Northvolt’s Struggles: What Lessons for Europe and the UK's Green Energy Futures?
Executive Summary
Northvolt, once heralded to become Europe’s flagship electric battery manufacturer, is now facing a turbulent chapter in its journey, reportedly due to financial and operational challenges. Envisioned as a cornerstone of Europe’s green energy transition and geopolitical self-sufficiency, the company has encountered critical obstacles, culminating in its filing for Chapter 11 bankruptcy protection in the United States in November 2024. Despite these recent challenges and setbacks, Northvolt is reported to remain operational, focusing on debt restructuring and seeking new financing to achieve turnaround. Just this week it was announced that the company had sold its remaining shares in battery recycler, Hydrovolt, for 78 million NOK ($6.79 million) (leaving Norsk Hydro as sole owner thereof for the time being).

This short blog delves into Northvolt AB’s meteoric rise, the underlying causes of its recent struggles (as currently known), and the broader implications this may have for Europe’s Green Transition. While a comprehensive understanding of Northvolt's challenges will take time to unfold, this synthesis aims to extract some key and immediate lessons for policymakers, investors, industry stakeholders, and civil society, in a broader sector context. It provides insights into balancing risk and reward in green technology scaling and examines strategic approaches required to foster resilient, clean energy initiatives.
Finally, it offers some brief, actionable recommendations for stakeholders to strengthen Europe's clean energy sector by focusing on cohesive policy, strategic regulation, risk management, investment diversification, and enhanced governance frameworks, within the confines of this short blog. These measures can support eco-innovation and balance the ‘risks’ and ‘rewards’ associated with the scaling of green technologies.
This case-study inspires crucial learning opportunities and insights for stakeholders navigating the complexities of clean industrial innovation within the evolving regulatory, challenging geopolitical, and economic landscapes.
Living Law is well-positioned to help stakeholders translate these insights into actionable strategies. Connect with us to learn more: www.livinglaw.co.uk
The Rise of Northvolt: Ambition Meets Innovation
Founded in 2015 by former Tesla executives Peter Carlsson and Paolo Cerruti, Northvolt set out to revolutionise Europe’s electric vehicle (“EV”) battery market. With a vision to create the world’s most sustainable battery manufacturing network, the company aimed to reduce Europe’s reliance on overseas suppliers and position the European continent as a leader in green energy storage.
Northvolt quickly gained the attention of industry giants, investors, and policymakers. By 2021, it had reportedly secured $6.5 billion in investments from prominent stakeholders, including Volkswagen, BMW, and Goldman Sachs. The European Commission supported Northvolt’s bold mission to push forward a vital aspect of de-carbonisation of the economy. And, in 2020, the European Investment Bank (“EIB”) signed a $350 million initial loan to support the financing of its gigafactory in Sweden – the first gigafactory for lithium-ion battery cells in Europe (supported by the European Fund for Strategic Investments ("EFSI"), the main pillar of the Investment Plan for Europe). Its flagship gigafactory, Northvolt Ett, in Skellefteå, began production of lithium-ion battery cells in 2021. Northvolt received additional funding under the 'Important Projects of Common European Interest' (“IPCEI”) framework in 2022 for a plant in Heide, Germany, with "matching aid" from the German government (approved by the European Commission in 2024). This is an exceptional measure to provide higher levels of aid where there is a risk of investment being diverted from Europe. In January 2024, the EIB announced a further lending package of approximately $1,038 billion (€942.6 million) to finance the expansion of Northvolt's gigafactory in Northern Sweden.
By mid-2022, Northvolt seemed unstoppable. It stated it had secured $55 billion in pre-orders, bolstered by commitments from European automakers eager to localise battery production. However, the company’s ambition to scale quickly is alleged to have soon exposed vulnerabilities in its operational and financial model and resilience. While it is said that much of the government money pledged to Northvolt has not yet been paid out, pension funds are understood to be more exposed.
Operational Challenges: The Unravelling of Vision?
1. Challenges in Scaling Operations
To meet aggressive or ambitious targets, Northvolt expanded its workforce to 7,000 employees and ramped up production at a rapid pace. However, this rapid expansion reportedly exceeded or outpaced management capacities. Operational inefficiencies reportedly emerged, compounded by technical issues with machinery sourced from overseas suppliers (primarily, in Korea and China). Production delays and quality control issues are said to have hindered its ability to fulfil pre-existing contractual obligations. Alleged safety incidents added to the operational challenge.
By 2023, the Swedish Work Environment Authority had initiated investigations into reported workplace fatalities at Northvolt Ett, also raising concerns about safety standards and governance practices.
These challenges reportedly contributed to overall missed production targets, straining relationships with key stakeholders and partners.
2. Financial Struggles and Contract Adjustments
Northvolt’s financial health reportedly deteriorated. Publicly available information suggests this was due to rising costs, delays, and an inability to scale production effectively. By 2024, the company faced an estimated $5.8 billion debt load. Its struggle to secure long-term contracts added to the financial strain. In a devastating blow, BMW and Volkswagen, key clients and early investors, cancelled or revised contracts and engagement terms. This triggered a cascade of investor uncertainty, pushing Northvolt to the brink of insolvency. Following Northvolt's filing for Chapter 11 bankruptcy protection in the United States – on which more might be said beyond the confines of this blog –, Volkswagen substantially wrote down its 21% stake in the battery manufacturer in the challenging climate for EVs. The Financial Times reported that funds managed by Goldman Sachs, Northvolt's second-largest shareholder with a 19.2% holding, wrote down their $900m stake.
3. Supply Chain Vulnerabilities
Northvolt’s reliance on a complex supply chain is said to have left it vulnerable to market fluctuations and heightened geopolitical tensions. The fluctuating cost of raw materials like lithium, cobalt, and nickel also added to its woes, further straining margins. Despite efforts to establish regional sourcing and recycling programs, such as aiming for 50% of raw materials from recycled sources by 2030, these initiatives are reported as insufficient to offset supply chain disruptions. Suppliers, too, began reassessing their commitments, with some halting material. Supply chain disruptions reportedly led to production slowdowns, affecting Northvolt's ability to meet customer expectations and fulfil contractual obligations.
Additionally, geopolitical factors, including export restrictions and shifting trade policies, further complicated Northvolt's procurement strategies. In response, Northvolt explored supplier diversification and alternative sourcing strategies, the results of which may yet have to materialise.
Chapter 11 Filing: A Lifeline?
In November 2024, Northvolt filed for Chapter 11 bankruptcy protection in the United States under the U.S. Bankruptcy Code, seeking to restructure its debt and secure debtor-in-possession (“DIP”) financing. The $245 million DIP financing is said to hold the promise to maintain operations at Northvolt Ett while negotiating with creditors. This strategic move also reflected an intent to preserve key assets and rebuild trust among stakeholders. While Chapter 11 is typically a U.S. process, Northvolt’s filing underscored its global ambitions, as it sought to protect assets in jurisdictions where its supply chain and client base were most exposed.
European governments, including Sweden, continued to signal support for Northvolt, albeit with calls for greater oversight and contingency planning in the future. However, calls for Swedish State Aid bail-outs have been rejected to date, citing concerns such as market distortion and public spending priorities. The postion in Germany is less definitive.
Implications for Stakeholders and Europe’s Green Transition
Northvolt’s challenges have reverberated across Europe, offering critical and immediate lessons for policymakers, investors, and industrial innovators, particularly where State Aid or other public finance and/or support has been granted to innovative green industrial initiatives within fluctuating geo-political contexts to ensure delivery/outcomes for flagship Green Transition ventures.
1. Pension Fund Risks
European pension funds, including Denmark’s ATP and Sweden’s AP funds, invested heavily in Northvolt and are said to be exposed. The Chapter 11 filing has left these funds facing potential losses worth hundreds of millions of euros. For instance, ATP has €308 million at stake. This situation has reignited debates about the level of risk pension funds should assume in emerging green technologies, highlighting the need, for example, for further diversification and enhanced risk assessment.
2. Supplier Setbacks
Some suppliers that had scaled operations to meet Northvolt’s needs, particularly those providing specialised materials, state they are grappling with financial uncertainty, raising broader questions about the resilience of green supply chains which require to be confronted.
3. Regulatory Oversight and State Aid
Northvolt’s struggles are intensifying scrutiny of the European Commission’s state aid policies. While such aid is crucial to fostering green innovation – recognised also by the EU Temporary Crisis and Transition Framework – the risks of over-concentration on a few ‘industrial champions’ are becoming increasingly evident. Policymakers must now assess whether future aid should include, for example, stricter conditions and enhanced milestone-based funding oversight, as well as greater transparency and other enhanced safeguards. However, as stated above, it is understood that the majority of funding from governments — including nearly €1bn from the European Union itself — has not yet been realised given the operational challenges encountered.
Lessons and Opportunities: A Careful Balance
1. Ambition vs Prudence
Northvolt’s rapid expansion cautions, more broadly, against the dangers of scaling too quickly without robust operational and governance structures. Green ventures must prioritise sustainable growth, operational efficiency, and reliable client relationships to weather the inherent risks of innovation, particularly in the current geopolitical climate.
2. Diversified Investment Strategies
The financial fallout for pension funds underscores the importance of diversified portfolios across Europe. Policymakers and institutional investors will likely explore further strategies that spread risk while continuing to support vital innovation efforts. Collaborative consortiums and public-private partnerships can continue to further mitigate risks associated with enhanced governance mechanisms through redesign. The European Commission's Green Deal Industrial Plan also includes mechanisms to further compliance with sustainability goals while managing financial exposure.
3. Governance and Legal Accountability
The allegations of mismanagement or short-coming and reported safety lapses at Northvolt reinforce the need for enhanced legal and governance structures across such sectors. Implementing regular audits, transparent reporting, deliverables frameworks and stringent safety protocols are all critical components for building stakeholder trust in flag-ship Green Transition initiatives.
4. Leveraging Setbacks as Learning Opportunities
Innovation carries inherent risk, and setbacks like Northvolt’s may be (to some extent) part of the process in the Green Energy Transition. However, these challenges must equally be managed/mitigated and off-set appropriately. They already offer valuable insights for regulators, investors, and green startups moving forward on the balance between fostering innovation and managing risk in a world pulling in multiple directions. Enhanced legal accountability and rule of law compliance can also serve vital for brand protections and bolstering stakeholder trust. Key initial takeaways include: cohesive policy commitment, strategic regulatory positioning, the importance of contingency planning, early intervention strategies, enhanced risk management, diversification in supply chains, and collaborative frameworks that further diversify risk. This may also require a transition to a more 'ecosystem' based support framework.
Meanwhile, the ongoing wider debate surrounding European efforts to localise critical supply chains in these areas, — considering challenges such as resource scarcity, regulatory intervention, as well as the competitive costs of production comparatively to global competitors —, continues abound.
A Green Transition Still in Progress
Northvolt’s rise and most recent challenges highlight both the promise and the peril of ambitious green industrial projects aimed at powering Europe’s Green Energy Transition in the face of the climate crisis. Moreover, these challenges extend beyond the companies directly themselves to include labour market, supply-chain, and broader social and societal impacts which must increasingly be acknowledged. While the company’s current challenges are ongoing, there is no question that Northvolt’s ability to recover will already have significant implications, offering lessons and insights on the importance of balancing ambition, governance, commitment and prudence in scaling new technologies, especially in areas involving public finance, support and/or backing. They also raise critical considerations for associated legal accountability measures and mechanisms. In particular, further exploration may be needed as to how legal and governance tracking is bolstered and enhanced and ecosystem-based frameworks.
In the UK, this case has specific and important implications and potential read-across also to ongoing discussions on other technologies, such as Carbon Capture Storage ("CCS"). It underscores that policymakers must balance innovation with prudent risk management and comprehensive governance to ensure that any future projects (regardless of the precise technology) are sustainable, resilient, legally robust and delivery/outcome focussed. It is essential, therefore, they also take into consideration existing environmental principles (such as, the 'Precautionary Principle', 'Efficiency First'), alongside detailed regulatory considerations, in policy positioning.
Finally, while criticism (and fair criticism) can seem easy whereas ambition and actions are difficult, it must also be recognised that it is only through clear-eyed acknowledgement of past challenges that the green sector can mature. Northvolt’s current challenges illustrate not only the steep climb faced by 'first movers' and innovative pioneers navigating (largely) unchartered territories, but also the incredible potential, with the right leadership, to quickly transform lessons learned into a stronger, more resilient future for Europe’s green ambitions. It will be interesting to monitor how Northvolt now pivots in that respect.
For wider stakeholders in Europe’s green economy, these developments serve as a critical turning point. The grit and resilience of Europe’s energy strategy will depend on its ability to now learn from such setbacks (swiftly) and adapt policies, investments, and legal governance frameworks to navigate the complexities of Europe’s clean industrial innovation, not least where public finance, support, investment and/or backing are involved. Living Law continues to monitor these developments and any further investigations with keen interest from that perspective, as well as how they continue to be shaped by fast-evolving geopolitical landscapes.
Meanwhile, Northvolt is expected to provide an update to the US bankruptcy judge on January 28th regarding its immediate funding searches. (Note: Since the time of publication, an extension has now been granted and the date moved forward to 18 February 2025).
* Disclaimer: This blog and the short analysis it contains are intended to provide a brief snapshot overview of an ongoing and topical news story. It is not, and is not intended to provide, legal or policy advice, nor provide exhaustive insights. No such reliance should be placed on its terms. The financial estimates and potential losses relative to Northvolt's Chapter 11 filing mentioned in this blog are speculative, based on publicly available information and sources, and subject to change as more information becomes available. Investors should seek independent financial advice before making any investment decisions or placing any reliance on any information contained herein.
EXPLORE
For further insights into the legal and policy implications of Northvolt’s journey and Europe’s Green Transition, visit:
Bloomberg (2025): “Northvolt Yet to Get Commitments From Investors as Cash Runs Low” https://news.bloomberglaw.com/bankruptcy-law/northvolt-still-looking-for-investors-with-cash-running-low
European Commission (2024): "Commission approves €902 million German State aid measure to support Northvolt in the construction of an electric vehicle battery production plant to foster the transition to a net-zero economy” https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6823
European Commission (2024): "Temporary Crisis and Transition Framework" https://competition-policy.ec.europa.eu/state-aid/temporary-crisis-and-transition-framework_en
European Commission (2024): "Authorisation for State aid pursuant to Articles 107 and 108 of the Treaty on the Functioning of the European Union – Cases where the Commission raises no objections" – SA.107936 https://competition-cases.ec.europa.eu/cases/SA.107936 & https://ec.europa.eu/competition/state_aid/cases1/202427/SA_107936_157.pdf
EIB (2024): "Sweden: EIB finances Northvolt’s battery factory with over $1 billion" https://www.eib.org/en/press/all/2024-011-eib-finances-northvolt-s-battery-factory-with-over-usd1-billion
Bruugel (2024): “Northvolt’s struggles: a cautionary tale for the EU Clean Industrial Deal.” https://www.bruegel.org/analysis/northvolts-struggles-cautionary-tale-eu-clean-industrial-deal
Financial Times (2024): “Northvolt’s Bankruptcy Filing: Implications for Europe’s Battery Ambitions.” https://www.ft.com/content/09938004-21b9-4750-8fa2-9ed15c566d4e
Financial Times (2024): “Transcript: Why Northvolt failed to become Europe’s battery champion” https://www.ft.com/content/4f7dcd81-5bbb-4893-ad20-da73793fe9ec
The Economist (2024): “After Northvolt’s failure, who will make Europe’s EV batteries?” https://www.economist.com/business/2024/11/28/after-northvolts-failure-who-will-make-europes-ev-batteries
Reuters (2024): “Northvolt crisis may be make or break for Europe's EV battery ambitions.” https://www.reuters.com/technology/northvolt-crisis-may-be-make-or-break-europes-ev-battery-ambitions-2024-11-22/
Le Monde (2024): “Northvolt's downfall, a symbol of acute European stalling” https://www.lemonde.fr/en/economy/article/2024/11/06/northvolt-s-downfall-a-symbol-of-acute-european-stalling_6731752_19.html
Politico EU (2024): “Northvolt and the Future of European Industrial Policy.” https://www.politico.eu/article/northvolt-bankruptcy-ceo-peter-carlsson-resign-eu-battery/
Guardian (2024): “‘Huge losses’: Sweden Fears for Future of Batterymaker Northvolt” https://www.theguardian.com/business/2024/oct/01/sweden-fears-for-future-of-batterymaker-northvolt
About Living Law
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