Sweden's green industry hopes have been damaged by Northvolt's problems

Heavy snow mixes with thick white clouds in Skellefteå, a riverside city in northern Sweden with a population of 78,000.

It is also the site of what was intended to become Europe's largest and greenest electric battery factory, supported by the region's abundance of renewable energy.

Swedish startup Northvolt opened its main production plant here in 2022, after signing multi-billion-euro contracts with carmakers including BMV, Volkswagen and truck maker Nordic Scania.

But it ran into major financial problems last year, declaring debts of $5.8bn (£4.6bn) in November, and filing for bankruptcy in the US, where it had hoped to expand its operations.

Since September, it has laid off about a quarter of its global workforce, including more than 1,000 employees at Skellefteå.

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

“I need to get a job in order to extend my work permit. Otherwise, I have to leave the country, unfortunately.”

Many researchers and journalists tracking Northvolt's downfall share the view that the reason is at least in part a global decline in demand for electric vehicles (EVs).

In September Volvo has abandoned its goal To produce only electric cars by 2030, arguing that “customers and markets move at different speeds.” At the same time, China, the leader in the electric battery market, was able to reduce Northvolt's prices.

Not meeting production targets (the main factor that prompted BMW to pull out of a €2 billion deal in June), expanding too quickly and the company's leadership have been widely cited as factors fueling the crisis.

“Building batteries is a very complex process,” says Andreas Cervenka, a business writer and economic commentator at a Swedish daily newspaper. “It requires a lot of capital, it takes time, and they clearly didn’t have the right employees to run the company.” Aftonbladet.

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

But this “now or never” approach, she says, ignores the fact that it was a venturesome startup that “never finished attracting investment.”

Northvolt did not respond to multiple requests from the BBC to respond to comments about its downfall or its future plans.

The company has appointed German Markus Dangelmeier, from global electronics company TE Connectivity, to manage Northvolt's operations in Skellefeå, from January, as it seeks to attract new investment.

Northvolt co-founder and CEO Peter Carlsson — a former Tesla executive — resigned in November.

As the post-crisis study continues, there are discussions about the potential impact on Sweden's green ambitions.

Northern Sweden, nicknamed the “Scandinavian Silicon Valley of Sustainability” By McKinsey Consulting Companyrapidly gaining a global reputation for new industries designed to accelerate Europe's green transition.

The region is a hub for biotechnology and renewable energy. Besides Northvolt, notable companies include Stegra (formerly H2 Green Steel) and Hybrit, both of which are developing fossil-free fuels using hydrogen.

But Cervenka, the economics commentator, says Northvolt's downfall has damaged Sweden's “very good brand” when it comes to green technologies.

“There was a huge opportunity to build this hero, to build this Swedish icon, but I think investors who lost money would be reluctant to invest again in a similar project in northern Sweden,” he says.

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

“I feel myself when I travel now – even to the southern parts of Sweden – and abroad, that people They really ask me questions.” Investor in Northvolt.

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

Here, climate policy analyst Eva Andersson 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 argues.

Clean technology for Nordic research He points out that there will be more than 200 investments in clean technology projects in Sweden in 2023.

Another study by Dealroomwhich collects data on startups, indicates that 74% of all venture capital funding for Swedish startups went to so-called impactful companies that prioritize environmental or social sustainability, compared to the European average of just 35%.

“Sweden is still punching above its weight in this sector. I think we can expect it to continue to do so in the future as well,” Andersson predicts.

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

“The US and China have huge support packages for green industry, and they are certainly catching up and outperforming in some sectors. This is certainly a significant threat,” Anderson says.

Only 3% of global battery cell production currently takes place in Europe – According to research For international consulting firm McKinsey – with market leading Asian companies.

Swedish Energy, Business and Industry Minister Ebba Bosch says the solution is more EU support rather than funding from individual governments.

Last month she He told Swedish television The situation at Northvolt was not a “Swedish crisis”, but rather a reflection of a European-wide challenge 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 green transition, it has been accused of sending mixed messages. The right-wing coalition that came to power in 2022 has come to power Reducing taxes on gasoline And diesel and Eliminate support for electric vehicles.

“This is a very politically sensitive area,” says journalist Cervenka. “The Swedish government is actually under international criticism for not meeting its climate commitments. This is a stark contrast to Sweden's image as a leading country.”

The BBC contacted Bush's media team, but was not granted an interview.

Back in Skellefteå, where it has been dark since after lunch, Joachim Nordin prepares to head home through the snow.

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

The criteria that prompted Northvolt to set up its first plant in Skellefteå will also attract other major global players to the region, according to the energy company's CEO.

“It's almost 100% renewable energy here… and that's pretty unique if you compare it to the rest of Europe. But on top of that, we're among the cheapest places in the world in terms of electricity prices. So, if you combine those two things, it's a huge opportunity.” “

Skellefeå Kraft recently announced its collaboration with Dutch fuel company Sky NRG. Their ambition is to open a large factory by 2030, producing fossil-free jet fuel (produced using hydrogen mixed with carbon dioxide from bio-sourced sources).

“The publicity around Northvolt doesn't help now, of course,” Nordean says. “But I hope this is just something we'll remember as a little bump in the road when we look back 10 years from now.”