CleanTechnica Interview with Peter Carlsson, CEO of Northvolt: Part Three — Low-Carbon Advantage, Product Mix & Strategy

CleanTechnica recently interviewed Peter Carlsson, Chief Executive Officer of Northvolt, the Swedish battery manufacturing startup-slash-giant. In this the third and final part of the interview, we discuss the benefits of Northvolt’s low carbon manufacturing approach in the European context, and learn about its product mix and strategic positioning. Also catch parts one and two of the interview if you missed them.

This article is an interview transcript lightly edited for clarity. You can also listen to the whole audio or video versions of the interview.

Northvolt CEO Peter Carlsson. Image by Northvolt.

[Max Holland, CleanTechnica] Now, on this low carbon aspect. Both with your hydropower electricity  supply, and with your aim to recycle materials, there will be this “low carbon tag” attached to Northvolt’s products, once you get rolling. Obviously, we believe that battery electric vehicles are already an environmental gain over combustion vehicles. But Northvolt will have this extra layer of “low carbon” on the actual cell and battery production. 

I’m also thinking in terms of the European Commission, who, in 2023, are going to be ruling on whether cars are assessed in terms of their full lifecycle emissions. At the moment they’re mainly regulated for their in-use emissions. 

Do you see Northvolt’s low-carbon approach as getting ahead of a coming cultural shift towards “let’s make the batteries themselves as green as possible?” Is it something you see as having value to your customers and end consumers right now, or something that’s going to grow in importance in the future?

I think there are two trends here that are playing out strongly for us.

One is obviously the car industry driving this transformation, and specifically certain companies that have come out of dieselgate, and [potential distrust] among customers etc. They certainly don’t want to move into this transformation having a new question over whether batteries are good or bad. And questions over how they’re being produced. And whether electric vehicles are better for the environment than a lean combustion engine. 

So, obviously, they are driving very strong sustainability strategies. And I think this has just been reinforced over the last couple of years, that this component is starting to become a more and more important part of the overall strategy, and [a growing] awareness among consumers which I think is another thing.

The other thing is that, in this era of fighting global warming and of CO2 reductions, I think there is going to be a wave of much more transparency required of industry companies. Transparency to really show the entire “book” of emissions. I think we’ve just seen the start of this. Obviously, for us being able to both enable a transformation, and to help the car industry and other industries going electric, and also starting with a blueprint and a setup where we feel this is the most sustainable path we could have taken — I think this is setting us up in a good starting point, for sure. 

Then, vertical integration on active materials does require additional investments on our side. It adds complexity to our manufacturing setup. But once we figure it out, it also connects us to the recycling in a much better way than others will be able to do. Because then those recycled materials — the cobalt and the nickel etcetera — we can bring them back into our precursor calcination processes, and thereby build a fully circular flow.

So I think we have found a really good blueprint to build on. And I do think we will see just stronger and stronger momentum about how important that sustainability aspect is going to be, specifically for energy intensive industries.

Initially you had planned to focus fairly exclusively on making cells. And then, with additional exploring of your customers’ and other stakeholders’ needs, you realized there was also going to be significant demand for Northvolt handling the whole battery pack design, and the BMS, and these areas. And so you’re now thinking these [product] areas are going to be a portion of your business, and I believe you have a factory being built in Gdansk in Poland, to handle this side of things.

But I’m thinking that ultimately — at least for some of your customers — they’re going to want to have some degree of control over the battery pack design because different use cases require different solutions. … So how do you see the value-add? And how do you see this balancing out in terms of your focus and the kind of services that you’re offering — cells/packs, or a bit of both?

Well, the starting point was — we went out to a couple of different industries — obviously, automotive, but also other industries, and said, “hey, we have this proposition … do you want to buy batteries?”

And pretty much everybody said, “Yeah, for sure, we want to buy batteries!” However, everybody’s vision of what buying a battery really means is very different.

If you go to a utility company and say — “do you want to buy a battery?” — they would like to have a plug-and-play battery system solution that they can implement into the grid.

While, mostly, if I go to an automotive company and say — “do you want to buy a battery?” — they think about the cell. 

So it became natural that for certain verticals — if we want to be part of those verticals — then we needed to add on the battery management system and some of the controls, the cooling systems, etc., and sell them a solution. Otherwise, they were not interested in interacting directly with us, but needed an integrator. So, we see that path pretty clearly on the industrial side, on the energy storage side. While we see on the portable side — for power tools, e-bikes, etc. — that the companies want to do this integration on their own.

In the car industry, I think there is right now an evaluation of the best supply-chain practice. Certain companies want to buy a complete pack. Others will want to buy modules. And others just want to buy cells. 

And then there is also an architectural analytics — how can you reduce the cost from cell to complete pack level? And could you reduce one layer between the pack, module, and cell?

So, there are interesting developments at work, specifically going on in the auto industry, where I think it is probably pretty difficult to be the middleman. Either you’re in cell development and you might also do module assembly, or you are the end customer, and you do the pack, and you might also do the module. 

I think over time it’s going to be a very squeezed space in between, being an integrator. But that’s more of my own reflection of that space.

[Zachary Shahan, CleanTechnica] Sorry, just to step in for a moment, I’m curious, can you say a little bit generally about European automakers — don’t need to name names — but how much do they really seem focused on wanting to be a part of the design of the batteries, the battery cells, the chemistry, and that kind of thing?

We see a significantly increased interest in learning and building up own-competence around cell design. In many cases, just in order to be setting the right set of specifications. You can see a car company in Munich building up a strong chemical department, that has its own development. You see another big car company up in Wolfsburg building up a significant prototype line. A large organization. So I think you’re seeing an industry that is really wanting to learn more in depth about this.

What we have not seen is the path where the auto companies want to put a lot of money into cell manufacturing as a standalone entity. And I think that’s because of two reasons:

One is that cell manufacturing is so capital intensive.

And this transformation that the auto companies are going through is requiring massive investments anyway. In R&D, in new platforms, in autonomous driving, in new software. So, on top of all of that, to start up your own cell manufacturing … there are very few companies doing this.

But then the approach to it is different between just building strong partnerships and to the extent that Volkswagen, for example, has really built a joint venture with us and we’re utilizing that joint venture to be able to build capacities and develop product.

So you clearly see a much more strategic approach as to how to build these partnerships, how to design, how to develop, and how to build these supply chains around it. And then you’re seeing different types of philosophies around “is this just a regular purchasing process?” or “is this a stronger integrated partnership?” or even a joint venture setup. I think we’re gonna see a lot of interesting constellations around this, going forward.

[Max Holland] We haven’t got a lot of time left, a couple of minutes I think. So let me ask you a couple of quick-fire questions if I can? Not exactly yes/no answers, but as close as you can. …

Energy storage products: Is that something you’re going to make and some of your partners — like Vattenfall, and Vestas, and ABB — will be handling the grid services, the arbitrage? Or do you see Northvolt getting directly involved with some of the grid services related to energy storage products?

Our aim is to develop a really good product proposition, and then offer it to utility companies and energy storage integrators. For a couple of reasons. Both — that they have large service organizations already for the grid — and also that with our scale up over the next couple of years, we’re already going to need so much capital in order to build the factories. Also, to utilize capital for installations is going to be a very stretched approach, and so we are probably going to stay out of that for now.

That makes perfect sense. I’m interested in your partnership with Scania for heavy-duty vehicles. Right now there’s a lot of hype in the US around Nikola Motor and their fuel cell trucks. I’m sure that hasn’t escaped your notice. What’s your timeline and your thoughts about battery supply for heavy-duty trucks and your partnership with Scania?

I think you will see a very rapid demand change on deliveries and transport in cities. It was one big truck and bus maker who told me that he thought that — within two years — 50% of all garbage trucks that are sold in Europe will be electric.

So, in-city deliveries, in-city transportation, and in-city services, I think are going to be very strongly driven by electrification. And, unfortunately, I don’t think that many, including Scania, are ready for this strong wave in terms of infrastructure and the capacity to deal with this. 

Then, as we are developing better and better cell performance in terms of cycle life, energy density, charge-discharge, we’re just going to see more and more applications coming into scope.

On the race between fuel cells and batteries — I leave myself out of that for now, because I do think that just the battery industry, by itself, is going to have such dramatic demand over the next 10 years that any relief — for example, from more fuel cells — I think would actually be beneficial.

A brief question on your battery chemistry focus. Paolo Cerruti [Northvolt Chief Operating Officer] mentioned that initially you plan to focus on nickel-cobalt-manganese cathodes. We’ve seen recently lithium-iron-phosphate making a bit of a resurgence in China, and Tesla using CATL’s lithium-iron-phosphate.

You’re planning to have fairly tight supply-chain relationships with mining companies. Presumably, you’re wanting to stay somewhat flexible on the battery chemistries, and how they evolve in the medium-to-long term. How are you balancing those two aspects — the solid mining contracts — but needing to stay flexible on the actual chemistries that you’re developing?

It’s a very good question. Right now we have two focuses. One, which is a large priority of our time, that’s our first and second generation of active material that we build into products, first for 2022–2023, and then the next generation for 2024–2025. And these are high-nickel-based chemistries, and where you’re starting to see higher and higher silicon doping in the anode.

Then if you look a little bit longer term, and say, “okay, how do we get to 1,000 Wh/liter?” [Note from Max: from the typical 600–700 Wh/L in cutting-edge cells today] Then it is likely that we will see some chemistry changes. 

What we are trying to do right now is to keep a flexible opening to this. And the reason for it is that, we don’t have a long history, so we can work out different paths, with partnerships, with our own types of development, etc. It is a tricky path to say, “is it lithium sulfur, or are there solid-state types of applications, etc.”

So right now we are just trying to be on our toes. We’re trying to evaluate. And the thing we do see is that, to go from initial pilot-state evaluations and performance, into large-scale … into applications … it takes a much longer time than what the industry normally forecasts.

And that’s one of the reasons that — even if we’ve come up with really strong chemistries here in the next coming years — for that to be evaluated into products, getting scale-up in manufacturing, etc., we’re still quite some years away from this.

But it is exciting. There’s never been so much money deployed in R&D in this field and it is a really exciting field to participate in!

[Zachary Shahan] Thank you so much for your insight and information. Thank you both, and we have to continue the conversation. We have a lot more to discuss, I think. So thank you for the time.

[Max Holland] Thank you, Peter.

[Peter] Thank you.

Interview Ends

If you haven’t yet had a chance to see parts one and two of our interview with Peter Carlsson, you should take a look. Also check out our video and audio channels to see and hear the interview and more like it in the future.

We’re planning to pick up on a few of the details that emerged in the interview for further analysis in the coming days, so stay tuned for that.