Rekubit Exchange:Sweden's Northvolt wants to rival China's battery dominance to power electric cars

SKELLEFTEA,Rekubit Exchange Sweden — The far north of Sweden is the land of the midnight sun, where it's daylight 24 hours a day at this time of year. Thick forests blanket the land and fast rivers produce carbon-free hydropower. It's here, just south of the Arctic Circle, where a Swedish startup called Northvolt has launched its bid to power electric cars around the world.

Formed seven years ago, Northvolt is the first homegrown European battery company. In an interview with NPR, its CEO Peter Carlsson says the company was created to help make the continent self-sufficient on the batteries that will power the future of energy — and less dependent on China.

"Europe was not really having any supply chains," he says. "We were all very, very Asia dependent. That was the key driver why we started this."

Northvolt hopes to compete in the race for control of the battery industry, which is key to the global economy and for stemming climate change. Batteries, like those made with lithium ion, are used for everything from cellphones to wind turbines and electric vehicles. The industry is currently dominated by China. Northvolt is trying to challenge that dominance, but it takes a vast effort that's literally clearing the landscape and redefining a city.

As with most startups, there were challenges at the beginning, including funding, COVID-19 and supply chain issues. Carlsson, a former Tesla executive, says at times there was doubt the company would survive.

"It was 2019 or 2020, there was a bunch of headlines around, you know, 'Northvolt running out of juice,' and 'is this going to fail?' etc.," he says. "It's not for fainthearted, and specifically when it comes to large-scale industrial projects."

Northvolt secured backing from powerful investors such as Goldman Sachs, as well as European carmakers like Volvo and Volkswagen, which allowed the company to, among other things, launch a "gigafactory" in the far northern Swedish city of Skelleftea to produce lithium ion batteries.

Roughly a million trees were cleared and tons of stone dynamited and removed to make way for the plant, says Joachim Nordin, the CEO of the local power station Skelleftea Kraft. The Northvolt plant will have 100% renewable energy at an affordable cost from nearby hydropower plants.

"If you look at the northern part of Sweden, we have all the big rivers and a lot of them are exploited with hydropower stations," he says. "Hydropower is the biggest energy source in Sweden."

Construction at the Northvolt plant, which started in 2019, is behind schedule. Only about one-third of the massive plant has been built. Roads are still being constructed. Shipping containers stacked two high are used for offices. But it's growing fast, says Christopher Gorelczenko, one of the company's executives, as he accompanied NPR on a tour of the Northvolt plant.

"When I got here in December 2020, this building we are in now had four exterior walls, that was about it," he says. "These clean rooms, you see, were not here."

Gorelczenko moved to Skelleftea with his wife, five sons, two cats and two dogs, during the pandemic. He oversees the launch of one of Northvolt's products, although he won't say what it is or which customer it's for. Such information is tightly held at Northvolt. Looking through windows, you can see technicians in protective uniforms and face masks working near large rolls of copper and aluminum used in the batteries. But visitors are forbidden in areas where battery cells are produced.

"Everything is proprietary," Gorelczenko says. "This is an industry that does not exist much outside of Asia at this point. And everybody keeps their stuff very, very close."

Gorelczenko, who previously worked for Tesla and Jeff Bezos' space exploration company Blue Origin, says post-pandemic there are still plenty of lingering challenges — including finding skilled workers needed for this type of work.

"It's very challenging because it's an industry that is not normalized to Sweden. So it's a new industry in a new area with new people who don't have this type of background," he says.

Northvolt is bringing in skilled workers from all over the world to work at the plant. Skelleftea is booming. The influx of 3,000 new residents — adults and children — over the past few years is placing a strain on this small municipality of about 75,000 people. There aren't enough schools or medical workers for the newcomers, and more roads will have to be built, says Helena Renstrom, marketing manager with the Skelleftea Municipality. Housing is an issue.

"Looking back 20 years, we ... maybe built, I don't know, 20 or 50 houses," she says. "Now we are up in 800 per year," which she says is a lot for a small city.

At a waterpark along Skelleftea's riverbanks, Habib Waqar watches his wife and young daughter play. They're from Karachi, Pakistan, and arrived in Skelleftea in March. Waqar, who works at Northvolt, says their biggest challenge in their new home was finding a place to live.

"It's pretty hard to find the housing — everywhere in Sweden, it's pretty hard — but yes, we found, we got it. We got it," he says.

On a recent warm Sunday, the local beer garden in the center of Skelleftea was filled with Swedes — mostly white and mostly blond. Asa Larsson, a social worker in Skelleftea who is enjoying a beer, says there have been a lot of changes in the city over the past couple of years. She says it's a good thing, there are more restaurants and interesting people.

"We were a small town with a small town culture, and now we're like everyone from the world is coming in and make [it] richer," she says.

The Northvolt plant is also bringing back some of Skelleftea's own. Sofia Lindstrom, a regional coordinator for the chamber of commerce, says for years young people have been moving away because of a lack of opportunities. "They didn't have any work ... so they moved to Stockholm or [other] bigger cities in Sweden to find work," she says that's now reversed. "They are coming back now ... so that's nice."

Northvolt plans on a 4,000-strong workforce at its Skelleftea plant. It's also expanding into another part of Sweden, as well as Poland and Norway. The United States is also a possibility. The American battery industry is more robust than Europe's, but still lags behind China. CEO Carlsson says he's interested in the U.S. because of the Biden administration's Inflation Reduction Act, which provides tax breaks and other incentives.

"You know, if you come here and put a factory, we will subsidize so much of your production up until 2032," he says, describing President Biden's policy. "So it's a fairly transparent program ... and very fast moving."

That produced a subsidy battle between Europe and the U.S. Berlin offered Northvolt a subsidy package worth about $1 billion to build a plant in Germany. Northvolt agreed, but Carlsson says it's still interested in a U.S. plant.

That's a lot of expansion, especially as Europe depends heavily on China for the critical raw minerals — such as lithium and cobalt — that are used in the batteries. Carlsson says Northvolt is trying to create new sustainable supply chains to break China's grip.

"Such as, for example, Canada, also in Australia," he says. "And we are actually building a supply chain in Portugal together ... with a joint venture for lithium."

Carlsson believes technologically, Northvolt can compete with China's battery makers. But he says the Asian companies are better at scaling up — producing more batteries faster.

"This is where we need to just be learning faster and be better," he says. "This will drive where we will end up ... how fast we can scale this business. They are incredibly good at it."

Currently, Northvolt is making enough to supply about 15,000 electronic vehicles a year. That's expected to increase to about a million car batteries once construction at the plant is completed in 2027. Meanwhile, there are more than three dozen new battery factories in the works in Europe in the coming years.