Located around the Artic Circle, Sweden’s Norrland is a land of rolling hills and roaring rivers — and a center for green energy. The region boasts cheap, clean hydropower and modern roads and ports. Underground lie critical minerals.  

Meta arrived first, in 2011, to build a data center in Luleå run by hydropower. H2Green attracted billions of dollars in Boden, aiming to reduce the carbon emission of traditional steelmaking by 95%. Most of all, ambitious electric batter company Northvolt chose the small town of Skellefteå. In 2020, CEO Peter Carlsson claimed the startup was “closing the gap’ with Asian battery manufacturers.  

Today, this ambition looks overhyped. Canceled contracts, production shortfalls, and ongoing police investigations are slowing Northvolt — and raising questions about Sweden and the rest of the continent’s ability to realize its Green Dream. On September 9, Northvolt announced that it would slash jobs, stop producing cathode materials, a key battery building block, and seek a buyer for its innovative electric storage business. 

Batteries represent a key green technology. At present, carmakers rely on Asian manufacturers, China’s CATL, Japan’s Panasonic, and Korea’s LG and Samsung. China alone has almost 85% of global battery cell production capacity, according to the International Energy Agency. 

The EU has a strategic, geopolitical interest in fostering domestic battery manufacturing. In 2017, the European Commission launched a European battery alliance. Carlsson and Paolo Cerutti, both former Tesla executives, launched Northvolt, and European Union officials touted the venture as the continent’s new Airbus.  

Money poured in, much of it public. Brussels relaxed the bloc’s state aid rules, approving €902 million of German state aid for Northvolt to build a gigafactory in Germany. In January 2024, the European Investment Bank, the Nordic Invest Bank, and 23 commercial lenders loaned Northolt $5 billion. In total, Northvolt has raised $15 billion.  

The company aims to produce the world’s greenest batteries. It is developing a new sodium-based battery that does not need Chinese critical minerals, easing supply-chain worries. 

Demand is strong. Northvolt customers include major carmakers BMW, Fluence, Scania, Volvo Cars and Volkswagen. They have placed $55 billion in orders. 

But multiple setbacks have set off alarm bells. Northvolt has struggled to scale up production, leaving customers angry. Northvolt aimed to produce 32 gigawatt-hours (GWh) by 2023. It now produces 1GWh of batteries and has pushed the goal of 32 GWh by two years to 2026. CEO Carlsson admits that Northvolt has been “a little too aggressive in our expansion plans.” 

In June 2024, BMW cancelled an order worth €2 billion due to delays and concerns with battery quality. Instead, it chose Samsung. In 2023, Northvolt recorded a $1.2 billion loss. 

Safety issues also plague the company. Since 2019, Northvolt factories suffered at least 26 serious accidents and two deaths, the result of inadequate protective equipment and machine failures, an investigation revealed. Police have opened an investigation when four workers, all healthy, died shortly after leaving shifts at the factory. Due to concerns about working conditions, Toyota has stopped its technicians from working in the factory.  

Serious environmental concerns represent another challenge. The Swedish Work Environment Authority and Swedish Chemicals Agency have launched investigations regarding an alleged gas leak. Local authorities are prosecuting Northvolt for allegedly storing chemicals unsafely in its laboratory in Västerås and exceeding the maximum allowed values of metal content in wastewater.  

Northvolt asked that all questions be sent in writing and did not respond to them. 

The company is retrenching. In June, Northvolt scrapped plans to build a factory in Borlänge, Sweden. It is shutting down battery development operations in San Francisco, relocating workers to their lab in Sweden. Plans for other gigafactories in Canada, Germany, and Sweden face uncertain futures or are now postponed.  

Hopes for reducing dependence on China are at risk. Although Northvolt represents the European response to Chinese battery production dominance, the company relies on Chinese material, equipment, and expertise. As part of its job cut announcement, the company said It would buy cathode materials from Korean and Chinese suppliers and was seeking buyers or partners for its Polish-based energy storage business.  

Electric vehicle sales are slumping in Europe, hurting battery manufacturers worldwide. At the same time, Asian producers are scaling up and pushing down battery prices. 

Ironically, the company announced its retrenchment plans on the same day as former Italian Prime Minister Mario Draghi released his much-awaited report on restoring European competitiveness. Draghi called for a massive increase in public investment in key tech industries. Northvolt illustrates that Europe’s road to restoring competitiveness and accelerating its green transition faces serious potholes. 

Ronan Murphy is the Director of CEPA’s Digital Innovation Initiative.  

Oona Lagercrantz is a Stockholm-based intern for CEPA’s Digital Innovation Initiative. She is a recent graduate from Cambridge University. 

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.

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