Germany allocates 700 million to a gigafactory despite its frozen budgets

2023-12-07 15:58:10

The Northvolt battery factory project in Heide will become a reality. The German federal government has approved a subsidy of 700 million euros for its construction to go ahead, a decision that comes “at a critical moment”, in which its future looked uncertain.

In mid-November, the German Constitutional Court ruled that it was unconstitutional to transfer excess resources from Covid recovery funds – around €60 billion – to environmental projects.

However, in the Magna Carta itself, the so-called Basic Law stipulates that the country cannot carry more than 0.35% of its GDP in debt. This, according to the tax expert Clemens Fuest“it makes sense from a legal point of view, but one wonders if it still makes sense in an environment of structural stagnation.”

Given these prospects, the Swedish battery company had considered withdrawing from the project, possibly to focus on more favorable investment environments, such as the US after its Inflation Reduction Act (IRA).

Furthermore, this is another example of the negotiating power that battery companies have before national governments and the threat of withdrawing their industrial projects from the transition to zero-emission mobility.

A similar case, closer to home, was the fight that the Volkswagen Group carried out with Spain for the award of more funds from the first Perte VEC for the construction of the battery factory in Sagunto.

In Germany, some 564 million euros will come from the national government, while the remaining 136 million will come from the state of Schleswig-Holstein, where the factory will be built.

The Minister of Economy, Robert Habeck, stated that “securing investment for Northvolt has been a great step to ensure private investment in the region. “That we were able to get an exception to the frozen funds is good news, but it’s just the beginning.”

The court’s decision has thrown the socialist administration of Olaf Scholz – which governs in coalition with the Greens and the Liberal party – to a moment of tension, as it ruined the budget negotiations that are taking place this week.

Northvolt’s plans for Heide are to create a battery plant that will be operational by 2026. The estimated investment is around €4.5 billion and will create around 3,000 jobs.