Swedish green industry hopes hit by Northvolt woes

Heavy snowfall mixes with thick white clouds in Skellefteå, a riverside city in northern Sweden that is home to 78,000 residents.

It is also the location of what was supposed to be Europe’s largest and greenest electric battery factory, fueled by the region’s abundance of renewable energy.

Swedish startup Northvolt will open its flagship production plant here in 2022, after signing multi-million-dollar contracts with automakers such as BMV, Volkswagen and Nordic truck maker Scania.

But last year it ran into major financial trouble, declaring debts of $5.8bn (£4.6bn) in November and filing for bankruptcy in the United States, where it hoped to expand its operations.

Since September it has laid off around a quarter of its global workforce, including more than 1,000 employees in Skellefteå.

“Many people have already moved,” says Ghanaian judge Dey-Seshie, 43, who moved to Skellefteå to work at Northvolt, after studying and working in southern Sweden.

“I need to get a job to extend my work permit. Otherwise, unfortunately I will have to leave the country.”

Many researchers and journalists following Northvolt’s downfall share the view that it was caused, at least in part, by a global drop in demand for electric vehicles (EV).

in september Volvo abandoned its goal produce only electric vehicles by 2030, arguing that “customers and markets are moving at different speeds.” Meanwhile, China, the electric battery market leader, has been able to lower Northvolt prices.

Failure to meet production targets (a key factor in BMW pulling out of a €2 billion deal in June), expanding too quickly and the company’s leadership have also been widely cited as factors fueling the crisis. .

“Making batteries is a very complex process. It takes a lot of capital, time, and obviously they just didn’t have the right people to run the company,” says Andreas Cervenka, business author and economic commentator for the Swedish newspaper. Aftonbladet.

At Umeå University, Madeleine Eriksson, a geographer who researches the impact of so-called “green industries,” says Northvolt presented a “save the world mentality” that impressed investors, media and local politicians.

But this “now or never” approach, he maintains, overlooked the fact that this was a risk-taking startup that “never ended up attracting investment.”

Northvolt did not respond to multiple requests from the BBC for comment on its demise or future plans.

The company has hired German Marcus Dangelmaier, from global electronics company TE Connectivity, to run Northvolt’s operations in Skellefeå from January, as it looks to attract new investment.

Northvolt co-founder and CEO Peter Carlsson, a former Tesla executive, resigned in November.

As the post-mortem of the crisis continues, there are debates about the potential impact on Sweden’s green ambitions.

Northern Sweden dubbed the “Nordic Silicon Valley of sustainability” by the consulting firm McKinseyhas rapidly gained a global reputation for its new industries designed to accelerate Europe’s green transition.

The region is a center for biotechnology and renewable energy. In addition to Northvolt, other high-profile companies include Stegra (previously called H2 Green Steel) and Hybrit, which are developing fossil-free fuels using hydrogen.

But Cervenka, the economic commentator, maintains that Northvolt’s demise has damaged Sweden’s “very good brand” when it comes to green technologies.

“There was a great opportunity to build this champion and this Swedish icon, but I think investors who lost money will be hesitant to invest again in a similar project in northern Sweden,” he says.

Some local businesses say publicity surrounding the Northvolt crisis is already having a negative impact.

“I myself feel that when I travel now – even to the south of Sweden – and abroad, people really ask me questions,” says Joakim Nordin, CEO of Skellefteå Kraft, a major supplier of hydropower and wind energy, which was one of the first inverter in Northvolt.

Based in Malmö, southern Sweden, Cleantech for Nordics is an organization representing a coalition of 15 major investors in sustainability-focused startups.

In this sense, climate policy analyst Eva Andersson believes that the nation’s long legacy as a defender of the environment will continue to be relevant.

“I think it would be presumptuous to say that we are now doomed here in the Nordic countries because a company has failed,” he argues.

Clean technology for research in the Nordic countries suggests that there were more than 200 investments in cleantech projects in Sweden in 2023.

Another Dealroom studywhich collects data on startups, indicates that 74% of all venture capital funding for Swedish startups went to so-called impact companies that prioritize environmental or social sustainability, compared to a European average of only 35% .

“Sweden continues to punch above its weight in this sector. And I think we can expect it to continue to do so in the future as well,” predicts Anderson.

There are growing calls for greater state support to help Sweden maintain its position. The Swedish government refused to bail out Northvolt, suggesting that all startups (sustainable or not) should be subject to market forces rather than being bailed out by taxpayers. But as other parts of the world ramp up battery production and other industries that reduce carbon emissions, the decision has faced backlash.

“The United States and China have massive support packages for the green industry, and they are definitely catching up and overtaking in some sectors. So, that is definitely a threat to watch out for,” Andersson argues.

Currently, only 3% of global battery cell production takes place in Europe. according to research for the international consulting firm McKinsey, with Asian companies leading the market.

Swedish Minister of Energy, Business and Industry Ebba Busch argues that the answer is more EU support rather than funding from individual governments.

Last month she he told swedish television The situation at Northvolt “was not a Swedish crisis”, but rather a reflection of a challenge at the European level regarding competitiveness in the electric battery sector.

But while the government insists it wants Sweden to play a key role in the European battery industry and the broader green transition, it has been accused of sending mixed messages. The right-wing coalition, which came to power in 2022, has reduce gasoline taxes and diesel, and Abolished subsidies for electric vehicles..

“This is a very politically sensitive area,” says journalist Cervenka. “The Swedish government is being criticized internationally for failing to meet its climate obligations. And this is in stark contrast to Sweden’s image as a pioneer.”

The BBC approached Busch’s media team but was not granted an interview.

Back in Skellefteå, where it has been dark since shortly after lunch, Joachim Nordin prepares to head home in the snow.

He says there is a strong industrial will for Sweden to remain a role model for green technology, even though policymakers are “not as ambitious” as previous administrations.

The criteria that induced Northvolt to establish its first factory in Skellefteå will also attract other large global players to the region, according to the energy company’s CEO.

“It’s 100% almost renewable energy here… and that’s pretty unique if you compare it to the rest of Europe. But on top of that, we’re among the cheapest places in the world in terms of electricity prices. So, yeah You combine those two things, it’s a great opportunity.”

Skellefeå Kraft recently announced a collaboration with Dutch fuel company Sky NRG. Its ambition is to open a large factory by 2030, producing fossil-free jet fuel (produced using hydrogen combined with carbon dioxide captured from biogenic sources).

“The publicity around Northvolt doesn’t help now, of course. But I hope it’s something that will be remembered as a small bump in the road, when we look at this in 10 years,” says Nordin.