pv magazine: I think one of the most talked-about issues here at Intersolar Europe is supply chain and challenges in securing some components, like modules, inverters, and batteries. If I was to place an order with Longi Europe today, when would I receive the modules?
Gulnara Abdullina: You would probably get them at the end of Q3 or maybe the beginning of Q4. The product is available. But you are right, there are some other bottlenecks in the industry.
And how is it that Longi is in this position of being able to supply? I have heard that negotiations are happening for module supply in 2023 or even 2024.
Well, there are some discussions like that – particularly for large scale projects where the stakes are higher and visibility is a little longer than usual. We are working on some 2023 deals right now, not 2024 in Europe unless there is a rather blanket type of framework agreement with some of our customers, which can span out across various geographies. For supply in 2022, we still have capacity available, and are happy to take on more orders.
Does it feel like the German market is particularly hot?
Because of the price increase and capex limitations, at the beginning of the year we have seen less dynamics on the German market, but now, with the EU Repower Europe initiative and the German government aligning its strategy to work towards energy independence, we see a nice upward trend from the German market.
You mentioned higher prices – how would you describe the situation from buyers? Are they holding off and waiting for prices to fall, or accepting the new reality?
It really depends on the project itself or whether it can be postponed. If a project is approaching a hard deadline, then often it cannot be postponed. You may remember that many projects that we have right now have been carried over from the previous year, or even as far back as 2020.
In some of the cases we see that the project economics are still acceptable. In some other cases we some flexibility with construction timelines, so they are able to wait. But in other cases, they simply have to order now and there will be a reduced profitability of the project – it is not only module prices, but balance-of-system prices have increased.
How many projects have you heard of actually being canceled, given that the cost of capital is going up?
When looking into greenfield developments in Europe, it takes over three years to develop a project. And all of the soft costs that have been incurred up until that time making it painful to give up. I’m not seeing projects cancelled, rather that it is a moving target and some projects are being pushed.
Looking to the rooftop segment, it seems that demand is very strong. Is that how you see it?
In the distributed segment, demand is very strong. Generally speaking, it is a much more agile segment. Also, the price elasticity of the final customer is different. That means that the segment can adjust to the new situation and the pricing trend. Rooftop projects do have their capex constraints, but price increases can be passed onto the final customer, particularly given gas prices right now. And with some country specific subsidies and recently reduced VAT, some end customers are able to absorb the additional price increase.
In the residential segment, we are seeing some formerly pure-play module suppliers moving into home energy supply, including battery storage, EV charging and so on. Is that a part of Longi’s strategy?
We are strong believers in being the best at what you do and focusing on what you are good at; and that is why, with all respect to other ventures, our company’s goal is to focus on our core business – which is modules. In saying that, we are venturing into hydrogen, and we are already commercializing alkaline electrolyzers in the market, focused on the utility segment. So, we are not looking into expanding into other segments. We also believe that there is enough negotiating power that comes from the systems integrators and distributers that already have established channels for BoS components – for us stepping in, I don’t see it as a value add for our clients.
On module technology, there is a shift to n-type from some manufacturers – heterojunction (HJT) and TOPCon, in particular. Can you give me an indication as to which way Longi will go in terms of n-type?
We are not discarding any of the technologies. Our R&D is strong and last year alone we invested €600 million ($644.7 million), over 5% of our revenues. Knowing that our founders are very much forward looking, they know the technology and are focused on what is coming next. There are still things to do with p-type and great potential with n-type as well. At the cell level, we are working on p-type and n-type among others. Some of the n-type technologies that are readily available on the market today and in the past, did not yield additional gains as expected. And some remain very expensive. This means that it is not always possible to strike the right price-performance balance required.
So, it’s p-type PERC for Longi in the foreseeable future?
In the near term, there are still things to do with p-type PERC, but n-type does have a good future and potential. Longi is working in several directions to allow us to exploit the gap when we can.
‘Made in Europe' cell and module production is also a big topic now. How seriously is a manufacturer like Longi investigating something like a module assembly production facility in Europe?
These decisions have to be taken in light of the growing market and the very sunny prospects for the European market, the way the market is designed with a very fair share of distributed generation, I would not rule out the possibility of Chinese manufacturers or other international manufacturers stepping in and localizing some parts of the value chain. But this will take time.
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