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VW, Goldman Sachs lead multibillion-dollar drive to put 56GWh of lithium cell factories in Europe

2017 sketch issued to media of planned facility in Skellefteå, Sweden. Construction begins in August. Image: Northvolt.

Northvolt, the consortium seeking to establish significant lithium-ion battery cell manufacturing facilities in Europe, has raised US$1 billion in equity capital from parties including Volkswagen and BMW and the merchant banking division of Goldman Sachs.

Northvolt, founded in 2016 by two former Tesla executives, said that construction will begin this August on the facility, in Skellefteå, Sweden, for large-scale production to being by an estimated date of 2021. It also announced a second facility to be constructed in Lower Saxony, Germany, through a joint venture (JV) with Volkswagen.

The group netted a US$64.8 million loan from the European Investment Bank (EIB) in early 2018 and later agree an ‘in-principle’ US$400 million loan in total from the institution. Northvolt has been sending out regular updates on progress towards establishing the mammoth facility, as have rivals and public bodies in territories including Australia and India, while China's booming EV market is serviced by numerous domestic big players and South Korea and Japan are the other big makers of ltihium cells at present. Northvolt had tied up a deal as early as 2017 for Swiss engineering and automation firm ABB to supply technology for its plant, as Energy-Storage.news reported back in September of that year.

VW hints at need for supportive policy framework

Northvolt Ett, the planned primary production site in Sweden, will have an initial cell manufacturing capacity of 16GWh, including “active material preparation, cell assembly, recycling and auxiliaries”, Northvolt said in a release yesterday. Plans are to eventually expand to 32GWh.

The second gigafactory, on its way through the JV with VW as it continues its public rehabilitation process from the ongoing diesel scandals, will also have an initial production capacity of 16GWh. It could begin to supply Volkswagen with battery cells from “late 2023 or early 2024”, which could lead to an initial ramp up to 24GWh. VW is investing US$1 billion in its JV battery activities with Northvolt.

“The transition to a clean energy future in Europe relies on sustainable and cost-effective battery cell production,” Goldman Sachs managing director Michael Brunn, said.

Brunn claimed Northvolt could “play a crucial role in European supply in the coming years”, due to its “industry-leading technology and processes,” while he also said that the company had a “world-class management team executing on an ambitious growth strategy”.

VW board member Stefan Sommer said that the carmaker is “laying the groundwork” for its electrification strategy, and said Northvolt’s “know-how and sustainable CO2 optimised battery cell production processes” would enable VW to advance its cell production in Germany - but warned that the “prerequisite for this is, of course, the creation of the political framework”.

ABB has signed up as technology supplier to Northvolt. Image: ABB/Northvolt.

Giga-economy

Tesla’s Gigafactory continues to gradually ramp up to the 35GWh of cell capacity and 50GWh of pack production it is aiming for by 2020 out in the Nevada desert. Meanwhile, Germany’s Tesvolt said a few weeks ago that it is closing in on completing a ‘gigafactory’ for assembling energy stationary storage systems by the end of this year, that endeavour, at literally 1GWh of capacity, will be considerably smaller than what Northvolt plans. To add further context, what Northvolt is proposing is battery cell making, which Tesvolt is not targeting, and Northvolt is tied in with electric vehicle manufacturers, which again Tesvolt is not. Northvolt also has an energy storage systems factory in Poland, where it built its first stationary storage unit in April this year, a 175kWh system.

Northvolt claims it has a “combined order value” pipeline of more than US$13 billion through to 2030, through a number of supply agreements already in place. Other participants in the equity raise, which was led by Goldman Sachs Merchant Banking Division and Volkswagen Group include BMW Group, Folksam Group and IMAS Foundation.

Northvolt CEO Peter Carlson said that the announcement demonstrated that Europe is “ready to compete in the coming wave of electrification and that we will do so using battery cells which carry the lowest CO2 footprint possible".

“With these world-class financial and industrial partners coming together and getting behind our mission, we see a tremendous opportunity and momentum for further capacity expansion and product innovation over the coming years. This is only the beginning,” Carlsson said.

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