Germany has agreed to give Northvolt $986.81 million towards a battery factory in the German city of Heide. Most of that is a straight grant. It was approved on a ground no award under Europe's crisis rules had used before: that without the money, the factory would have been built in the United States.
Key takeaways
- Northvolt secured $986.81 million from the Government of Germany, announced on 8 January 2024, to build an electric vehicle battery plant in Heide, made up of a $765.81 million direct grant and a $221 million guarantee.
- Without the German aid, Northvolt would have established the Heide battery plant in the United States, where support was offered in particular under the Inflation Reduction Act, according to Leap's record.
- The Northvolt Heide award is the first individual aid approved under the European Union's Temporary Crisis and Transition Framework, in place since March 2023, to prevent an investment from leaving Europe.
- The Northvolt Heide plant is designed for an annual capacity of 60 GWh, enough for 800,000 to 1 million electric vehicles a year, with production scheduled to start in 2026 and reach full capacity by 2029.
- Enerdatics records four government grants among 22 electric vehicle financings in Europe from 2023 to 2024, and Northvolt's Heide award is the largest of them.
What exactly is Germany paying for?
It is paying to change where a factory goes, not whether it gets built. That distinction is what makes this award unusual. Most state support for industry is justified as filling a gap the market leaves open. This one was justified by an offer from another country.
The package has two parts that work differently. The grant is money Northvolt does not repay. The guarantee is a promise by the state to cover a lender's losses if Northvolt defaults, which lowers the cost of borrowing without any cash leaving the treasury unless something goes wrong. Of the $986.81 million headline, about 78 percent is grant.
The asset is large. A gigawatt hour is a measure of battery cell output, and 60 GWh a year is enough for between 800,000 and 1 million cars. Spread across that capacity, the full package comes to about $16.4 million per GWh, and the grant alone to about $12.8 million per GWh.
Why did Europe need a new rule to approve it?
Because the usual rules do not let a state pay a company simply to stay. European state aid law generally bans subsidies that distort competition between member states. The exceptions are built around specific aims, such as research, regional development or environmental protection.
The Temporary Crisis and Transition Framework, introduced in March 2023, added a new kind of exception. It allows a member state to grant aid to keep an investment in Europe when a company has a credible alternative outside it. Leap's record states that the Heide award is the first individual aid approved under that framework for that purpose.
The alternative in this case was the United States. The IRA manufacturing credits created by the Inflation Reduction Act reward production on US soil, and Leap's record names that law as the source of the support Northvolt was offered. The US was also lending at scale: in 2023 the Ford and SK On battery venture secured a $9.2 billion federal loan commitment for its battery plants. Europe's answer, in this case, was a direct grant.
How does Heide compare with other European battery plants?
It is bigger, and the state paid less per unit of capacity. The closest comparison in Leap is Verkor's gigafactory in Dunkirk, France. In September 2023 Verkor secured about $698 million in French subsidies under the France 2030 plan, alongside a $912 million equity round and $644 million of debt support from the European Investment Bank. Its total funding came to $2.2 billion.
Verkor's plant has an initial capacity of 16 GWh a year. The French subsidy therefore works out at about $43.6 million per GWh, more than three times the grant per GWh that Germany gave Northvolt. The comparison has limits. Verkor's support was approved under a different framework, for research, development and innovation, and its 16 GWh is a starting figure. But it shows that Heide's headline, large as it is, was spread across a much larger factory.
Northvolt was raising money elsewhere at the same time. In January 2024 it also secured $5 billion of debt from a group of lenders including the European Investment Bank and export credit agencies to expand its Northvolt Ett factory in Sweden. In August 2023 it raised $1.2 billion from investors including the Canada Pension Plan Investment Board, BlackRock and OMERS. The German money was one strand of a much wider funding effort.
Enerdatics records 22 electric vehicle financings in Europe from the start of 2023 to the end of 2024. Four are government grants, totalling about $1.76 billion, and Northvolt's Heide award accounts for more than half of that sum. The others are Verkor's French subsidy, a $56 million European Commission award to Eni for charging networks and a $22 million grant from Business Finland to Virta. Half of the 22 are equity raises, most of them by charging network operators.
What does the deal signal for European battery manufacturing?
It signals that European governments were prepared to compete with US incentives on a project-by-project basis. The framework that cleared Heide was designed for exactly that contest, and Heide was its first use. Other member states could point to it when making the same argument for their own factories.
It also signals where the money was going. Grants on this scale went to cell manufacturing, not to charging or vehicles. Cell plants are capital-intensive, slow to build and mobile until the first shovel goes in, which makes them the kind of investment a rival subsidy can actually move.
The open question at the time was whether a direct grant would prove enough. A grant lowers the cost of building a plant. It does not guarantee that the plant will fill its order book once it is running. That risk stayed with Northvolt, and with the lenders and investors behind its other financings.
Frequently asked questions
How much did Germany give Northvolt for the Heide plant? Germany committed $986.81 million, made up of a $765.81 million direct grant and a $221 million guarantee, announced on 8 January 2024.
Why was the Northvolt aid approved? Leap's record states that without the aid Northvolt would have built the plant in the United States, where support was offered under the Inflation Reduction Act. It was the first individual aid approved under the EU's Temporary Crisis and Transition Framework to keep an investment in Europe.
How large is the Northvolt Heide battery plant? The plant is designed for 60 GWh of annual capacity, enough for 800,000 to 1 million electric vehicles a year, with production scheduled to start in 2026 and reach full capacity by 2029.
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