CleanTechnica Interview with Peter Carlsson, CEO of Northvolt: Part Two — EV Market Growth, Timeline & Capacity, Cheap Hydropower

CleanTechnica recently interviewed Peter Carlsson, Chief Executive Officer of Northvolt, the Swedish battery manufacturing startup-slash-giant. In part two of the interview, we discussed the growth in the European EV market, Northvolt’s plans to scale its manufacturing capacity, its timeline, and its access to low-cost, renewable hydroelectric energy in Sweden. Catch part one of the interview here if you missed it.

This article is an interview transcript lightly edited for clarity. You can also listen to the whole audio or video versions of the interview.

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Max Holland for CleanTechnica: So let me dive into the speed and the scale of the transformation and Northvolt’s ambitions in relation to that. You’ve mentioned that this year especially Europe is growing very quickly in the battery electric vehicle market share. So just to put it in round terms — there’s around 15 million light vehicles sold per year in Europe. So, supplying 1% of that market — around 150,000 vehicles — to be full battery electric requires around 10 gigawatt-hours of batteries …

Peter Carlsson, Northvolt: Yes, give or take.

And at some point — notwithstanding some of the hype around fuel cells right now — we’re imagining that probably getting towards 100% of the light vehicle market in Europe (and in other places ultimately) will become battery electric. So, for that to be the case, we’re looking at a potential annual battery capacity or demand of a thousand gigawatt-hours to supply 100% of those 15 million vehicles. … Does that sound roughly in the right ballpark? 

I do think so, yes. These are the kind of numbers that we are doing on some back-of-the-napkin calculations…

For example, Volkswagen’s ID.3. They are planning for the top seller to be that mid-range model with a battery pack of around 65 to 70 kilowatt-hours. And I think that for the European, and especially the Asian markets, that’s going to be enough — as drivetrain efficiency is improving — enough to get most consumers on board.

So, when we get 100% of electrification, we’re looking at potentially a thousand gigawatt-hours of manufacturing a year, just for the Europe market. What are Northvolt’s ambitions? How big a slice of about a thousand gigawatt-hour pie, roughly speaking, do you think Northvolt intends to be aiming for?

So, to answer first a sub-question of that: Given the complexity of these supply chains, the value of these batteries, and also the industry’s requirement of just-in-time types of setup, I think the majority of these volumes will be supplied regionally. So, whether it’s Asian manufacturers or European or American, just like most other key components in the auto industry, you will build regional supply chains. So, that’s number one.

We think that over the next 10 years there will be what I would call almost an “industrial land grab” by the companies that have sufficient technology. And I don’t think you need to be extreme in technology, because you need to be part of vehicle platforms. And also, the automakers will not very strongly drive “single source” on those platforms.

But to be in the lead, I think there’s going to be three key criteria for success:

One is the scalability of your blueprint. Basically, your ability to clone your capacity in an effective way. And my role model there is another Swedish company, IKEA — just fantastic in building a retail structure that is cloning itself. Now, battery factories are significantly more difficult to build than a retail outlet of IKEA. But the thinking is there. The way we’re thinking is — what’s the number of 8 gigawatt-hour blocks that we need to build around Europe?

Yes, and each of those is roughly 1% of the European light vehicle market…

Exactly, and each of them is then considering both an expansion team — how do you build a factory — and then partners around “how do you set up, commission, start up, and scale?” So, basically, you need a strong team around the blueprint. So, that’s number one. 

Number two: In order to support that blueprint, you need a lot of capital. It’s a very capital intensive industry. So, your ability to raise the financial means of going after this is second, it’s very important. And obviously, this is something that is very clearly understood by the Chinese government, who have been feeding strong financing to the Chinese battery industry, and thereby helping them grow.

And number three: Your ability to attract top talent. Talent overall, but top talent to scale. These are the three factors in my mind that are the key in order to deal with this.

This, in combination with strong customer relationships, I think is a winning formula for where we are going. And the way that we are trying to build these strong customer relationships is we’re doing more co-development with customers on the cell design. So we engage them more and thereby learn more from each other. But also to build a proposition around not just performance, cost, and capacity, but also around sustainability.

And, basically, helping the customers build the lowest carbon footprint around their product as possible. But also working very closely with the customers so — at the end of life of their product — we build a fully circular flow. So, 10 years down the road at whatever hundreds of thousands of miles that has been consumed on the battery, then we are ready and integrated with the customers to bring back that battery, to grind it, and then to recycle it.

And on recycling, we’re doing some really exciting stuff here actually in Västerås, outside Stockholm, where we are now putting a place, in a small industrial scale, a [hydrometallurgy] method to separate the raw materials. And also recycling lithium — not just cobalt, nickel, manganese, and copper, etcetera, but also bringing lithium back in. And I think this is — as far as we know — the first, in Europe at least, to do that. And if you can build that, and then take that raw material, bring it back and build new batteries, then you’re building a pretty exciting company. Fully circular, fully sustainable, and with a huge opportunity of scale.

So, that’s a long answer to your question! If you want a numeric answer — we think that we need to build roughly 150 gigawatt-hours over the next 10 years, in order to get a good market share in Europe. You know, maybe somewhere around 20%, 25% market share. We think that’s doable.

So, if 150 GWh would be ~25%, then … that’s imagining … what, roughly a 60% sales penetration of EVs [in Europe] in 2030? 

Yes, but not just EVs. You must also remember, the ESS market.

Yes, but aren’t you planning for around roughly 15% of your output for ESS, I think I saw in some of your presentations? That may have changed … but roughly that proportion?

Yes, somewhere in that range is an ambition. And I think everybody is struggling a little bit to analyze how big the energy storage market could be because it’s kind of a new toolbox into a grid that is also transforming.

And also we do know that the wave of electrification — of electric cars, for example — will push tremendous peak challenges, into city grids, also into charging stations, etc. And then there’s two solutions to that. 

One is you dig up entire cities and bury more copper cables. Or you’re starting to implement energy storage to bring in energy during low-consumption hours and use it for charging.

And I do think this is gonna be big. I think it’s gonna be really, really big. If you even just analyse what happens when you want to charge all your city buses in a location — because they’ve gone from gas and biogas to electrification — that demand could bring down a city grid.

Yes, and we don’t yet know the extent of the opportunity with electric cars having a vehicle-to-grid capability, for those maybe 40% or 50% of owners who can plug in overnight. These are a lot of complex dynamics here.

Absolutely. Just a kind of a fun story — Audi launched its e-tron at the skiing world championship last year up in the northern city of Åre in Sweden. They brought up 50 Audi e-trons to that event, and it almost brought down the grid! So they had to bring up stationary storage in order to be able to charge them during the event. 

And that’s just small-scale — so I think we’re gonna see a massive change around this. And we have the tools to fix it, but we are not yet sure exactly how big this is going to be. But I am very bullish on this aspect.

Let’s move on now to some slightly more technical questions. I’ve seen previous interviews you’ve done where you mentioned that Swedish hydro energy is quite a large part of your business model. Because on the one hand it’s obviously 100% carbon free, pretty much, and on the other hand it’s actually very inexpensive.

And you said something like your energy bill savings from locating in Sweden and accessing this very inexpensive carbon-free energy might support something like 2,000 staff salaries, compared to paying that kind of energy bill in somewhere like China. Is that roughly the size of it?

The business model that we’re building is built on scale and vertical integration. So we are starting up and we’re producing our own active material. These precursor calcination processes where you’re taking your nickel sulfate, and your manganese, and your cobalt sulfate … and you’re putting it into a precursor making very fine particles, and then you mix it together with lithium in order to make this active. This consumes a lot of energy in these ovens and kilns etc. 

And then later when you produce the battery itself, that also uses a lot of energy. Because you have coating processes, where you have big ovens … and then you have formation, and then you process. 

So it’s a highly energy intensive industry. When we are fully built out, up in the northern part of Sweden, in Skellefteå, right now we’re aiming for roughly 40 gigawatt-hours. We estimate we will consume roughly 2% of Sweden’s electricity generation, about there.

So, to produce a kilowatt-hour of battery, you basically consume somewhere towards 80 times that amount of energy [in the production phase]. And then both your cost of energy really, really matters, but also the carbon footprint of how that energy was generated really, really matters. And here I think we’ve found a formula where in northern Sweden this hydropower that we can get is roughly a fourth or a fifth of the cost versus the equivalent energy cost in Germany, for example. It is a fifth or a sixth of the cost — i.e., the energy is five to six times more expensive in China, coal based, versus our hydropower based. 

And when you’re starting to put that together on a massive scale, and you look at the equation of the bill of materials — without going into too much detail — the labor and the energy are starting to become very equal components. You could get energy in Northern Europe for below two euro cents per kilowatt-hour, which is making this really, really beneficial.

And the factories are highly automated, so I’m assuming you’re aiming to run them pretty much 24 hours. So, you’ll have some off-peak electricity as well?

We will, and that’s another thing. This will be a 24/7 operation — you can’t shut it down and it’s very capital intensive. So, it will be run all the time, which means that we will need continuous power. And then one might think, “you need 3000 people for running this operation” — but when you think about it — 3000 people, over five shifts, over half a million square meters of a manufacturing space — it’s actually going to be a pretty empty space for the operators. It’s highly automated, it’s going to be dependent on a lot of AGVs (automated guided vehicles) for material handling, etc. And you run this production in clean rooms and dry rooms, where your biggest source of moisture is actually your operators. So, we want a fair amount of operators, but not too many.

End of Part Two

In the third and final part of the interview, coming soon, we hear about the factors that make low-carbon battery production valuable in Europe, Northvolt’s strategic focus, and its product offerings.

Again, you can find part one here.