Swedish battery storage company Northvolt and Portuguese oil firm Galp have agreed to set up a joint venture called Aurora with the goal to build Europe’s largest and most sustainable integrated lithium conversion plant.

The facility in Portugal is set to have an initial annual output capacity of up to 35,000 tonnes of battery grade lithium hydroxide, a material needed in the production of lithium-ion batteries. That will be sufficient for batteries in about 700,000 electric vehicles.

Northvolt is currently building up large production capacities for lithium-ion cells and battery storage systems as part of a European attempt to overcome the continent’s dependency from Asian battery producers in the booming market for electronic vehicles and energy storage.

“The development of a European battery manufacturing industry provides tremendous economic and societal opportunity for the region,” said Paolo Cerruti, chief operating officer of Northvolt.

“Extending the new European value chain upstream to include raw materials is of critical importance.

“This joint venture represents a major investment into this area, and will position Europe with not only a path to domestic supply of key materials required in the manufacturing of batteries, but the opportunity to set a new standard for sustainability in raw materials sourcing.”

Northvolt said as part of the agreement, it will secure an off-take for about half of the plant’s capacity for use in its battery manufacturing.

Galp and Northvolt at the plant will use spodumene from key suppliers - probably on the Iberian Peninsula - as raw material for the conversion into lithium hydroxide. Spodumene is a hard rock mineral and source of lithium.

Most of the world’s lithium currently comes from mining operations in Australia, Chile and China.

In an attempt to become less reliant on those far-away suppliers, German carmaking giant Volkswagen last week announced a deal to source lithium from developer Vulcan from 2026 on that is extracted from waters in Germany’s Upper Rhine Valley in a process linked to geothermal power generation.

Galp and Northvolt are still searching for the best site for their lithium conversion plant, which they envision to start commercial operations in 2026, pending a final investment decision.

The plant could represent an investment of about €700m ($792m), and create up to 1,500 direct and indirect jobs.

"This is a once-in-a-generation opportunity to reposition Europe as a leader in an industry that will be vital to bringing down global CO2 emissions, in line with European and Portuguese climate-change priorities," said Galp chief executive Andy Brown.

"To be successful in this drive, we must all work together, industry and decision makers, with a sense of urgency, because if we do not claim this role today, others will."