Sweden’s green industry hopes have been hit by Northvolt’s woes

Heavy snow merges with thick white clouds in Skjeleftea, a riverside town in northern Sweden with a population of 78,000.

It is also the location of what was to become Europe’s largest and greenest electric battery plant, powered by the region’s abundance of renewable energy.

Swedish start-up Northvolt has opened its flagship plant here in 2022 after signing multibillion-dollar contracts with carmakers including BMV, Volkswagen and Nordic truck maker Scania.

But it ran into major financial problems last year, announcing in November that it had $5.8bn (£4.6bn) in debt and a bankruptcy filing in the US, where it had hoped to expand.

It has laid off about a quarter of its global workforce since September, including more than 1,000 employees at Shkeleftea.

“A lot of people have already left,” says Dei-Seshi, a 43-year-old Ghanaian judge who moved to Skeleftea to work at Northvolt after previously studying and working in southern Sweden.

“I need to find a job to renew my work permit. Otherwise, unfortunately, I will have to leave the country.”

Many researchers and journalists tracking Northvolt’s decline share the view that it was at least partly caused by a global drop in demand for electric vehicles (EVs).

In September Volvo abandoned the target to produce only electric cars by 2030, arguing that “customers and markets move at different speeds.” Meanwhile, China, the leader in the electric battery market, was able to lower Northvolt’s prices.

Missing production targets (a key factor in BMW’s exit from a €2 billion deal in June), too-rapid expansion and the company’s leadership are also often cited as contributing factors to the crisis.

“Creating batteries is a very complex process. It takes a lot of capital, it takes time, and they obviously just didn’t have the right staff to run the company,” says Andreas Cervenka, a businessman and economic columnist for a Swedish daily newspaper. Aftonbladet.

Madeleine Eriksson, a geographer who studies the impact of so-called “green industries” at Umeå University, says Northvolt has introduced a “save-the-world mentality” that has impressed investors, the media and local politicians.

But this now-or-never approach, she argues, glosses over the fact that it was a risky startup that “never finished raising investment.”

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

The firm hired German Markus Dangelmeier from global electronics company TE Connectivity to run Northvolt’s operations in Shkelefea from January as the company looks to attract new investment.

Northvolt co-founder and CEO Peter Carlson, a former Tesla executive, resigned in November.

As the post-mortem crisis continues, debate rages over the potential impact on Sweden’s green ambitions.

Northern Sweden, known as the “Northern Silicon Valley of Sustainable Development” consulting company McKinseyquickly gained a global reputation for new industries designed to accelerate Europe’s transition to environmentally friendly products.

The region is a center for biotechnology and renewable energy. In addition to Northvolt, high-profile companies include Stegra (formerly H2 Green Steel) and Hybrit, which are developing non-fossil fuels using hydrogen.

But Mr Cervenka, an economic commentator, says Northvolt’s downfall has damaged Sweden’s “very good brand” when it comes to green technology.

“There was a huge opportunity to build this champion and build this Swedish icon, but I think investors who lost money are hesitant to invest again in a similar project in the north of Sweden,” he says.

Some local businesses say the publicity surrounding the Northvolt crisis is already having a negative impact.

“I feel that now, even in the southern parts of Sweden and abroad, I feel that people are really asking me questions,” says Joakim Nordin, CEO of Skellefteå Kraft, a major hydropower and wind energy supplier that was an early investor in Northvolt .

Headquartered in Malmö in southern Sweden, Cleantech for Nordics is an organization representing a coalition of 15 major investors in sustainability-focused startups.

Here, climate policy analyst Eva Anderson believes the country’s long legacy as an environmental champion will remain relevant.

“I think it would be presumptuous to say that we are now doomed here in the Nordics because one company failed,” she claims.

Cleantech for Scandinavian research estimates that more than 200 investments in clean technology projects have been made in Sweden in 2023.

Another Dealroom studywhich collects data on startups, shows that 74% of all venture capital funding for Swedish startups went to so-called impact companies that prioritize environmental and social sustainability, compared to the European average of just 35%.

“Sweden continues to punch above its weight in this sector. And I think we can expect her to continue to do that going forward,” predicts Anderson.

There are growing calls for more government support to help Sweden maintain its position. The Swedish government refused to bail out Northvolt, arguing that all startups – sustainable or not – should be subject to market forces, not bailed out by taxpayers. But as other parts of the world ramp up battery production and other carbon-cutting industries, the decision has faced backlash.

“The US and China have massive support packages for green industries and they are certainly catching up and overtaking in some sectors. And this is definitely a threat to be reckoned with,” says Anderson.

Only 3% of global battery cell production currently takes place in Europe – according to research for the international consulting firm McKinsey – with Asian firms leading the market.

Sweden’s energy, business and industry minister, Ebba Busch, says the answer is more support from the EU, not funding from individual governments.

Last month she told Swedish television the situation at Northvolt was “not a Swedish crisis” but a reflection of a pan-European problem when it comes to competitiveness in the electric battery sector.

But while the government insists it wants Sweden to play a key role in Europe’s battery industry and the wider transition to green products, it has been accused of sending mixed messages. The right-wing coalition that came to power in 2022 reduce gasoline taxes and diesel, and canceled subsidies for electric cars.

“This is a very politically sensitive area,” says journalist Chervenka. “The Swedish government is actually criticized internationally for failing to meet its climate commitments. And this is a sharp contrast to the image of Sweden as a pioneer.”

The BBC approached Bush’s media team but did not receive an interview.

Back in Skeleftea, where it has been dark since lunch, Joachim Nordin prepares to drive home through the snow.

He says there is strong industrial will for Sweden to remain a role model in green technology, even though politicians are “not as ambitious” as previous administrations.

According to the energy company’s CEO, the criteria that prompted Northvolt to establish its first factory in Shkeleftea will attract other major global players to the region.

“It’s almost 100% renewable energy here… and that’s quite unique compared to the rest of Europe. But we are also one of the cheapest places in the world for electricity prices. So if you put those two things together, it’s a huge opportunity.”

Skellefeå Kraft recently announced a collaboration with the Dutch fuel company Sky NRG. Their ambition is to open a large fossil-free jet fuel plant (made using hydrogen combined with carbon dioxide obtained from biogenic sources) by 2030.

“Certainly the hype around Northvolt isn’t helping now. But I hope that it will just be something that will be remembered as a small inequity when we look back on it in 10 years,” says Mr. Nordin.