With growing demand in European markets and market segments, the supply of key components is tight. Longi has a product and is ready to ship, according to Gulnara Abdullina, Vice President Europe of Longi Solar, who reports that while some projects may be postponed, plans are not shelved.
pv magazine: I think one of the most discussed topics here at Intersolar Europe is the supply chain and the challenges of securing certain components, such as modules, inverters and batteries. If I were to order today from Longi Europe, when would I receive the modules?
Gulnara Abdullina: You would probably have them at the end of the third quarter or maybe the beginning of the fourth quarter. The product is available. But you’re right, there are other bottlenecks in the industry.
And how come Longi is in this position of being able to supply? I have heard that negotiations are underway for the supply of modules in 2023 or even 2024.
Well, there are discussions like that – especially for large-scale projects where the stakes are higher and visibility is a bit longer than usual. We are currently working on 2023 agreements, not 2024 in Europe, unless there is a rather general type of framework agreement with some of our customers, which may span different geographies. For 2022 supply, we still have capacity available and are happy to take more orders.
Do you have the impression that the German market is particularly hot?
Due to rising prices and investment limits, we saw less momentum in the German market at the start of the year, but now, with the European Repower Europe initiative and the German government aligning its strategy to working towards energy independence, we see a nice upward trend in the German market.
You mentioned higher prices – how would you describe the situation for buyers? Are they waiting for prices to drop or are they accepting the new reality?
It really depends on the project itself or if it can be postponed. If a project is approaching a difficult deadline, it is often impossible to postpone it. You may remember that many of the projects we have right now were carried over from the previous year, or even 2020.
In some cases, we find that the economics of the project are still acceptable. In other cases, we have some flexibility with construction times, so they can wait. But in other cases, they just have to order now and there will be reduced project profitability – it’s not just module prices, but system balance prices have gone up.
How many projects have you heard of being canceled as the cost of capital increases?
When looking at greenfield developments in Europe, it takes more than three years to develop a project. And all the ancillary costs that have been incurred up to that point, which makes it painful to give up. I don’t see any canceled projects, it’s more of a moving target and some projects are pushed.
As far as the roof segment is concerned, it seems that the demand is very strong. Is that how you see it?
In the distributed segment, demand is very strong. Generally speaking, it’s a much more nimble segment. Moreover, the price elasticity of the final customer is different. This means that the segment can adapt to the new situation and price trend. Rooftop projects have their investment constraints, but price increases can be passed on to the end customer, especially given gas prices right now. And thanks to some country-specific subsidies and the recent reduction in VAT, some end customers are able to absorb the additional price increase.
In the residential segment, we are seeing some once-pure module vendors moving into home energy supply, including battery storage, electric vehicle charging, and more. Is this part of Longi’s strategy?
We strongly believe that you are the best at what you do and focus on what you are good at; and that’s why, with all due respect to other companies, our company’s goal is to focus on our core business, which is modules. Saying that, we are venturing into hydrogen, and we already have alkaline electrolysers in the market, focused on the utility segment. We are therefore not looking to expand into other segments. We also believe that there is enough bargaining power from system integrators and distributors who have already established channels for BoS components – for us, I don’t see this as added value for our customers.
On module technology, there is a move to n-type by some manufacturers – heterojunction (HJT) and TOPCon, in particular. Can you give me an indication of where Longi is headed in terms of n-type?
We do not reject any of the technologies. Our R&D is strong and last year alone we invested 600 million euros ($644.7 million), more than 5% of our revenue. Knowing that our founders are very forward-looking, they know the technology and are focused on what’s next. There are still things to do with p-type and great potential with n-type as well. At the cellular level, we are working on p-type and n-type among others. Some of the n-type technologies that are readily available in the market today and in the past have not produced the expected incremental gains. And some are very expensive. This means that it is not always possible to find the right price-performance balance required.
So this is p-type PERC for Longi for the foreseeable future?
In the short term, there are still things to do with the p-type PERC, but the n-type has a good future and good potential. Longi is working in several directions to allow us to exploit the gap when we can.
The production of “Made in Europe” cells and modules is also a hot topic. How seriously does a manufacturer like Longi investigate something like a module assembly production facility in Europe?
These decisions have to be made in light of the growth of the market and the very sunny outlook 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 that Chinese manufacturers or other international players manufacturers step in and localize parts of the value chain. But this will take time.
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