[Update: On June 12, 2019, Northvolt announced that they have raised the capital required to build “Europe’s first homegrown gigafactories for lithium-ion batteries”!]
In the midst of final exam week, I enjoyed a brief visit to Silicon Valley to learn more about the exciting tech startup Northvolt from its CEO, Peter Carlsson, the proud dad of Chapman University student Amanda. The event was hosted by the Swedish-American Chamber of Commerce Silicon Valley/San Francisco and by Silicon Vikings in a beautiful office space generously shared by global supply chain specialists Elementum.
Peter Carlsson, with a past as the Chief Purchasing Officer at Tesla where he spent four years reporting directly to Elon Musk, shared the plans of Northvolt to build a mega-sized, lithium-ion battery factory to be located either in Sweden or Finland. He explained how such a factory would play an important role in our world’s much-needed transformation from a reliance on fossil fuels to one in which we can live on and efficiently preserve green and renewable energy.
Electrification of society
Peter admitted that it may still be a couple of decades before we regularly commute 500 km via an electrically-powered, self-flying aircraft ordered via an Uber-like interface but technically, that would be quite doable already today, he argued! Complying with regulations, however, that would be another matter that could take a long time to resolve.
One bright spot in the transformation to green energy sources is the mining industry in which companies are willing to pay two or three times the regular price to buy an electric excavator. What many people don’t realize is that mining companies actually spend enormous amounts of resources transporting exhaust fumes out of the mines in order to create a safe working environment. By using electric excavators instead, they could simply focus on transporting whatever treasures that they are digging for instead.
A Vertically Integrated Supply Chain for Battery Production
Whereas many companies are outsourcing many of the things that they previously used to do themselves in order to focus on their core competencies, Northvolt is choosing a different direction. In their aim to build the largest European mega battery factory, they also want to secure the access to as many of the necessary raw materials as possible either with direct ownership or at least via strong European supplier partnerships. Peter Carlsson emphasized the benefits of operating in Europe and in Scandinavia in particular thanks to its relative political stability compared to many other places where mining is done.
The Location of the Battery Plant
In collaboration with Business Sweden, Northvolt is currently undergoing an extensive screening process in order to identify where the best location of its factory should be. They had hoped to have a list of twenty cities to consider. They got forty! Even now, Peter shared, new cities and even new countries are approaching him to try to be added to their consideration set. However, Northvolt recently declared that they had narrowed the number of possible locations to a short list of eight Swedish cities and two Finnish ones, all of which fulfilled a number of criteria.
In selecting the winner, factors they weigh include the access to reliable energy supply, industrial-zoned land availability, logistical concerns, access to a skilled workforce, university collaboration opportunities, and the degree to which the city could attract foreign expert engineers to move to and live in the area long-term with their families. The plan is to move quickly to get down to only two final candidates.
Why build only one mega factory?
Given that my hometown of Piteå is not on the shortlist, my unsolicited vote that I shared with Peter went to Luleå even if Skellefteå would be a close second. I am confident that either of these two great cities would deliver if they were to be selected and I even proposed to Peter to build two, not “just” one mega factory given that they predict that Europe’s demand will be calling for seven such mega factories around year 2025. His response was that he didn’t want to risk being accused of suffering from hubris given that the magnitude of this project is large enough as it is proposing the development of one mega factory which will require about 4 billion Euro in investment.
I wish Peter and Northvolt the best of luck and his family a nice transition in their move from Palo Alto to Stockholm. I am also very much looking forward to visiting their Stockholm headquarters this summer with my Chapman University MBA travel course Business in Scandinavia!