Energy Transition

Germany grants Northvolt $750m subsidy for battery plant despite budget freeze

Decision according to broadcaster NDR was taken due to urgency for final decision on factory's location

Image of Northvolt Ett gigafactory in Sweden.
Image of Northvolt Ett gigafactory in Sweden.Foto: Northvolt

Germany and the state of Schleswig-Holstein will grant Swedish battery and storage specialist Northvolt about €700m ($758m) in subsidies for the construction of a battery factory in the northern state – despite a budget freeze recently declared by the finance ministry in the wake of a constitutional court ruling against a federal government shadow budget.

The support will be granted over the course of several years, according to public broadcaster NDR, which said a so-called ‘funding notice’ had been sent to Northvolt by the federal economics ministry. Of the total amount, some €564m would come from the federal government, and another €136m from Schleswig-Holstein.
The subsidy now granted is the first since the constitutional court last month had ruled that redirecting €60bn of unused credit authorisations originally destined for emergency measures to fight the Covid-19 pandemic and its economic fallout into a climate and transformation fund was unconstitutional. The budget trickery had been invented to avoid Germany’s strict zero-debt budget policy.

Economics minister Robert Habeck had pledged billions of euros from the climate fund to several companies in the renewables, green hydrogen and chip-making sector to lure investments into new factories to Germany and thus compete with huge subsidy programmes in the US, China and Japan.

While Habeck and its Green Party want to live up to all those promises, the liberal Free Democrats (FDP) coalition partner has insisted on budget cuts and maintaining Germany’s debt-brake policy despite losing the extra money from the climate fund in budget planning.

The subsidy for Northvolt was granted regardless of the budget freeze due to the urgency for a final decision on the location of the factory.

“With the funding, the federal government wants to provide direct incentives for the establishment of key technologies such as battery cells in Germany in times of growing global competition,” the economics ministry is quoted as telling the NDR.

The support still needs the approval of the European Commission in accordance with EU state aid rules.

Schleswig-Holstein’s economics minister Claus Ruhe praised the “great news from Berlin” as “unique chance” for his state and said the federal and state governments had delivered.

His conservative CDU party – in government in Schleswig-Holstein but in opposition in Germany – had lodged the complaint against the repurposing of the budget credit authorization to the climate fund.

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Published 4 December 2023, 14:53Updated 4 December 2023, 14:53
EuropeGermanyNorthvoltBatteriesPolicy