Germany Gains EU Approval for Electric Battery Factory Subsidies

The German program aimed at supporting the establishment of the Swedish Northvolt in the north of the country was approved on Monday January 8. Worth 902 million euros, the state aid is intended to be a response to the vast American IRA support program and the threats it represents for European industry.

“It’s a first!” says Margrethe Vestager, vice-president of the Commission in charge of competition issues [Le Monde]. The European executive “authorized, Monday January 8, Germany to financially support, to the tune of 902 million euros, the construction on its soil of a battery factory for electric vehicles of the Swedish group Northvolt”, announces the evening newspaper.

Germany “becomes the first EU member state to use the system of aligning the amount of subsidies with proposals from third countries” [Euractiv]. This measure was put in place in March 2023 as part of the “industrial plan for the Green Deal”, with the aim of “preventing companies from setting up abroad”, recalls the media.

According to France 24, “the European Union thus provides a concrete response to the Inflation Reduction Act (IRA), the $370 billion support plan decided by the American administration to promote green industry” and the establishment factories on United States soil. Also on January 8, France was authorized by the Commission to support investments in green industries to the tune of 2.9 billion euros, in the form of tax credits.

Compliance with European rules
The Commission services thus considered that the German measure complied with the new EU rules on state aid. Support for the Swedish company “was granted on the basis that the production was essential for the ecological transition and that it would benefit a disadvantaged region” of the country, summarizes the Financial Times. Furthermore, “the subsidies were sufficient to trigger investment in Europe without artificially increasing Northvolt’s profits if it invested in Germany rather than in the United States,” continues the economic daily.

In detail, this financial support across the Rhine consists of “subsidies and guarantees from the federal state and the Land” of Schleswig-Holstein, where the factory is to be installed [Süddeutsche Zeitung]. “Of the subsidies, around 564 million euros come from the federal state and up to 137 million euros from the Land,” specifies the German daily.

“It is important to be pragmatic,” Margrethe Vestager stressed yesterday during a press conference in Brussels with the German Minister of the Economy, Robert Habeck [Le Temps]. “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.

“While they have committed […] to a vast decarbonization of their economy, in order to achieve […] carbon neutrality by 2050, Europeans fear that this revolution will first benefit American or Chinese” [Le Monde]. However, “Northvolt was the first European company to produce a battery cell within a gigafactory”, these large-scale sites dedicated to the electrification of the economy [Financial Times].

Located in northern Germany, the factory “will start producing in 2026 and will be running at full speed in 2029, when 800,000 to 1 million batteries per year will come off its lines,” explains Le Monde. “First of the group outside of Sweden, [it] should employ 3,000 people” [France 24]. “At the same time, a plant for recycling used batteries from discarded electric cars should see the light of day,” adds the Süddeutsche Zeitung.

“The project will be the largest industrial construction site in Schleswig-Holstein in decades,” reports Die Zeit. The north-west coast of Germany has the advantage of producing a lot of wind electricity on land and at sea, “which the factory needs in large quantities”, continues the weekly across the Rhine. “The Swedish group also announced in November that it had developed a new sodium-ion battery technology, less demanding in strategic metals, which could reduce dependence on China,” adds France 24.

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