in response to the United States, the EU authorizes the subsidy of a “gigafactory”

2024-01-10 19:12:47

Faced with the gigantic American IRA (Inflation Reduction Act) recovery plan, the European Union is not giving up. This is the message that dominates, within European spheres, the day after the green light from Brussels for German aid of 902 million euros (700 million euros in subsidies and 202 million euros in guarantees) granted to the Swedish company Northvolt, to convince it to locate a mega-factory of battery cells for electric vehicles near Hamburg.

To win the game, with the key to equipping 800,000 to 1 million cars per year and providing employment for 3,000 people, Berlin did not hesitate to align itself with the promise of subsidies made by the Americans, within the framework of the IRA, this plan of 370 billion dollars (338 billion euros) intended to support the green industrial policy of the United States.

A response to American and Chinese offensives

To restore the competitiveness of the Old Continent against the United States, but also against China, also very aggressive in the industrial battle of energy transition, the Commission adopted last March a text valid until 2025 and aimed at facilitating State aid for projects helping to reduce CO2 emissions (batteries, solar panels, wind turbines, heat pumps, etc.). In some “exceptional cases” and regulated, this regime authorizes Member States to match the amount of aid offered by a third country, thus exceeding the ceilings normally set by the EU (350 million euros maximum).

For the first time, the Commission has therefore just given the green light to such an “equivalent aid clause” (matching aid). “It’s important to be pragmatic”underlined Margrethe Vestager, the executive vice-president in charge of competition policy, during a press conference in Brussels. “We could have done nothing, but we know, thanks to internal Northvolt documents, that the investment would then have taken place in the United States”continued the Dane, without specifying the amount of American aid.

Strategic sectors for Europe

While exemptions from the common law state aid regime have multiplied since the pandemic, this authorization marks a further shift in the very strict European competition policy. “Europe that bows its head, it’s over”, se congratulates MEP (Renew) Christophe Grudler, who nevertheless warns against a possible drift – “although unlikely” : « The exceptional possibility of aligning with, or even outbidding, an aid proposal from a non-European country should not be allowed, does not lead companies to blackmail, in the mode of “if I don’t have my subsidies, I will look elsewhere!” »

In this case, Northvolt had first announced its desire to open its first factory outside of Sweden in northern Germany. Before announcing that, due to the cost of electricity but also the substantial aid available in the United States, it was considering investing on the other side of the Atlantic instead. The green light from Brussels therefore allowed a return to square one. With production expected to start in Heide in 2026 and increase by 2029 to reach 60 gigawatt hours (GWh).

Co-founded by two former Tesla employees, Peter Carlsson and Paolo Cerruti, Northvolt is one of those companies that embody Europe’s industrial renewal. And this, in a key area for decarbonization. The Twenty-Seven will need batteries in large numbers to succeed in their challenge of completely banning the sales of thermal vehicles by 2035.

France, too, has entered the race for mega-factories producing electric batteries. It now has four “gigafactory” projects (those of the French ACC and Verkor, the Taiwanese ProLogium and the Sino-Japanese AESC-Envision). All are located in Hauts-de-France, a region which sees the electric car as its third industrial revolution.