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Friday Five

17th February 2023

Northvolt May Build US EV Battery Plant Due To IRA Subsidies

Northvolt AB, a Swedish battery supplier to automakers such as Volkswagen AG and BMW AG, has highlighted the sizable tax credits offered by President Joe Biden's Inflation Reduction Act.

These credits are projected to cover about 30% of cell manufacturers' operating costs and could be worth around $8 billion for similar-size factories in North America by the end of the decade.


According to CEO Peter Carlsson, Europe currently is at a disadvantage due to their slower application process and limited funding window in comparison to those available through US subsidies. This development indicates a shift in momentum towards investments in the United States.

EU Leaders Conclude Brussels Summit, Adopt Reforms But Refuse To Renounce State Aid Rules
European Parliament

The outcome of the high-profile European Union meeting in Brussels last week was much anticipated as many had hoped to see a raft of new measures designed to loosen state-aid rules.


Instead, EU leaders declared an intention to improve their current policies, and make European businesses more competitive with international rivals led by the US and China.


Evidently, the process will take some time and effort before any tangible results can be achieved - officials estimate that it could take days or months for new directives to be created and then enforced by each of the national governments.


Even then, it won’t be enough: Germany’s largest industry body, BDI, claims that €380 billion dollars has been pledged for green transition through 2030 but substantial steps should made quickly if Europe desires to boost investment attractiveness for businesses.

Siemens' CEO Says The EU's Lack Of A Long-Term Energy Plan Is Stopping Investment

Christian Bruch, CEO of Siemens Energy, raised a valid point when he identified the biggest issue with EU programs: slow implementation and unpredictable financing plans. Companies are often apprehensive about investing their resources into projects that rely on the EU for funding.

The IRA provides funding for critical raw materials, operating expenditures in the form of tax breaks that are immediately available to companies scaling up a range of technologies, including solar energy, wind power or hydrogen technologies, and providing funding for critical raw materials as well as financing for operating expenditures providing much-needed support to encourage companies to start taking the initiative in implementing green energy initiatives.


The EU framework is more focused on research and development than commercialisation which can lead to lengthy application processes adding risk for companies. Reliable systems that enable organisations to confidently fund projects without worrying about unnecessary red tape would lead to smoother implementation of European initiatives outlined under the clean energy package.

Denmark Freezes Wind Power Projects Over Complicated Process
Wind Turbines on Water

Denmark has made a clear statement with its recent criticism of European policymakers for the tedious and complicated process they have been implementing that they had to stop issuing wind-power permits, leaving Europe behind when it comes to new offshore wind park projects.

To further highlight this issue, Mette Frederiksen, Prime Minister of Denmark has called on EU decision-makers to address this issue as soon as possible and be more responsive to the needs of all stakeholders who are part of the fast-growing green energy industry.

It is quite evident that in order for there to be real climate measures taken across Europe and elsewhere, policy should play an important role in providing efficient support structures that allow renewable energy initiatives to remain sustainable and develop even further over time.

Pursuing The Future: Volvo, Daimler And VW To Power Up European Trucks

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The same observations are rippling through the automotive industry. Volvo is taking steps to revolutionise heavy-duty vehicles through renewable fuels and technologies.


In an effort to scale up its operations, CEO Martin Lundstedt has indicated that together with Daimler Truck AG and Volkswagen’s Traton, the Swedish company will be investing €500 million over the coming years and installing at least 1,700 charging stations throughout Europe for heavy-duty vehicles.

However, Lundstedt states that without action taken in the European market, Volvo may have to look elsewhere for investment opportunities. Under provisions of the US's IRA, $45 per kilowatt-hour of a battery’s production costs could be covered. 

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Will European Businesses Make The Jump To The US Market After Tax Reform?

The potential of the US market is hard to ignore, especially with the recent developments in tax reform and deregulation. For European businesses, the lure may be too much; however, some caution is wise.


Investment plans are not small decisions, and rushing into shifting a company's focus from Europe could lead to an underestimation of risk or opportunity costs.


It remains to be seen how many European companies will take the plunge into an uncertain US market and how far their investment plans will go if they decide to move forward.

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