Setting ourselves stringent net zero targets will help us get ahead of other countries in the race to develop green technologies of the future. We know this must be true because Ed Miliband, and many others, keep telling us so. It is just that things don’t seem to be working out quite this way in the real world.
The collapse this week of the Swedish electric vehicle (EV) battery-maker Northvolt has once again shown how the countries most committed to net zero seem to be the ones which keep missing out on the spoils – while their industries drain away abroad, quite often to China.
Was there any company which symbolised Europe’s green industrial future more than Northvolt? Founded in 2015 with the help of a €350 million loan from the European Investment bank, it promised to provide for Europe’s rapidly growing EV industry. Soon it attracted the attention of Volkswagen and BMW who also poured in millions. By 2021, when its first factory opened, Sweden had the toughest net zero target of any industrialised country in the world – it committed itself to achieving that target by 2045. A second factory was planned for Germany, which also went on to adopt a 2045 target. Everything seemed to be playing into the hands of the net zero lobby – a booming Northvolt would become the nucleus of a reborn European car industry.
Now we know otherwise. The company, which had been on the skids for some time, has filed for bankruptcy. While Northvolt got further than Britishvolt, the government-backed ‘gigafactory’ which didn’t even manage to put a spade in the ground to construct its Northumberland factory, Europe’s dream of becoming a big player in the world market for EV batteries is all but dead.
The wonder is, though, why anyone thought it would turn out differently. It has been clear for some time that China has been building a position of dominance in the EV battery business.
While western governments have been trying to bully motorists to go electric, the Chinese government adopted a hard-headed policy made up of carrots rather than sticks. There were generous subsidies for electric carmakers, but there was also a policy of trying to vertically integrate the electric car industry by securing the supply chain.
It is no use building an EV battery factory unless you know where you are going to be able to source the metals that go into the batteries. This is especially true if you are making lithium nickel manganese cobalt oxide (NMC) batteries. Nickel and cobalt are the biggest supply chain issues. Global production of nickel is dominated by Indonesia, while the vast majority of cobalt comes from the Democratic Republic of the Congo. While China accounts for around two thirds of global EV battery production its dominance is far greater when it comes to particular components of EV batteries, such as the material used for anodes and cathodes – where the country controls over 90 per cent of global production.
At the same time as securing nickel and cobalt supplies, China also began to sidestep the issue by adopting a different battery technology, Lithium Iron Phosphate (LFP), based on two much more easily available metals. LFP batteries have lower energy density than NMC ones but they also have serious advantages. They are safer, and less prone to ‘thermal runaway’ where a chemical reaction in a fire produces oxygen, thus further feeding the fire. They last longer, being able to bear up to 3,000 charge-discharge cycles rather than 1,000 to 2,000 with NMC batteries (this is going to become ever more important in coming years as EVs age). But above all, they are around 20 per cent cheaper to produce, kilowatt-hour for kilowatt-hour.
In China, LFP batteries have steadily come to dominate, accounting for 67 per cent of production in 2023. Yet they are hardly made elsewhere. Why? Because China owns the patents. To be fair to Northvolt, it did attempt to move the industry further on still by developing a technology which, in turn, could one day undercut LFP – sodium iron batteries. But evidently it did not progress fast enough and has run out of the very generous funds sunk into the company. Even if it did have the right technology it would have remained hampered by one important factor which is dragging down all European manufacturing industry: high energy costs. China keeps its energy prices low through an unashamed policy of cheap power, 60 per cent of which still comes from coal.
Europe sets the net zero targets but it is China which gets the jobs and wealth-creating ‘green’ industries which Europeans were promised would be the prize from net zero. That is how it has been for the past decade, and how it looks like being for the foreseeable future.
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