03-05/eu-to-register-chinese-solarpanels-highlighting-tariff-threat.html, [29.04.2013]. BMU (2012): O'Sullivan/Edler/Nieder/Rther/Lehr/Peter (Ed.): Bruttobeschftigung durch erneuerbare Energien in Deutschland im Jahr 2011 - eine erste Abschtzung -, http://www.erneuerbare-energien.de/fileadmin/eeimport/files/pdfs/allgemein/application/pdf/ee_bruttobeschaeftigung_bf.pdf [29.04.2013]. BMU (2013): O'Sullivan/Edler/Bickel/Lehr/Peter/Sakowski (Ed.): Bruttobeschftigung durch erneuerbare Energien in Deutschland im Jahr 2012 - eine erste Abschtzung -, http://www.erneuerbareenergien.de/fileadmin/Daten_EE/Dokumente__PDFs_/bruttobeschaeftigung_ee_2012_bf.pdf, [17.04.2013]. BNetzA (2013): Data on PV installations is available at: http://www.bundesnetzagentur.de/cln_1931/DE/Sachgebiete/ElektrizitaetGas/Erneuerba reEnergienGesetz/VerguetungssaetzePVAnlagen/Archiv_VerguetungssaetzePhotovoltaik_Basepage.ht ml;jsessionid=37FD716C250F81A61084825497A67724?nn=198602 [02.05.2013] EEG (2012): Gesetz zur nderung des Rechtsrahmens fr Strom aus solarer Strahlungsenergie und zu weiteren nderungen im Recht der Energien, Vom 17. August 2012, http://www.clearingstelle-eeg.de/files/BGBl_1754_120823.pdf, [03.05.2013]. EPIA (2012a): Economic Benefits of Solar Photovoltaics, The PV Value Chain, EPIA fact sheet 24th September 2012, http://www.epia.org/index.php?eID=tx_nawsecuredl&u=0&file=/uploads/tx_epiafactshe ets/Fact_Sheet_on_the_PV_Value_Chain.pdf&t=1367574261&hash=56d7622cb4b3e583 0977ed2b27d5433743702bfd, [29.04.2013]. EPIA (2012b): Sustainability of Photovoltaic Systems, Job Creation, EPIA fact sheet 24th September 2012, http://www.epia.org/uploads/tx_epiafactsheets/Fact_Sheet_on_Job_Creation.pdf, [29.04.2013]. EPIA (2012c): Global Market Outlook For PV, 13 March 2013. EuPD Research (2013): German PV Market Briefing 2013, Session I: Rckblick und Status Quo.

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EurActiv (2012): Europe must stand up to China over solar panels, http://www.euractiv.com/climate-environment/europe-stand-china-analysis-515547 [29.04.2013]. EurObservER (2012): Baromtre Photovoltaique, http://www.eurobserver.org/pdf/photovoltaic_2012.pdf [29.04.2013]. Europressedienst (2013): PwC received written information of Europressedienst dated 2nd May 2013. European Commission (2011): Best practices for the submission of economic evidence and data collection in cases concerning the application of articles 101 and 102 TFEU and in merger cases http://ec.europa.eu/competition/antitrust/legislation/best_practices_submission_en.pdf, [29.04.2013]. Federal Register (2012): Volume 77, No. 201 / Wednesday, October 17, 2012/Notices, p. 63791 ff., http://usitc.gov/trade_remedy/731_ad_701_cvd/investigations/2012/cspv_cells_and_mod ules/final/PDF/Solar%20panels%20AD%20Final%20determination.pdf, [29.04.2013]. GTM Research & SEIA (2013): U.S. Solar Market Insight 2012 Year in Review, http://www.seia.org/research-resources/us-solar-market-insight-2012-year-review, [21.04.2013]. Observ'ER (2012): The State of Renewable Energies in Europe, http://www.energiesrenouvelables.org/observ-er/stat_baro/barobilan/barobilan12.pdf, [03.05.2013] Photon (2013): Aus der Traum, January 2013. Photon.Info (2012): EuPD Research: European installers divided on anti-dumping case, http://www.photon.info/photon_news_detail_en.photon?id=71998, [26.04.2013]. Photon.Info (2013): Photovoltaik-Produktionsanlagenbauer rechnen mit weiteren mageren Jahren, http://www.photon.info/photon_news_detail_de.photon?id=75626, [03.05.2013]. photovoltaik (2012): AFASE: 30.000 Arbeitspltze in Europa bei Strafzllen gefhrdet, http://www.photovoltaik.eu/nachrichten/details/beitrag/afase--30000-arbeitspltze-ineuropa-bei-strafzllen-gefhrdet_100009447/, [28.04.2013]. photovoltaik (2013a): Anhrung in Brssel zu Photovoltaik-Strafzllen, http://www.photovoltaik.eu/nachrichten/details/beitrag/anhrung-in-brssel-zuphotovoltaik-strafzllen_100010314/, [28.04.2013]. photovoltaik (2013b): Weltweit mehr als 100 Gigawatt Photovoltaik installiert, http://www.photovoltaik.eu/nachrichten/details/beitrag/weltweit-mehr-als-100gigawatt-photovoltaik-installiert_100010259/, [30.04.2013]. pv magazine (2012): Italys ministers sign Conto Energia V, http://www.pvmagazine.com/news/details/beitrag/italys-ministers-sign-conto-energia-v_100007664/#axzz2S9RlX47A, [03.05.2013].

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Prognos (2013): Ehrentraut/Peter/Schmutz/Krampe (Ed). The Impact of Anti-Dumping and/or Countervailing Measures on Imports of Solar Modules, Cells and Wafers from China on EU Employment and Value Added, http://www.photon.de/newsletter/document/74183.pdf, [29.04.2013].

Prognos Press Release (2013): Studie zu Arbeitspltzen in der PhotovoltaikWertschpfungskette verffentlicht, http://www.prognos.com/Singleview.306+M5b54cca71f1.0.html, [18.04.2013]. RECHARGE (2013): Jinko eyes US solar boom in 2013, http://www.rechargenews.com/solar/asia_australia/article1322839.ece [25.04.2013]. Sonne Wind & Wrme (2012a): Ausgabe 14/2012. Sonne Wind & Wrme (2012b): Ausgabe 16/2012. The Brattle Group (2012): Berkman/Cameron/Chang (Ed.) The Employment Impacts of Proposed Tariffs on Chinese Manufactured Photovoltaic Cells and Modules, http://coalition4affordablesolar.org/wp-content/uploads/2012/01/TBG_Solar-TradeImpact-Report.pdf, [29.04.2013]. The Solar Foundation (2012): National Solar Job Census 2012, http://thesolarfoundation.org/sites/thesolarfoundation.org/files/TSF%20Solar%20Jobs %20Census%202012%20Final.pdf, [19.04.2013]. TIS innovation park (2012): Informationsschreiben 01/2011, Der vierte Conto Energia, http://www.tis.bz.it/doc-bereiche/ren_doc/pdf/4.-conto-energia-de.pdf, [03.05.2013]. United States Census Bureau, U.S. Department of Commerce, http://www.census.gov/foreign-trade/reference/products/catalog/impDVD.html#cost, [30.04.2013]. WACKER (2013a): 2012 Wacker Chemie AG Geschftsbericht, Wege zur Nachhaltigkeit, http://www.wacker.com/cms/media/de/documents/wacker_group/annual_report_12.pdf, [03.05.2013]. WACKER (2013b): Roadshow Presentation Full Year 2012, http://www.wacker.com/cms/media/documents/investorrelations/roadshow_fy_2012.pdf, [29.04.2013].

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Annex
Calculation of employment effects based on PV installations We perform a rough estimation of the direct and indirect employment effects for 1 GW of newly installed PV capacity. An estimated job number per installed GW allows us to update the employment figures of the year 2012 to the new market realities in 2013, i.e. reduced installations of 2.6 GW between 2012 and 2013 (7.6 GW - 5.0 GW). Like the Prognos study we base our calculations on EPIA data. Our calculation has the following steps and assumptions: 1. EPIA states that one 1 MW of installed volume triggers 3 - 7 direct and 12 - 20 indirect jobs.56 2. The overall structure of these jobs is summarized by EPIA. The overall jobs are differentiated by type of input for installation.57 Module Inverter Other system costs Installation Admin/Eng/Sales 45% 10% 18% 17% 10%

3. The share of value added remaining in Europe has been estimated by EPIA(58% in total). The data reflects the value added for the European economy for the installation of PV systems:58 Module Inverter Other System Costs Installation Admin/Eng/Sales 25% 53% 80% 100% 100%

We consider it reasonable to apply these European figures as a proxy for the value chain in Germany. To reflect the high productivity in Germany we applied the lower end of EPIA's estimation for direct and indirect job creation, i.e. 3 + 12 = 15 jobs per MW which equals 15,000 jobs within the entire global supply chain per 1 GW. If we apply this to the reduction of 2.6 GW, this equals a loss of 39,000 jobs within the global supply chain.59 The following table shows how we estimated the ballpark figure for the related employment effect in Germany.
56 57 58

EPIA (2012b). EPIA (2012b). EPIA (2012a).

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Table 5 - Estimated job losses in Germany in 2013 for the baseline scenario (without tariffs)
Global Number of jobs eliminated for baseline scenario (without tariffs) for a 2.6 GW reduction Differentiation along the value chain Module Inverter Other System Costs Installation Admin/Eng/Sales 45% 19% 18% 17% 10% -17,550 -3,900 -7,020 -6,630 -3,900 25% 53% 80% 100% 100% -4,388 -2,067 -5,616 -6,630 -3,900 Thereof in Germany Share -39,000 58% Absolute -22,601

Source: PwC calculation based on EPIA data. Rounding differences may occur.

If we subtract 22,601 jobs from 87,800 (employment level 2012) we get the employment level of the baseline scenario of 65,200 jobs for 2013 - 2015 (based on the EPIA forecast of 5 GW installation).60

59 60

2.6 * 15,000 = 39,000. Rounding differences may occur.

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