Sweden’s Northvolt announced this week it will build a third battery factory in the city of Heide in northern Germany. The new factory will be known as Northvolt Drei and will be able to produce 60 gigawatt-hours of batteries — enough for about 1 million electric cars — when it reaches full production. It is expected to begin operating in 2025 and provide employment for 3000 workers.
Heide was chosen because that region of Germany has the cleanest energy grid in the nation, thanks to access to abundant renewable energy from onshore and offshore wind farms. In addition, the area has access to clean energy from neighboring Denmark and Norway. Peter Carlsson, CEO of Northvolt, tells the European press, “We’re excited to announce Northvolt Drei — a project which fits well into a promising future cluster of clean technology ventures emerging in northern Germany and advances the wider European transition towards a sustainable society within which Germany plays a crucial role.”
Another reason for locating the new factory in northern Germany is that the region is centrally positioned in the emerging European battery supply chain connecting Scandinavia and continental Europe and provides the space required to establish a battery plant of sufficient size to leverage the economies of scale in production which are key to reducing battery costs. Access to skilled labor that is familiar with auto manufacturing is also a consideration.
An important part of the new factory will be a battery recycling facility. The company expects to source 50% of the materials it consumes from recycled materials. The recycling operation will focus on efficient reuse of byproducts from the production process and provide a sustainable solution for end-of-life electric vehicle batteries recovered from European markets.
“It matters how we produce a battery cell. If you use coal in your production, you embed a fair amount of CO2 into your battery, but if we use clean energy, we can build a very sustainable product. Our philosophy is that new energy-intensive industries, such as battery manufacturing, should be established in actual geographical proximity to where the clean energy is produced,” says Carlsson. That seems like a perfectly logical position to take, and one we may see more corporations adopt as the transition to renewable energy lurches forward in fits and starts. China has just announced a major new investment in coal-fired generating plants as energy prices soar worldwide.
New Funding Acquired
Northvolt recently raised $2.75 billion from a host of financial heavy hitters, including Goldman Sacks, Volkswagen, and several Swedish and Canadian pension funds. Total investment in the company now stands at $6.5 billion. The latest round of funding values Northvolt at $11.75 billion, according to a person familiar with the company who asked to remain anonymous. Some of that money will go to expand production at the company’s first factory from 40 gigawatt-hours (GWh) per year to 60 GWh per year.
Northvolt recently announced its second battery factory that will be built in conjunction with Volvo Cars near its main factory in Torslanda, Sweden. That factory will be cooled by waste water from the local treatment facility. The heated water will later be used for district heating in the community. The company has also taken over a former paper mill in Sweden where it plans to produce cathode materials. It has booked orders from Volkswagen and BMW worth more than $27 billion. The total of orders from Volvo Cars is unknown but if it is enough to justify building a new factory, it must be considerable.
Peter Carlsson told CNBC in an interview on Wednesday that the company is doing “fairly significant shipments” from a smaller facility that has been in operation for over a year to customers who are now doing their own “validations.” While none of the company’s batteries are in electric vehicles that are on the road today, they’re being used on test tracks, Carlsson said, adding that he expects Northvolt’s batteries to be delivered in vehicles from 2023 and in energy storage applications from the end of next year.
Northvolt’s batteries are built on a “different chemistry” to those manufactured for Tesla but both have similar performance characteristics. Carlsson, was Tesla’s vice president of supply chain from 2011 until 2015, when he left to start Northvolt. Making the batteries in a sustainable manner is one of his company’s biggest challenges. If the world transitions to electric vehicles with batteries from countries like China that derive most of their electricity from coal, that will create a new carbon footprint the size of Spain. “If we do it based on renewable energy, we can prevent this from happening,” Carlsson says.
Europe is anxious to have access to batteries manufactured by European companies for the electric cars it produces. Northvolt is leading the way to making that wish a reality.