2024-01-08 16:48:55
The Swedish battery manufacturer Northvolt can expect subsidies of 902 million euros for the construction of a battery factory in Heide in northern Germany. The EU Commission approved a aid package on Monday that, in addition to the 700 million euros in direct grants from the federal government and the state of Schleswig-Holstein already promised by the Federal Ministry of Economics, also includes guarantees of 202 million euros that could help the company with bank financing of the project .
Almost two years ago, Northvolt selected the small town of Heide between Hamburg and Sylt as the preferred location for a battery factory, in which 4.5 billion euros would be invested. Northvolt’s customers and investors include Volkswagen and BMW. From 2026 onwards, the new factory will be able to produce batteries for 800,000 to one million electric cars annually. Northvolt cited the location near the coast and thus access to climate-friendly wind power as an important location argument.
Stefan Kooths, head of economic development at the Kiel-based Institute for the World Economy (IfW), doubts whether this calculation justifies such a subsidy: “The state is taking it upon itself to want to know the products and technologies of the future today. And the funds for subsidies must be raised by all other, unsubsidized economic sectors. This puts them at a location disadvantage,” he explained to the FAZ
“Prevent investment from being withdrawn from Europe”
For the first time, state aid is being approved for an individual company “to prevent an investment from being withdrawn from Europe,” said EU Competition Commissioner Margrethe Vestager in a joint press conference with Federal Economics Minister Robert Habeck in Brussels.
This individual subsidy is made possible by a changed set of rules for aid that the Commission decided on in November. Northvolt had announced that it would review its own plans in Schleswig-Holstein after it became clear that there could be even higher subsidies in the USA through the “Inflation Reduction Act” (IRA).
Vestager does not see a subsidy race
It is not true that the EU is entering into a global subsidy race with this decision, said Vestager. The EU must face global reality “pragmatically”. The EU welcomes the fact that the USA is now also promoting investments in climate protection with the IRA. In addition, the EU must become more autonomous.
Habeck added that it was also about independence in battery cells for electric cars. In critical areas, a certain proportion of production must always take place in Europe. Both politicians rejected the objection that the subsidies from Germany, which is relatively financially strong by EU standards, endanger the internal market. “It is not Germany, France or Italy that are in competition with each other, but Europe with China and America.” The entire European industry benefits from the subsidies.
“The positive aid decision by the EU Commission is groundbreaking not only for Northvolt’s settlement project in Heide, but for the European battery cell industry as a whole,” commented a Northvolt spokesman on the announcement from Brussels.
Hurdles remain
However, the last hurdle has not yet been removed, he makes clear: “We are now waiting for the municipal decisions as part of the ongoing land-use plan process.” Building can only take place if the responsible local politicians pass the statutory resolutions that finally turn arable land into building land . The 110 hectare site for the factory is spread across the two communities of Lohe-Rickelshof and Norderwöhrden. There are signs of a majority for the meetings on January 18th and 22nd. But there are also voices against the settlement.
For example, there are concerns about whether the infrastructure could become overloaded, from traffic to the local hospital. With the establishment of the Swedish battery manufacturer, which itself expects 3,000 jobs, a whole eco-system of suppliers will emerge in the previously very rural area, but also service providers for the new employees moving to the region.
Frustration for regional companies?
IfW economics director Stefan Kooths also warns that industrialization of this kind could actually be detrimental – because existing bottlenecks, for example in the labor market, could worsen. “Other companies that finance the subsidies with their tax money will find that the subsidized companies steal the best people from them. “That will frustrate them,” says Kooths.
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From Schleswig-Holstein’s perspective, he can well understand the commitment to the battery factory: “The settlement can be sold politically, and there is federal money for it that would otherwise not flow into the state.” It would be more promising to invest in the general location conditions : Schools and training, an efficient and efficient administration, for example. Northvolt has already contributed to a boost in innovation of this kind by naming very specific requirements very early on – including information about which job profiles would be in demand in the future.
The responsible committees at Northvolt have not yet made the final investment decision – that will only happen after the decision has been made in the local communities. Northvolt did not raise any doubts about the seriousness of the project. Around 100 million euros have already been invested in the preparation of the factory construction.
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