In an Asia-dominated market, the world’s greenest electric battery could be a European feat. Chinese manufacturers, alongside Japan’s Panasonic and U.S.-based Tesla, command an 85% share of the global lithium-ion battery market, the rechargeable batteries used in everything from mobile phones to electric vehicles (EVs).
In comparison, Europe’s battery market is minuscule. In 2018, European manufacturers, according to McKinsey, only supplied approximately 1% of the global battery demand. Regulatory compliance, access to raw materials along with limited financing and an influx of Asian companies looking to get a share of the pie, has made it difficult for European manufacturers to compete. However, in recent years there has been a regulatory push by the European Union towards EVs, which has gained further momentum during the pandemic. McKinsey anticipates that by 2040 about 70% of all vehicles sold in Europe will be electric. Europe’s lithium-ion battery market might catch up.
In anticipation of this, Swedish battery maker Northvolt, founded by ex-TeslaTSLA executive Peter Carlsson, is going long in Europe. The company, which was set up back in 2016, aims to build the world’s greenest battery on European soil. To achieve this, the battery maker has a team of 800 employees from 71 different nationalities, which is continuing to grow by hiring around 15 people per week. Having raised a total of $3.5 billion to date, Northvolt is currently building a giga-factory in Germany and one in Sweden. It is not every day that Volkswagen, Goldman SachsGS and Spotify founder Daniel Ek, line up to throw money at a company. Nevertheless, last week Northvolt completed their most recent raise of $600 million, adding the aforementioned household names, among others to their private investor list.
Are Batteries Ever Going to Walk the Talk?
The battery market is a puzzling one. Despite the significant scientific progress that has been made over recent years, the road has been longer and bumpier than initially anticipated. “It is pretty clear that the battery industry historically has been over-confident in its ability to deliver the next revolutionary technology,” says Northvolt CEO Peter Carlsson. When asked how confident he is in what lies ahead, Peter thinks that we can “expect a significant development of the lithium-ion technology over the coming decade, but it will likely not be an over-night revolution of new chemistries or solid-state battery cells.”
I point out the recent investor disappointment that followed Tesla’s much-anticipated Battery day where many people expected to see a battery prototype that never appeared. Carlsson doesn’t seem to share this discontent, “it was an impressive demonstration of a holistic strategy to make batteries affordable and at scale” he tells me. “Tesla’s holistic view on hands-on involvement in the supply chain, manufacturing innovation, while making incremental technology improvements over time makes sense to me. It is similar thinking we have developed here at Northvolt as well,” Carlsson points out.
Perhaps the initial excitement surrounding the electrification of transportation, created inflated promises and expectations. “We need to be realistic about what is possible in the short term. Radical new battery technologies take time to move from the lab into the commercial market. Reducing cost is a challenge – some progress has already been achieved with massive increases in production – but ultimately, it will also need to involve new chemistries (materials),” says Clare Grey, Geoffrey Moorhouse Gibson Professor at the University of Cambridge.
Go Big or Go Home
Northvolt thinks reducing cost is possible. “Go big or go home, basically. By building at a scale you can reach cost advantages and economies of scale, especially with our vertically integrated setup, that will translate into more affordable batteries for the OEMs and more affordable products for the consumers at the end of the day,” says Jesper Wigardt VP communications at Northvolt.
Not a Jack-of-All-Trades
“Electricity works when you need to cover short distances, but we need a different solution for heavy, long-haul vehicles,” Bill Gates who has invested in battery companies has said. Electrification to him doesn’t appear like a viable solution for heavy vehicles. Carlsson seems more optimistic, “as batteries improve even further with increased energy density over the coming years, they will become a key enabler also for the heavy transportation sector,” he says. “Obviously, large airplanes and ships will not be driven by batteries in the near term, but I think we will see smarter combinations of energy use in these industries too and this will drive large reductions of carbon emissions,” Carlsson says.
The World’s Greenest Battery
Electric vehicles have the potential to radically reduce pollution, and carbon emissions, but it’s not a free lunch, the lithium-ion batteries powering them have a chequered environmental record. Mining, extracting and processing lithium has significant environmental impacts. Studies show that to address this issue, recycling and recovery of metals at end of life can significantly reduce the environmental impacts. Northvolt seems to be aware of this. They have developed a recycling program that aims to achieve the company’s goal of having 50 % of all raw materials coming from recycled sources. They aim to produce batteries with a minimal CO2 footprint, by using carbon-free energy in manufacturing and developing circular methods, alongside having a full recycling program which enables re-use of every single battery cell that they produce. To help them meet their aspiring green goals, they have placed Emma Nehrenheim at the steering wheel, as their Chief Environmental Officer. Emma is one of only two women in Northvolt’s senior management team. Perhaps Northvolt’s next grand ambition should be to tackle gender diversity. Their current female to male employee ratio is 30% to 70%. Not a surprise as this is a problem of the wider tech industry. They can do better.