Sweden’s green industry hopes hit by Northvolt woes

A heavy snow blankets Skellefteå, a riverside town in northern Sweden with a population of 78,000.

It is also the site of what is expected to be Europe’s largest and greenest power plant, powered by the region’s vast renewable energy.

Swedish start-up Northvolt is set to open its own billboard production facility here in 2022, after signing multibillion-dollar deals with automakers including BMV, Volkswagen and Nordic truck maker Scania.

But it ran into financial trouble last year, announcing $5.8bn (£4.6bn) in debt in November, and reinvesting in the US, where it hopes to expand its operations.

Since September it has laid off a quarter of its global workforce including more than 1,000 workers in Skellefteå.

“Most people have already left,” says 43-year-old Justice Dey-Seshie from Ghana, who moved to Skellefteå to work for Northvolt, having previously studied and worked in southern Sweden.

“I have to get a job to renew my work permit. Otherwise, I have to get out of the country, sadly.”

Many researchers and journalists following Northvolt’s collapse share the view that it may have been caused by the global increase in electric vehicles (EVs).

In September Volvo abandoned its mission to produce only EVs by 2030, arguing that “customers and markets are moving at different speeds”. Meanwhile, China, the market leader in electric batteries, may reduce Northvolt’s prices.

The lack of production targets (a key factor for BMW to exit the €2bn contract in June), is growing rapidly, and the company’s leadership has also been cited as factors causing the problem.

“Building batteries is a very difficult process. It costs a lot of money, it takes time, and apparently they didn’t have the right staff to run the company,” argues Andreas Cervenka, a business writer and commentator on the Swedish daily economy. Aftonbladet.

At the University of Umeå, Madeleine Eriksson, a geographer researching so-called “green companies” says that Northvolt presented a “world-saving idea” that impressed investors, the media and local politicians.

But this strategy of “now-or-never”, he argues, regrets because it was the beginning of risk-taking that “did not end up attracting investment”.

Northvolt did not respond to multiple requests from the BBC for comment on its collapse or future plans.

The company has hired German Marcus Dangelmaier, from global power company TE Connectivity, to run Northvolt operations in Skellefeå, starting in January, as it seeks to attract new investment.

Northvolt co-founder and CEO Peter Carlsson — a former Tesla executive — resigned in November.

As the postmortem in the crisis continues, there are arguments about what will affect Sweden’s green ambitions.

Northern Sweden, known as the “Nordic Silicon Valley of Sustainability” and the McKinsey firmhas gained worldwide popularity thanks to new industries designed to support Europe’s green transition.

The region is a center for natural resources and renewable energy. Next to Northvolt, well-known companies are Stegra (formerly known as H2 Green Steel) and Hybrit, both of which are developing hydrogen-based fuel.

But Mr Cervenka, an economic commentator, says the collapse of Northvolt has damaged Sweden’s “excellent brand” in terms of green technology.

“There was a great opportunity to build a hero, and to build this Swedish brand, but I think investors who lost money will be suspicious of the government again in the same project in the north of Sweden,” he says.

Some local businesses say the publicity about Northvolt’s problem is problematic.

“I feel myself when I travel now – even in the southern parts of Sweden – and abroad, that people ask me questions,” says Joakim Nordin, CEO of Skellefteå Kraft, a provider of water and wind energy, which was the first. Investor at Northvolt.

Headquartered in Malmö in the south of Sweden, Cleantech for Nordics is an organization representing a consortium of 15 major sustainable start-up investors.

Here, climate researcher Eva Andersson believes the country’s long legacy as an environmental hero will remain relevant.

“I think it would be presumptuous to say, well, now we’re ruined here in the Nordics because one company failed,” he argues.

Cleantech for the Nordics research shows that there were more than 200 investments in technology projects in Sweden in 2023.

Another dealroom lessonwhich collects data on startups shows that 74% of all Swedish startup funding went to impact companies that prioritize environmental or social sustainability, compared to a European figure of just 35%.

“Sweden is still punching above its weight in this category. And I think we can expect it to continue to do so,” predicted Anderson.

There are increasing calls for public assistance to help Sweden stay responsible. The Swedish government refused to fund Northvolt, saying that all startups – sustainable or not – should be driven by the market rather than driven by taxpayers. But as other parts of the world expand battery production and other carbon-cutting industries, this decision has come under fire.

“The US and China have great support for green companies, and of course they are working and passing through other groups. And so it is dangerous,” argues Andersson.

Only 3% of the world’s battery cells are produced in Europe – according to research for the international consulting firm McKinsey – with Asian companies leading the market.

Sweden’s Energy Minister Ebba Busch says that EU support rather than funding from individual governments is the answer.

It’s been a month he told Swedish television what is happening at Northvolt was not a “Swedish problem”, but a manifestation of European problems regarding competition in the electric battery sector.

But while the government insists it wants Sweden to take a leading role in Europe’s battery industry, as well as a green transition, it has been accused of sending mixed messages. The right-wing coalition, which came to power in 2022, said cut taxes on petrol and diesel, and ended subsidies for EVs.

Journalist Cervenka said: “These are the ones who are most affected by politics. “The Swedish government is being criticized around the world for not fulfilling its climate responsibility. And this is very different from Sweden’s image as a pioneer.”

The BBC reached out to Busch’s press team, but was not granted an interview.

Back in Skellefteå, which has been dark since just after lunch, Joachim Nordin prepares to return home to the snow.

He added that there is a strong desire from industry for Sweden to remain a model of green technology, although policy makers are “not as ambitious” as previous administrations.

The strategies that attracted Northvolt to set up its first factory in Skellefteå will also attract other major players from around the world, according to the power company’s CEO.

“It’s 100% almost renewable energy up here… and that’s pretty unique if you compare it with others in Europe. But on top of that we’re among the cheapest places in the world for electricity prices. So if you combine those two things, it’s an opportunity big.”

Skellefeå Kraft recently announced a partnership with Dutch oil company Sky NRG. Their goal is to open a large factory by 2030, producing zero-emission jet fuel (made using hydrogen combined with carbon dioxide extracted from natural resources).

“The publicity around Northvolt is not helping now, of course. But I hope that it is something that will be remembered as a small camp in the road, when we look back on this 10 years from now,” says Mr Nordin.