Battery makers have welcomed the proposed European response to a huge package of US subsidies for green technology, but warned it must be followed with swift action or investment will drain across the Atlantic.
Volkswagen and Norway’s Freyr Battery have both brought forward plans to build battery factories in North America and delayed plants in Europe because of generous subsidies in the US Inflation Reduction Act that can add up to as much as $10bn per factory.
Several European industrial groups have criticised the EU’s response — the Net Zero Industry Act announced earlier this month — but battery makers, a crucial sector much courted by Brussels in the past five years, struck a different tone.
“We are encouraged by what we are seeing. Now it’s time to go from ambition to action,” said Tom Jensen, Freyr chief executive. Backed by its main shareholder Koch Industries, Freyr recently accelerated its plans to build a factory in the US state of Georgia thanks to the IRA.
Olivier Dufour, co-founder of French battery maker Verkor, said the EU proposals were “overall very positive. What is very positive is they take into account all the international context, not just the US with the IRA but also China, India.”
Over and above the Net Zero Industry Act, battery makers said the temporary crisis and transition framework approved by Brussels this month as a response to the severe disruption in the energy market, was much more important. This allows for subsidies until 2025 to help with investment costs for projects including batteries, wind and solar energy and carbon capture and storage.
“It doesn’t have the clarity or ease of use of the IRA. But they have moved fast and they have done something. If it doesn’t level the playing field, then it starts to level the playing field,” said one senior European battery executive, who also described the measures as a “typical, bureaucratic response” from the EU.
A test of the strength of the European response is likely to come next month when Northvolt, the Swedish company that was the first on the continent to open a gigafactory in 2021, will decide whether to build its next factory in Germany or the US. Executives have delayed the decision to allow the EU time to respond to the IRA.
The EU is not proposing as simple a scheme as the IRA, which offers subsidies worth between a third and a half of a battery factory’s operating expenses. Instead, Jensen expects it to offer a mixture of measures such as direct grants, energy price guarantees, and debt support.
“There are many ways to achieve the same thing . . . Unless you want [non EU producers] CATL, Samsung and LG to do all of it, we need to do more in Europe,” he added.
Dufour said the mixture of measures would make it tricky to directly compare European projects with US ones where the subsidy is easy to calculate. “You don’t have a simple, pragmatic figure to put in your business model. It adds some complexity,” he said.
All the battery companies urged the EU to act on its proposals quickly because so many investment decisions are pending. “We can’t dilly-dally,” said another senior battery executive.