In a significant move aimed at bolstering domestic production of batteries and clean technologies, the European Union (EU) has announced plans to allocate €1 billion in grants to companies that reduce their sourcing of cathodes, anodes, and active materials from China. This initiative coincides with the US Inflation Reduction Act, which, unless repealed, will provide substantial production credits to US-based manufacturers of lithium-ion batteries that rely on domestically sourced materials or those from allied countries.
Speaking to CleanTechnica, Teresa Ribera, the newly appointed executive vice president in charge of the clean transition, highlighted the design of the grant programme, stating, “All three calls include new resilience criteria to boost European industry.” This announcement, made on December 3, 2024, is part of a broader strategy to cultivate a robust and self-sufficient clean energy supply chain within Europe, as the region works towards achieving its climate goals by 2050.
The EU’s initiative to support hydrogen production includes a €1.2 billion auction that requires projects to restrict the sourcing of electrolyzer stacks from China to no more than 25% of their total capacity. Another €2.4 billion has been earmarked for financing net-zero technologies, where project criteria are focused on reducing reliance on critical raw materials sourced from China, Malaysia, Thailand, and Vietnam, which have often been used to bypass tariffs.
Despite these ambitious plans, the transition to a domestically robust battery production sector faces immediate challenges, primarily due to the recent collapse of Northvolt, a Swedish battery manufacturer. The company had previously committed to manufacturing batteries using locally sourced materials, but it succumbed to financial difficulties after BMW withdrew from a significant €2 billion deal due to Northvolt's inability to deliver the necessary battery production.
Peter Carlsson, co-founder of Northvolt, had indicated a shift towards becoming a leader in sustainable, large-scale cell manufacturing while ramping up production at Northvolt Ett in Sweden and the R&D facility at Northvolt Labs in Västerås. However, just three months later, this goal was rendered null as Northvolt failed to adapt to market conditions, leading to bankruptcy.
Commenting on Northvolt’s struggles, industry analyst Michael Barnard noted that the company underestimated China’s capacity to scale EV battery production. “Getting China wrong is a major western failure right now, and until they get China right, they will continue to fail,” Barnard remarked. He further emphasised that Northvolt's multi-faceted approach was detrimental to its success, as the company engaged in numerous projects and partnerships without a clear focus, which diluted its operational efficiency.
The broader implications of Northvolt's downfall raise critical questions for European policymakers regarding the viability of the EU’s strategy for achieving energy independence and fostering a competitive green technology sector. Many analysts believe that while the EU is aiming for a resilient domestic industry, the short-term costs associated with sourcing restrictions may inhibit rapid technological adoption.
The EU’s commitment to developing its own clean technology sector amidst global supply chain challenges illustrates the complex dynamics at play as governments strive to balance economic resilience with environmental goals. While financial pledges are in place, the lessons from Northvolt’s failure highlight the importance of focused strategy and sustainable operational practices for success in the rapidly evolving battery industry.
Source: Noah Wire Services