(Bloomberg Businessweek) -- In a dense forest just below the Arctic Circle, a half-dozen windowless concrete buildings rise above the snow-laden pines. Inside, massive machines combine lithium, nickel, manganese, and cobalt into a mix that will ultimately be turned into electrodes for shiny silver batteries. The facility represents Europe's biggest effort to compete in the fast-growing market for electric vehicles, and the company behind it, Northvolt AB, promises to do so with far lower greenhouse gas emissions than rival manufacturers. “We are laying the foundations for one of the largest recycling facilities in Europe,” says Chief Executive Officer Peter Carlsson. “We need to build greener batteries, because if we don't, we have a major climate impact.”
Since its founding six years ago by a pair of former Tesla executives, Northvolt has signed contracts valued at more than $50 billion with Europe's leading automakers, which want to foster a battery industry in the region to match Asian giants such as China's CATL, Japan's Panasonic, and LG Chem from South Korea. Northvolt's investors include Volkswagen, BMW, Goldman Sachs Group, and Spotify co-founder Daniel Ek. Although Europe's automakers have long been leaders in combustion engines, they risk falling behind in a world where the most important—and expensive—part of the vehicle is the battery. “There are people at Volvo and Volkswagen who are super experts on how to squeeze the most out of an engine,” says Emad Zand, head of Northvolt's battery systems. “Exactly the same thing applies to batteries. If you don't have that technological knowledge, you're lost.”
The factory in the sub-Arctic town of Skelleftea, where winter temperatures can drop below -25C (-13F), made its first batteries in December. By 2026, Northvolt expects to have 3,000 full-time employees at the plant churning out 60 gigawatt-hours of battery capacity annually, enough to power about 1 million cars. The company has chosen a location near the southern Swedish city of Gothenburg for a second facility, and it's close to deciding on a site in Germany. By the end of the decade, Northvolt aims to be able to make enough batteries to power more than 3 million cars a year.
Although electric cars emit no carbon, creating their batteries requires massive amounts of energy and raw materials shipped from far-flung mines. Northvolt says it can supply European carmakers with greener batteries by tapping Scandinavia's hydro and wind power: While Skelleftea will consume about 1.5% of Sweden's total energy production, it will come from renewable sources. Added to its ambitious recycling program, those efforts will help Northvolt reach its goal of cutting emissions of carbon dioxide per kilowatt produced by about 80% vs. producers using electricity generated by coal.
By 2030 about half of the material Northvolt uses for new cells will be extracted from recycled batteries, and the company says it aims to someday reach 100%. That's important because global supplies of nickel, cobalt, and lithium are already stretched and the shift to electric cars is just getting under way. Recycling “is the only way for the electric-car industry to be both environmentally and economically sustainable,” says Emma Nehrenheim, who manages Northvolt's recycling program from a research facility an hour's train ride west of Stockholm.
The trouble is that Northvolt's recycling program is as unproven as it is ambitious. Extracting the materials from old batteries is expensive and cumbersome and tends either to be energy-intensive or require hazardous chemicals. And there's a risk of overcapacity as a slew of companies, including the big Asian players, are planning more than 40 battery factories across Europe. Management consultant Roland Berger predicts that by 2030 capacity will exceed demand by a third. All of those companies, meanwhile, will be seeking to hire from the same pool of talent in the nascent industry, which means it may be tough for Northvolt to get the workers it needs, especially for jobs in remote locales including Skelleftea. “Producing lithium-ion cells is no trivial matter,” says Wolfgang Bernhart, a partner with Roland Berger. Even experienced cell manufacturers replicating their Asian factories in Europe “have experienced substantial quality problems.”
Northvolt, though, has already overcome plenty of challenges, Nehrenheim says. Early on, “the numbers just wouldn't add up” for recycling. “The cost for the customer would have been too high,” she says. But after more than a year of honing the process, her team managed to bring the cost down to an acceptable level. And Fredrik Hedlund, the head of the Skelleftea site, says he's had about 50,000 applicants for jobs there. He predicts demand for EVs will grow so fast that there will be room for multiple players and many different factories across Europe. “A single company or a number of companies from Asia cannot do it alone,” Hedlund says. “It's good that there are more projects. But many of them have not passed the first hurdles as we have.” —With Wilfried Eckl-Dorna and Elisabeth Behrmann
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