Europe’s Growing Battery Manufacturing Market: Focus on Local Opportunities
From an outsider’s perspective, regional consolidation of the battery manufacturing market looks fairly resolved. Over 70% of the 1,000 GWh of planned capacity (by 2023) is centered in China. Increasingly frequent announcements of new manufacturing plants from players such as Great Wall Motors/SVolt, Sunwoda, and EVE Energy illustrates the pace at which the market can grow in China.
A European Problem Needs a Local Solution
In Europe, current battery cell manufacturing is less than 3% of the global share, and is mainly focused on high-end niche markets, not the automotive sector. Many European automotive firms have signed long-term trade agreements with Chinese manufacturers. This regional focus and Europe’s lack of its own local production capacity for the cells that power EVs is creating uncertainty, prompting warnings that Europe could leave the car industry exposed and too reliant on others. A recent EU Commission report stated that the “EU’s high dependency on battery cell imports could expose industry to high costs and risks in the supply chain and undermine the automotive industry’s ability to compete with foreign competitors, notably if there is a shortage in the light of the forecast increase in demand.”
As a result, the leading Asian players are looking to follow in the footsteps of Northvolt, who just last month closed the $1.5 billion in financing to kickstart its German manufacturing plant (the first large-scale manufacturing plant in the region). At the start of the month, China’s CATL announced plans to build a first production site in Europe, agreeing a major contract with BMW.
Today Europe is projected to see huge growth in order to try to meet the European Battery Alliance 400 GWh 2015 demand projections.
But not all stakeholders are coming from the Asian market. Following in the footsteps on Northvolt, new entrant to the market FREYR Battery, thinks that the European market offers enough opportunity for local companies to flourish. We caught up with CEO and Founder, Tom Einar Jensen to get his view on the state of the EU Battery market.
Louis Brasington (LB): On the back of some big movements in the European battery manufacturing market, what is FREYR Battery up to and where are they hoping to create impact?
FREYR: In short, FREYR Battery is the most developed battery project opportunity after Northvolt for sizeable battery cell manufacturing in Europe. The company was founded in 2017 and incorporated in 2018. We are planning to build a 32 + 2 GWh hours of battery cell manufacturing capacity. 32 GWh will be for the automotive market and the other 2 GWh will be used for an industrial scale up facility for emerging verticals including maritime, aviation, industrial and stationary storage.
The company had a soft launch on 3 April and received initial funding from InnoEnergy of $8.25 million, which will be part of a EUR 25/30 million seed round. This funding will be used to build out the organization and the capacity required to achieve large-scale battery manufacturing. We are currently forming the team and working through the technology transfer process required for a deep licensing solution which will be completed by the end of next year and will allow us to start construction in early 2021.
LB: Where do you fit in the value chain?
FREYR: We will be focused on the energy intensive part of the value chain; sourcing active materials, electrode manufacturing and battery cell manufacturing. We will also be providing a blueprint white label cell to customers, which can be designed and altered for emerging markets. Further, we are working with InnoEnergy to co-develop an in-licensing blueprint that can be utilized as reference for other players to establish domestic and captive battery markets.
LB: Can you tell me about the plant and why Norway was selected as the location?
FREYR: Norway should be an ideal location for battery scale manufacturing. Given its abundance of 100% green energy, it’s probably the lowest cost energy you can get for sustainable power in the world. It will provide a competitive edge on the cost side for power use. Battery cell manufacturing is not as intensive as say aluminum manufacturing, but it is still around 100 KWh for every 1 KW of batteries that are produced. We are looking at a 600 MW offshore wind facility to power the plant, which will produce roughly the same amount of power (2.5 TWh) on an annual basis as the factory. It won’t be directly linked to the grid, but by putting in what we are taking out, we will neutralize the impact on Norway’s grid.
Furthermore, Norway has a strong heritage in industrial manufacturing. Given this industrial competence and recent advancements in digital industrial solutions such as AI and machine learning, which are now finding its way into Norway’s traditional industries, we see the country as a strategically ideal location to grow out a new manufacturing hub.
LB: Aside from the automotive sector, what are the applications for the cells you will be producing?
Two GWh of the plants capacity will be used for the industrial scale up facility for emerging verticals. Norway has led the charge of electrification on EVs and more recently the maritime sector, which is seeing the start of a substantial decarbonization process. Also, several stakeholders in Norway are looking at applications combining offshore wind and storage as a balancing solution. We have entered into a strategic collaboration with SINTEF, a research facility in Norway, with the aim of creating a more compelling offshore solution, given the recent growth in the market.
LB: Many feel that innovation across the anode, cathode and electrode will be a core driver to achieve the 2028 lithium-ion cost reduction needed to support the broader adoption of EVs. Is FREYR Battery considering these innovations in plant design?
FREYR: We want to establish a production system which is as flexible as possible. For cathode innovation, there is not too much process change so we can adapt on the fly. I don’t see the market moving away from liquid-based electrolytes anytime soon. Too many long-term contracts have been secured to establish the manufacturing plants, and these will take a while to be renewed. We are investigating solutions with a partner. On the anode side we don’t see the pace of innovation changing much, unless there is a material breakthrough and we don’t see that coming anytime soon.
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LB: Has Europe missed the boat for the battery manufacturing revolution? Hasn’t Asia already taken the lead?
FREYR: From a technical standpoint, I don’t see anything that should limit Europe from being capable and competent in delivering an industrial transformation. However, the strategic political situation does need to change. By 2025, Europe’s automotive industry could mainly rely on Asian based suppliers. This will cause uncertainty and job scarcity. It is a worrying situation if cell manufacturers and car producers are both supplying and producing. To that end there is strong regional strategic bias towards establishing a captive manufacturing capacity close to market.
To transition over to captive cell capacity, EU stakeholders will first indeed need to partner with Asian manufacturing partners. As demand increases, EU stakeholders should be brought in to meet and match more local demand. I don’t see us completely missing the boat here, but see us working well alongside Asian market stakeholders. In truth, there will be opportunity for all stakeholders to have part of the pie.