Northvolt needs to construct a gigafactory in Germany after the federal government has promised help

Northvolt, Europe’s largest battery maker, has confirmed it will build its next gigafactory in Heide, Germany, after the German government promised state aid.

The announcement comes after several months of uncertainty. In March 2022, the Swedish manufacturer and the German state of Schleswig-Holstein signed a memorandum of understanding to build a factory in the region. But in October 2022, Northvolt said it might postpone the plan and instead prioritize a US expansion – unless the EU is willing to match the IRA’s higher subsidies for green tech.

In response, the German government has now confirmed that it will fund the Gigafabrik under the Temporary Crisis and Transition Framework (TCTF) – a new EU grant scheme designed to support the development of green projects in light of respective US subsidies and Russia’s energy monopoly.

The funding must first be approved by Brussels, but the German government said it is already “in initial constructive talks” with the European Commission.

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“Based on this commitment from the federal government, Northvolt has decided to take the next steps towards our expansion in Heide,” said Peter Carlsson, the company’s founder and CEO.

The gigafactory will have an annual production volume of battery cells of 60 GWh and is expected to deliver around 1 million electric vehicles. This is expected to unlock billions of euros in private investment and create 3,000 direct jobs, with thousands more estimated to be created in the surrounding industrial and service sectors.

“With the next steps at Northvolt, Germany can look forward to one of the most important lighthouse projects in the energy and transport transition,” said Robert Habeck, Federal Chancellor and Economics Minister of the Federal Republic of Germany.

In addition to Commission approval, the Gigafactory still requires on-site preparatory construction work and final planning permission. Delivery of the first battery cells is expected in 2026.