FREYR's shift away from Europe - Sign of things to come?

FREYR Battery is one of Europe's big hopes in lithium-ion battery cell production, with one of the continents' largest Gigafactories (27GWh) planned for Norway, following in the footsteps of their Scandinavian neighbour, Northvolt. 

Unfortunately, these hopes are now replaced with uncertainty as FREYR has announced intentions to pause all European Giga activities and focus on their Atlantic Gigafactory development in the US instead. 

Fundamentally, FREYR has faced a cocktail of challenges. Execution challenges when it comes to scaling production, the ability to attract the best talent to Norway, a high interest rate climate, and the uncertainty triggered by recent reduced EV demand (although this is likely to only be a temporary dip). All the while, Europe has stuttered and stalled with their response to the growing competition from the USA, post-IRA.

The name FREYR derives from the Norse God of fertility and prosperity but the irony is, the European landscape is far from fertile nor prosperous for battery manufacturers! As much as there was some encouraging intent shown in the EU's “Green Deal Industrial Plan” earlier this year, in reality we're yet to see any real, tangible change. In fact, earlier this year the European Federation for Transport & Environment study showed that 68% of planned Giga projects in Europe were “at risk” since IRA, unless action was taken.

Let's compare that with the US, where the US Gigafactory landscape is ripe… 

Since the IRA was passed in August 2022, there has been a monumental shift from the US being way behind Europe in planned Gigafactory capacity, to now jumping ahead with 15+ new Giga sites announced and over $70Bn being invested in EV and battery supply chains since then. Even this month we've seen further DoE commitments to the tune of $6Bn as part of the Bipartisan Infrastructure Law "With the demand for EVs and stationary storage alone projected to increase the size of the lithium battery market by five- to ten-fold by the end of the decade, it is essential that the United States invests in the capacity to accelerate the development of a resilient supply chain for high-capacity batteries"

Not only have they talked a good game, but they've backed it up too!

European countries shouldn't be shocked - the study above shows that! Additionally, this spring Volkswagen put out a warning on how US subsidies and tax incentives were going to be a real risk to Europe's progress in battery production and now this latest FREYR news could be the biggest wake up call yet!

If you take the average cost of manufacturing lithium-ion cells, 100 USD per kWh, and most manufacturers are looking at tens, if not hundreds, of Gigawatt hours scheduled. With IRA tax incentives, the US can offer a 35 USD per kWh tax credit in comparison. It really is a no brainer!

"Why would they do it in Europe when you can do it in the US for 35% cheaper?”  - FREYR CEO Birger Steen.

Europe simply must act, and quickly, as confidence is waning. Not only do we risk European companies shifting focus to the US, like FREYR, but there's also the risk that those committed to ongoing European Giga projects face further fundraising squeezes, and major Asian battery players, who were once considering Europe for their international expansion, will now turn their attention to across the Atlantic. 

There are of course positives to be seen, such as Northvolt's commitment to a new Gigafactory in Germany and the likes of Verkor's Dunkirk site etc. but more must be done at national and regional level to help incentivise further investments into Europe, or otherwise they face being left behind!

I lead the Energy Storage practice at Hyperion Executive Search, and for 10 years we've helped battery manufacturers, cell materials companies, and BESS developers to hire top senior talent in Europe and North America. If you're looking to grow your team and want support from an expert firm, or you're a leader in the sector looking for your next challenge, then get in touch today!