In a perfect world, there would be plenty of battery materials available at affordable prices, manufacturing costs would be dropping steadily, and there would be a large supply of affordable electric cars in the world’s showrooms. Sadly, we don’t live in a perfect world. The price of battery materials is soaring, the cost of electricity to power battery factories is headed for the stratosphere, and as a result the cost of manufacturing batteries is going up instead of down.
High Energy Prices In Europe
Europe is struggling with extraordinarily high energy prices thanks to Russia’s barbaric invasion of Ukraine and shut down of the pipelines that used to bring plenty of cheap Russian gas to the Continent. Volkswagen Brand CEO Thomas Schäfer warned on LinkedIn this week that investments in German and EU industrial projects such as battery cell factories will be unfeasible if the region’s policy makers fail to control ballooning energy prices in the long term.
“Unless we manage to reduce energy prices in Germany and Europe quickly and reliably, investments in energy-intensive production or new battery cell factories in Germany and the EU will be practically unviable. The value creation in this area will take place elsewhere,” he wrote.
Schäfer said an outline for industrial policy cooperation proposed by the French and German economy ministers last week “falls short in crucial areas and does not address the envisaged priorities. The EU’s programs do not focus enough on “the short-term ramp-up, scaling and industrialization of production,” Schäfer said. He criticized what he called “outdated and bureaucratic state aid rules.”
According to Automotive News Europe, Volkswagen plans to have six battery factories in full operation across Europe by 2030. It broke ground on its lead plant in Germany in July of this year and signed a €3 billion joint venture with Umicore for cathode material production in September.
The IRA & Battery Factories
Europe’s energy crisis is putting pressure on how battery manufacturers respond to the Inflation Reduction Act, which aims to boost domestic production of electric cars in America and reduce reliance on China for battery components and materials. European Union officials have said the subsidy program violates World Trade Organization rules and discriminates against non-US companies.
As if to prove the accuracy of those concerns, Northvolt this week said it is considering postponing its planned factory in Germany as surging energy costs threaten to stall that country’s bid to build a sizable electric vehicle supply chain.
The Swedish manufacturer will decide next year whether to build the Heide facility in northern Germany in time for production to start in late 2025 or expand first in North America, where the Inflation Reduction Act is offering billions of dollars worth of incentives to battery cell manufacturers.
“Given what is happening in North America and what is happening in Europe on the other hand, with energy prices not the least, we are during next year going to decide what to prioritize,” Jesper Wigardt, a Northvolt spokesman, told Automotive News Europe. A decision in favor of North America might delay the German plant “a bit,” he said.
The Heide facility is among the first EV projects in Europe’s biggest economy that may get pushed back because of runaway energy inflation. Northvolt’s deliberations also point to intensifying competition among countries trying to attract key manufacturers for the transition to zero emissions transportation.
“IRA has changed the dynamics for suppliers, the entire value chain is looking at North America instead of at Europe,” Wigardt said. “European politicians on various levels need to act quickly to ensure that Europe remains attractive to invest in.” Northvolt has not made a final decision on the Heide timeline and in any case will have to expand in Europe to be a leader in that market, he said.
The Heide plant is due to produce its first cells in late 2025, with commercial output starting the following year. Northvolt announced the project in March, saying it will have an annual capacity of 60 gigawatt-hours — sufficient for roughly 1 million EVs — and benefit from abundant wind power supplies in northern Germany.
Volvo Cars and Northvolt are planning a joint battery manufacturing plant in Gothenburg, western Sweden, the two companies have said. The factory will make battery cells specifically developed for use in next-generation full-electric Volvo and Polestar cars and is expected to begin operations in 2025.
“The joint venture [with Northvolt] allows us to be able to set up a battery factory anywhere that we choose in the world. So, we can take that and replicate it if we wanted to in the U.S.,” Volvo CEO Jim Rowan told Automotive News Europe earlier this month.
The Takeaway
Europe is getting squeezed by Russia and by the US. High energy prices could have a disastrous effect on all manufacturing on the Continent, not just for batteries. Some way will be found to mollify European leaders about the Inflation Reduction Act and its made in America requirements. The way forward for Europe is more renewable energy, but such things take time and time is what Europe doesn’t have as winter sets in and energy prices spike higher.
Some day we will all look back on this and laugh, but right now there is nothing funny about the predicament Europe finds itself in.
Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.
EV Obsession Daily!
Tesla Sales in 2023, 2024, and 2030
CleanTechnica uses affiliate links. See our policy here.
