Economic climate starts to bite for battery gigafactory projects in Europe

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Gigafactory firms Northvolt and Britishvolt have commented on news reports that economic conditions are negatively affecting their plans, in statements provided to Energy-Storage.news.

Sweden-based lithium-ion battery manufacturing firm Northvolt is considering delaying the 2025 start of commercial operations for Northvolt Dreit, its third battery cell manufacturing facility, in Heide, Germany, after recent high energy prices affected the profitability of such investments. That is according to the company’s CEO Peter Carlsson, speaking to Frankfurter Allgemeine.

In response to a request for comment, a spokesperson for Northvolt told Energy-Storage.news: “We remain committed to the vision we have outlined for Northvolt Drei, and the program is developing with the project team expanding in key areas as we work towards our timeline of start of operations late 2025. Challenges, not least in terms of energy pricing, do exist, and we are responding to these appropriately in order to secure our goals.”

The firm, which has a valuation of US$12 billion, is launching multiple facilities across the continent including cathode material production, battery recycling and lithium-ion cell production, and is targeting a total annual battery production capacity of 170GWh. The company told Energy-Storage.news that it still plans to dedicate roughly 20% of its capacity to the energy storage system (ESS) market.

Northvolt Drei would contribute 60GWh of that. Carlsson said talks were ongoing with federal and state governments. “We all want to make Heide possible,” he said in Frankfurter Allgemeine.

The company spokesperson said that Northvolt Drei would be powered by “almost 100% renewable energy” but added that Germany has seen significant energy price rises compared to Sweden recently.

“The situation underscores the importance of the continued buildout of additional renewable energy capacity in Germany to support the sustainability of manufacturing industries,” they added.

Energy-Storage.news recently reported that gigafactory projects in Europe were being forced to delay or cancel plans altogether due to, amongst other things, lithium carbonate shortages, long lead times for equipment and a wider inflationary environment.

But the continent has seen much sharper increase in electricity prices compared to the US, a market which has also recently introduced a host of incentives for setting up facilities in the battery supply chain there through the Inflation Reduction Act. This may have made the US a more attractive place to invest in the sector, after years of falling far behind Europe in this regard.

“We want to continue to be a European champion and market leader. But we are now at a point where we may initially prioritise expansion in the US over Europe,” Frankfurter Allgemeine quoted Carlsson saying. He added that Europe needed to expand financial incentives to compete. State and federal bodies have previously promised to fund €155 million (US$151 million) of the (reported) €4.5 billion cost of Northvolt’s Germany facility.

Asked if the aforementioned macro-economic factors were affecting the planned start of full commercial operations of its two other gigafactories in Sweden – Northvolt Ett, also 2025 – and Poland – Northvolt Dwa, the company’s dedicated stationary energy storage pack and system factory, in 2023 – the spokesperson said:

“The current industrial landscape does bring additional challenges, however, we have taken appropriate actions to mitigate risks and safeguard the progress and timelines of our projects at Northvolt Ett and Northvolt Dwa. Importantly, for our manufacturing plants, including Northvolt Ett, electricity prices are assured through long-term agreements.”

Britishvolt

Meanwhile, UK firm Britishvolt has secured the short-term funding it needs after widespread news reports it was close to filing for administration. The company is planning to build a gigafactory in Northumberland, as previously reported by Energy-Storage.news, which the reports threw into doubt.

“While the weakening economic situation is negatively impacting much business investment at present, at Britishvolt we are continuing to pursue positive ongoing discussions with potential investors. In addition, we have also received promising approaches from several more international investors in the past few days,” a statement sent to media including Energy-Storage.news read.

“The result is we have now secured the necessary near-term investment that we believe enables us to bridge over the coming weeks to a more secure funding position for the future.”

The Financial Times reports that the investment only gives it another five weeks of runway, citing company chair Peter Rolton.

The UK government’s business secretary position has changed twice within the past week, and the approach of the latest incumbent Grant Shapps may be important. “The ‘Britishvolt Effect’ is also of huge strategic importance to UK plc. and the country’s standing on the global battery stage,” Britishvolt said in its statement.

In Spain, Valencia outlet Las Provincias reported today that the government there has had to provide several million in aid to the local subsidiary of Volkswagen to ensure its gigafactory project in Sagunta goes ahead, after it reportedly theatened to back down after central government funding for the project was lower than expected.

Another firm developing a gigafactory in Spain, Envision, was left out of public aid from the Ministry of Industry, Commerce and Tourism (MINCOTUR) entirely, but said it would go ahead with its project regardless.

As readers of Energy-Storage.news will know from previous articles on the topic, these projects are just a few of several dozen gigafactories underway in Europe totalling over a TWh of eventual lithium-ion battery production capacity.

Energy-Storage.news’ publisher Solar Media will host the eighth annual Energy Storage Summit EU in London, 22-23 February 2023. This year it is moving to a larger venue, bringing together Europe’s leading investors, policymakers, developers, utilities, energy buyers and service providers all in one place. Visit the official site for more info.

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