Skellefteå, a city known for its picturesque riverside views and snowy winters, is at the heart of an unfolding Northvolt crisis that threatens to undermine Sweden’s reputation as a leader in green technology. Once heralded as the site of Europe’s largest and most sustainable electric battery factory, Northvolt’s struggles have sent shockwaves across the region, leaving questions about the future of Sweden’s green transition.
What Went Wrong with Northvolt’s Dream of Sustainability?
Skellefteå was chosen as the site for Northvolt’s flagship production plant, a project designed to serve as the cornerstone of Europe’s electric vehicle (EV) revolution. The Swedish start-up, founded with ambitions to revolutionize battery production, opened its doors in 2022 after securing multi-billion-euro contracts with major automakers including BMW, Volkswagen, and Scania. This was supposed to be the dawn of a new era, fueled by Sweden’s abundance of renewable energy sources, such as hydropower and wind.
However, by November 2023, Northvolt’s dream was facing a harsh reality. The company reported debts of $5.8 billion (£4.6bn), and soon after, it filed for bankruptcy in the United States, where it had hoped to expand. The company’s rapid growth, alongside a global dip in demand for electric vehicles, left it vulnerable. The Northvolt crisis is now a symbol of how the pressures of fast expansion and unmet production targets can undermine even the most promising green tech initiatives.
How Is Northvolt’s Failure Impacting Its Workers?
The effects of the Northvolt crisis have been far-reaching, and many of the company’s workers are feeling the brunt of it. “A lot of people have moved out already,” says Justice Dey-Seshie, a 43-year-old Ghanaian who relocated to Skellefteå for a job at Northvolt. “I need to secure a job in order to extend my work permit. Otherwise, I have to exit the country, sadly,” he adds.
Since September, Northvolt has laid off around a quarter of its global workforce, including more than 1,000 staff in Skellefteå alone.
How Has the Global EV Market Contributed to Northvolt's Struggles?
Many industry analysts and experts point to the decline in global demand for electric vehicles as a significant factor behind Northvolt’s struggles. In September, Volvo made the decision to abandon its target of only producing electric vehicles by 2030, citing that “customers and markets are moving at different speeds.” Meanwhile, China’s dominance in electric battery production has only increased, with the country undercutting Northvolt’s prices and adding further pressure to the Swedish company.
The crisis deepened as Northvolt faced missed production targets, including a key factor in BMW’s decision to withdraw from a €2 billion deal in June. Expanding too quickly and lacking the necessary leadership were also significant contributors. “To build batteries is a very complex process. It takes a lot of capital, it takes time, and they obviously just didn’t have the right personnel running the company,” argues one business author and economics commentator.
What Is Sweden’s Government’s Response to Northvolt’s Crisis?
Despite the growing concern over Northvolt’s crisis, Sweden’s government has maintained that this is not a national crisis. “The situation at Northvolt is not a Swedish crisis,” argues Ebba Busch, Sweden’s Minister for Energy, Business, and Industry. She attributes the difficulties to broader challenges facing Europe’s competitiveness in the electric battery sector.
However, the Swedish government’s refusal to offer a bailout to Northvolt has sparked debate. Critics argue that this lack of intervention, especially in the face of growing global competition from the US and China, undermines Sweden’s ability to remain a leader in green technologies. “The US and China have massive support packages for green industry, and they definitely are catching up and overtaking in some sectors. And so that is definitely a threat to be reckoned with,” says one climate policy analyst.
How Will Northvolt’s Collapse Impact Sweden’s Green Tech Industry?
Northern Sweden has rapidly gained global recognition as the “Nordic Silicon Valley of sustainability.” McKinsey, a global consultancy firm, has praised the region for its role in fast-tracking Europe’s green transition. The area is home to a burgeoning biotech industry and is increasingly seen as a hub for renewable energy. High-profile companies such as Stegra (formerly known as H2 Green Steel) and Hybrit are working to develop fossil-free fuels using hydrogen, and their presence underscores the region’s ambition.
However, the collapse of Northvolt has put a dent in Sweden’s green tech brand. “There was a huge opportunity to build this champion, and to build this Swedish icon, but I think investors that lost money are going to be hesitant to invest again in a similar project in the north of Sweden,” warns an economics commentator. Local businesses have also been feeling the effects of the negative publicity. Joakim Nordin, CEO of Skellefteå Kraft, a major hydropower and wind energy provider, has noticed that people are now asking questions about the viability of green tech in Sweden.
“I feel it myself when I travel now – even to the southern parts of Sweden – and abroad, that people really ask me questions,” says Nordin. Skellefteå Kraft was an early investor in Northvolt, and the company’s struggles have put a cloud over the region’s green ambitions.
Will Sweden’s Green Tech Legacy Endure?
Despite the setbacks, some experts argue that Sweden’s long-standing legacy as an environmental champion remains intact. Cleantech for Nordics, an organization representing 15 major investors in sustainability-focused start-ups, remains optimistic. “Sweden is still punching above its weight in this sector. And I think we could expect it to continue to do so moving forward as well,” predicts one analyst.
Sweden continues to attract investments in clean tech, with over 200 projects funded in 2023 alone. Research from Dealroom indicates that 74% of all venture capital funding to Swedish start-ups went to impact companies, which prioritize environmental or social sustainability, compared to a European average of just 35%. This statistic highlights Sweden’s continuing leadership in the sustainability sector, even in the wake of Northvolt’s difficulties.
What Does the Future Hold for Skellefteå and Sweden’s Green Tech?
Looking ahead, Sweden’s green ambitions are not entirely dashed. Skellefteå, despite the challenges, remains an attractive location for other global players due to its unique combination of renewable energy and competitive electricity prices. Nordin points to this as a strong advantage: “It’s 100% almost renewable energy up here… and that’s pretty unique if you compare it to the rest of Europe. But on top of that, we are among the cheapest places in the world for electricity prices. So if you combine those two things, it’s a huge opportunity.”
Skellefteå Kraft has recently announced a collaboration with Dutch fuel company Sky NRG, with the goal of opening a large factory by 2030 to produce fossil-free plane fuel using hydrogen combined with carbon dioxide captured from biogenic sources.
While the fallout from Northvolt’s crisis has certainly tarnished the region’s image, Nordin remains hopeful that it will ultimately be seen as a “little bump in the road.” “I hope that that’s just something that will be remembered as a little bump in the road, when we look back at this 10 years from now,” he says.
As Sweden moves forward, the question remains: will the country’s green tech vision weather the storm, or has Northvolt’s crisis cast too long a shadow on Sweden’s green future? Only time will tell.
