The European Battery Alliance is one of EU’s main industrial initiatives in the green transition but competition from China and the financial problems of its flagship project does not bode well for its future during next term of the European Commission.
As previously reported, the EU has been pushing for developing an entire value-chain for the production of batteries in Europe by launching the European Battery Alliance, a network of innovation and industry actors established in 2017 at the initiative of then Commission Vice-President Maroš Šefčovič.
The Commission estimated that to cover the EU demand alone, the battery market requires 20 - 25 Gigafactories to be established in Europe. Batteries are crucial for the transition to a green economy in the transport sector and the use of e-vehicles instead of vehicles driven by fossil fuels.
It started promisingly with the Swedish company Northvolt which built the first Gigafactory in Skellefteå, Sweden, and planned to build more factories in Sweden and other countries. In 2020, it planned to target a 25 percent market share in Europe by 2030 with 50 percent of raw material secured from recycled batteries and using 100 % renewable energy.
Northvolt secured larges contracts with automobile manufacturers. In beginning of 2024, the company was continuing to receive debt funding and state aid to expand although the production at its first factory did not pick up the pace as planned. A spokesperson of Northvolt told The Brussels Times that the company had not yet finalized its raw materials strategy and that it could take years to do it.
Since then, the situation has become precarious for Northvolt because of the declining demand for e-vehicles in Europe. In June, it lost a large contract with BMW. It was forced to fire 1,600 employees at its first factory in Sweden and cancel its expansion plans in its home country. It became insolvent and was not able to pay salaries and invoices to subcontractors and local authorities in Sweden.
Besides financial problems, Northvolt has also been hit by several workplace accidents linked to dangerous chemicals, including deaths that still are investigated.
The EU backed investments in the company with loan guarantees worth more than €300 million for the expansion of its Gigafactory in Sweden and is also exposed to Northvolt’s crisis. The Commission referred to Norhvolt and the European Investment Bank (EIB) for information about the current status of the guarantees.
Recently, Northvolt filed for bankruptcy for subsidiaries in Sweden and the US. Its CEO, Peter Carlsson, who had worked at Tesla and co-founded Northvolt in 2016, resigned last week. He described his resignation as a consequence of Nothvolt’s application for a ‘chapter 11’ company reconstruction in the US.
He sounded optimistic as the reconstruction is expected to give Northvolt access to more capital to roll out its strategic plan. The company group consists of more than 20 units with around 5,600 employes across seven countries. The company group might still survive but the recent development bodes not well for a company which was described as the poster child of the Battery Alliance.
The Battery Alliance and the new Commission
Maroš Šefčovič, who has been Commissioner since 2009, will apparently not continue to deal with the Battery Alliance. He was Vice-President for the European Green Deal and Interinstitutional Relations and Foresight in the outgoing Commission. In the new Commission, which starts to work on Monday, his new portfolio will be Trade and Economic Security/ Interinstitutional Relations and Transparency.
Asked on Thursday about his future rule, the outgoing chief spokesperson of the European Commission referred to his mission letter. Šefčovič will lead on Clean Trade and Investment Partnerships to bolster EU’s competitiveness and diversify its supply chains for instance on critical raw materials. It does not mention the Battery Alliance.
Another Commissioner will take over. Stéphane Séjourné, a former MEP and French minister, has become Executive Vice-President for Prosperity and Industrial Strategy. He will lead the work on critical raw materials. He is tasked “to set up a dedicated EU Critical Raw Materials Platform, notably to support joint purchasing and manage strategic stockpiles, and to implement the Critical Raw Materials Act”.
Séjourné’s mission letter does not mention the Battery Alliance but he is tasked to develop, with the Commissioner for Climate, Net Zero and Clean Growth, the Clean Industrial Deal in the first 100 days of the mandate, notably with a focus on decarbonisation, clean technologies and incentivizing investment.
The market situation has changed since the Battery Alliance was launched in 2017 because of the import of cheaper and perhaps better batteries from China. Will the Battery Alliance remain a priority?
A Commission spokesperson replied that competitiveness and prosperity are the first priorities in the Commission’s new mandate.
“We must and will stay the course on the goals set out in the European Green Deal,” Commission President von der Leyen said in her political guidance. “There is an equally urgent need to decarbonise and industrialise our economy at the same time. We need a new Clean Industrial Deal for competitive industries and quality jobs in the first 100 days of the mandate.”
The outgoing Commission continued until last week to describe the Battery Alliance as a success with 30 gigafactories and a total of 167 GWH by 2023, from a virtually inexistent battery industry with 1 GWh capacity in 2017. However, whether all factories are up and running with their planned capacity is not clear.
Have other Gigafactories the same problem a Northvolt in the sourcing of critical raw materials needed for the production of batteries or are they relying on domestic mines?
The outgoing Commission could not comment on behalf of private companies and referred to the Critical Raw Materials Act, which entered into force last May. For the first time, a list of critical raw materials is codified in law. The Act includes benchmarks for domestic capacities along the strategic raw material supply chain and for diversifying EU supply.
EU’s extraction capacity is set to at least 10% of the EU's annual consumption of strategic raw materials. The EU will continue to be dependent on import but not on a single country as import of each strategic raw material is limited to 65 % of the annual consumption for any relevant stage of the value chain.
M. Apelblat
The Brussels Times
