Northvolt slips at ‘critical’ moment for European battery industry 

Good morning from Houston, where we were hit with our first hurricane of the season yesterday.

Hurricane Beryl barrelled up the Texas Gulf Coast causing disruption across America’s most important oil hub: refineries dialled back activity, ports were closed and oil rigs were evacuated.

While the damage will take weeks to fix in some cases, all told the impact on the US energy complex was far from seismic. Oil settled 1 per cent lower as traders calculated any hit to crude demand from battered refiners would be shortlived.

Yet there are ominous signs that Beryl — the earliest category five hurricane on record when it slammed into the Caribbean last week — could portend a particularly rough hurricane season.

“Beryl is a warning sign as opposed to a market-making event,” Tom Kloza at the Oil Price Information Service told me. “[It] could be the precursor to storms that had much more dramatic global impact,” he said, pointing to the likes of Hurricane Katrina in 2005 and Hurricane Harvey in 2017.

Elsewhere, Bernard Looney, the ex-BP boss, is plotting a comeback in the UAE after his fall from grace at the oil major. My colleagues have the scoop.

On to today’s newsletter, where Richard Milne, our Nordic and Baltic correspondent, explains why Sweden’s Northvolt — Europe’s leading battery maker — is rethinking its aggressive expansion plans.

Thanks, as ever, for reading. — Myles

Northvolt hits the reset button

Northvolt is Europe’s great hope in the global battery race, designed to compete with the dominant Asian suppliers.

Generously supported by European authorities as well as the region’s carmakers as both customers and shareholders, the Swedish group has become the best financed start-up in Europe (having raised more than $15bn). It produced its first battery cell in 2021, well ahead of the competition, and aimed to open three factories in Germany, Canada and Sweden soon. It even unveiled new battery technology that could work particularly well for energy storage.

But in recent months the wheels appear to be somewhat coming off Northvolt.

It lost its symbolic first contract of $2bn with German carmaker BMW, which instead gave it to Samsung SDI, the battery unit of the South Korean electronic group. Its production output is a tiny fraction of its capacity after two deaths last year in its factory in Skellefteå, just below the Arctic Circle, led to a halt in manufacturing.

Police are now investigating three separate deaths of workers away from the factory. Its high-profile chair, Jim Hagemann Snabe, head of the supervisory board of Siemens and former chief executive of SAP, is on sick leave and is probably not returning. And local politicians in the central Swedish town of Borlänge are furious as Northvolt seems likely to abandon plans to build a cathode active material factory there.

So it’s little wonder that the company is pressing the reset button.

Peter Carlsson, the former Tesla executive who is co-founder and chief executive of the group, told the Financial Times that Northvolt was conducting a strategic review of its business model and growth plans. He hinted that international expansion could be delayed and its capital needs reassessed, with the implication being that its lofty production ambitions are likely to be curbed.

Instead, Carlsson said: “It is super important to get the entire company rallying around every type of support that is needed and to do a little bit better in the scale-up of Skellefteå.” Production capacity there is already at 16 gigawatt hours (1GWh would be enough batteries to power about 17,000 cars). Northvolt is hoping to manufacture about 1GWh this year, and “a handful” in 2025, a sign of how it is struggling to increase its output.

All this comes against a pretty miserable backdrop for the much-vaunted European battery industry. Demand for electric vehicles is lower than expected, US President Joe Biden’s Inflation Reduction Act has attracted significant investments across the Atlantic (with some such as Norway’s Freyr essentially abandoning Europe for now), and Asian suppliers such as China’s CATL steaming ahead with their own plans on the continent.

“It was always going to be a gamble, but a necessary gamble. Europe can’t afford to give away such an important part of the supply chain — both for autos and energy storage,” said one European car executive.

Carlsson himself insisted that the battery business would be regional, and that it’s crucial that there were large European players active. “It is a very critical time for Europe the next couple of years,” he added. (Richard Milne)

Power Points

• Europe’s nascent battery industry has been hit hard by a global slowdown in EV sales, prompting a number of project delays.

• South African utility Eskom is bracing for another loss. But an end to blackouts means that next year it could turn its first profit since 2016.

• Shell is set for a hit of up to $1bn after it halted work on a Rotterdam biofuel plant amid tough market conditions.

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.