Swedish start-up Northvolt last month declared it would build Europe’s largest factory for energy storage systems in Gdansk, Poland, by next year. Emad Zand, the company’s president of battery systems, speaks with Recharge about how battery storage systems can play a crucial role in stabilising the grid as renewables make up an ever increasing share of power generation.

What share of battery cells and energy storage systems to be produced by Northvolt in Sweden and Poland will be for energy storage at the utility level, or for home owners, and which for car batteries or other uses?

Towards 2030, we intend to be producing 150GWh battery cells per year across several gigafactories. About 80% of that is going to the automotive sector. The remaining 20% of Northvolt’s cell volumes will go towards energy storage systems for grid and industrial applications, such as modules, packs, racks etc., which we will manufacture at Northvolt Systems in Gdansk, Poland.

How do Northvolt's expansion plans fit into strategies by the EU or individual countries such as Germany or Sweden for a greater independence from Asian battery producers?

It fits in perfectly. There are two big trends, and some policy intentions that are working together. One trend is electrification, which has now been shown to be very strong and sustainable. And there is another trend, which is towards renewable energy generation.

Both trends feed the fact that we need more batteries. And then Europe comes on top with policy ambitions... to become an independent, technology leader in this new industry.

Supporting European needs and policy, Northvolt’s strategy is to secure a complete, vertically integrated battery manufacturing base in Europe, but also research and development in cell manufacturing, and battery systems manufacturing. Additionally, Northvolt is investing heavily into in-house battery recycling, and this is also part of the European agenda – to create long-term independence and hopefully market leadership in this area.

How can you compete with East Asian countries, given Europe’s expensive labour costs? Is it because electricity is so cheap in Sweden?

That is one part of it. Electricity is very cheap in Sweden, and electricity is a large part of the cost base. Then, Northvolt batteries are produced on highly automated lines which brings other factors, efficiency of capex, and efficiency of process, that drive costs more than classic labour differences between the countries. Batteries are also heavy, so the proximity to your customer is also important with respect to logistics and distribution.

Additionally, for a European car manufacturer or ESS player to be truly successful, they need to work integrally with their cell manufacturer to develop products. And that interplay between customer and supplier is much improved by having us being close to our customers here in Europe.

Volkswagen owns a stake in Northvolt, and you have a deals with BMW. Are you in talks with other carmakers?

We are talking to everyone that is in European market. We want to be informed. And we are hoping to become pan-European battery supplier – that is our vision.

How do you think batteries may be able to even out a volatile renewable energy production?

They will play a pivotal role, especially when more and more renewables are coming into the grid. They will play a role in two parts of that value chain.

One is on the supply end. PV, for example, has a very nice generation profile for batteries. You can charge the batteries during the day, and then you discharge them over night to maximise use of that clean electricity.

And secondly on the demand side, where batteries are demonstrating themselves to play a role in establishing more resilient, decentralised power grids. For example, with batteries we can better manage peaks in demand, unlock more stable grids and more electrification in the society. The suitability of batteries in providing ancillary services is also key, since these functions become increasingly necessary as we replace traditional sources of generation with renewables.

What share of our power system do you think would need to be backed up by batteries to make sure there is enough electricity in the system all the time?

This figure will vary from grid to grid, and region to region. Broadly we can say it depends on the resilience of your grid. All grid owners are looking at their different assets, and they are looking at what is bearable and what is based on load that doesn’t change with the weather. Depending on the overall makeup of your generation base, the need for energy storage varies, and with that the need for more or less battery storage.

What I can say is, batteries will play a role to stabilise the grid and it’s one of many tools to be leveraged to support an increase in renewable energy generation capacity.

Comparing batteries and green hydrogen, what do you think is the better alternative to support electricity generation?

I see batteries and hydrogen as complementary technologies. I like green hydrogen between seasons, and for longer duration energy storage. If you have seasonality in a country, where you have a lot of sun during the summer, or a lot of wind, then you want to store that surplus energy to discharge over later months, green hydrogen can make a lot of sense. For shorter cycles and faster responses, batteries are superior.

European utilities are slowly increasing their battery storage project development. But it is still relatively small when compared to renewable generation plants. Do you think they are doing enough?

I think that the utilities in Europe can lean into battery technology more, when they learn more about the flexibility it allows, and how quickly it can be deployed to improve congestion and frequency irregularities in the market. I hope that utilities will continue to work proactively towards this, and not reactively to the consequences of electrification.

If you are a utility, and you want to transition into renewables, because you want to make the generation truly sustainable, one should think about the CO2 content of the battery that supports that. One of the main reasons why Northvolt is getting into this field is to be able to make sure that we have the world’s greenest battery system supporting the grid.

The alternative would be to have non-green batteries from Asia, next to green energy generation from Europe. And that in my view is the wrong way to go. You want green batteries supporting green power generation.

But Swedish electricity isn’t all renewable. There is also nuclear in the power mix which many Germans may not like very much.

That is true, but in the North of Sweden it is predominately hydro. In Skellefteå, where we are, it is almost 100% hydro. If you look at where we are consuming our energy, and where it is being produced, we are in one of the most sustainable regions in the world.

In our battery systems, we have recycled materials for aluminium and other parts. We are making sure that we audit our suppliers for CO2 content and sustainability. We are putting a lot of effort and cost into making sure this is done the right way. It is important for utilities and other players that deliver a service to end customers to take the responsibility as buyers to ensure that they are buying a green and sustainable battery.

By when do you expect Northvolt to be profitable?

On a gross profit level, we should be profitable in 2024/25. But we will continue to invest until 2030. So, depending on how fast we invest, we would see how quickly we turn in to an actual profit.

As soon as our manufacturing is ramped up, it is designed to make money. We should be making money on each battery we sell, beginning from start of production at Northvolt Ett in 2021. If we make money as a company is depending on our growth ambitions. We are ambitious as to continue growing and grow rapidly for the next 10 years.

Do you have financial figures for 2020?

No, we are a private company. Northvolt is designed to become a sustainable and profitable venture. We will be here and we want to be one of the premier industrial companies in Europe.

Would you still call yourself a start-up?

I think being a start-up is a mentality, so we are going to be that for a long time.