Northvolt AB, the startup preparing to begin large-scale battery production in Sweden and Germany, will invest $200 million in ramping up capacity for energy storage systems that will compete with Tesla Inc.’s Megapack.
The expanding factory in Gdansk, Poland, is scheduled to start production in 2022 with initial output of 5 gigawatt hours.
It could be further built out to reach capacity of 12 GWh, which would make the facility the largest of its kind in Europe, according to Northvolt.
The initiative positions the company founded by former Tesla executives to seize share of the growing market for batteries used to balance electricity supply in power grids.
“This will catapult us into large-scale energy storage production,” said Peter Carlsson, Northvolt’s chief executive officer. “This segment will need very large volumes and we’re making this investment to scale up and meet that demand.”
As one of Europe’s most promising battery startups, Northvolt has assembled a star-studded investor base including Baillie Gifford, one of Tesla’s biggest shareholders; Goldman Sachs Group Inc., Volkswagen AG and BMW AG. It stands to gain from governments rushing to set up a local battery supply chain in Europe to compete with dominant players based in China, South Korea and Japan.
While most of the battery cells Northvolt plans to make at its factory in Skelleftea, Sweden, will go to carmakers that are ramping up offerings of electric vehicles, the company also has signed deals with buyers of energy storage systems. Carlsson expects almost a quarter of the cells made in Skelleftea will initially be shipped to Poland, where they’ll be used in modules deployed to stabilize power grids.
Mega-batteries are becoming increasingly important as the shift from fossil fuels has made utilities more reliant on renewable technologies that are clean but at times unpredictable. To avoid blackouts when there is no wind or sunshine to generate energy, large storage systems are being deployed around the globe.
“There is a need for grid-scale batteries to enable 24/7 wind and solar energy,” said Emad Zand, who heads Northvolt’s unit for battery systems.
“We have contracts that will be announced, and discussions with customers have come far enough for us to acquire the land and make the investments needed.”
Northvolt’s investment will ensure that it has capacity to supply 15% to 25% of the market for utility-scale energy storage. Within five years, the Swedish company could control as much as a third of the market, Zand said. Others in the space include fellow cell manufacturers such as BYD Co. and LG Chem Ltd. and system integrators including Engie SA, Wartsila Oyj and Fluence, a joint venture betwe
The expansion also will put Northvolt in indirect competition with Carlsson’s former employer, which installed more than 3 GWh of energy storage products in 2020, 83% more than the previous year. Carlsson, who was head of supply chain management at Tesla before founding Northvolt, said that while his company’s products will be pitted against Tesla’s Megapack, they will be delivered to storage system integrators that in turn are rivals with the EV maker.
A key selling point for Northvolt is a manufacturing setup based on Swedish hydro power that lower its carbon-dioxide footprint. The assembly of batteries in Poland, a far less energy-intensive process than the cell manufacturing in Skelleftea, will be powered with renewable energy, including on-site generation.
“We have the world’s greenest battery systems,” Zand said. “That enables utilities to fulfill their visions about fossil-free energy with a battery that is aligned with that.”