Sweden's North frets about financial risks as the green boom stumbles

Sweden's local governments, frightened by Northvolt's struggle for survival and its potential impact on taxpayers, have asked the central government to increase financial support for Sweden's transition towards green industry. Last month, Europe's leading electric vehicle battery manufacturer filed for Chapter 11 bankruptcy in the United States with $5.8 billion of debts. The EU's energy transformation is failing, and shockwaves were sent through Skelleftea, northern Sweden, where its Northvolt Ett plant is located.

Sweden is leading Europe in its efforts to switch from fossil fuel based industries to nonpolluting energy. This has been driven by cheap carbon-free electricity, and abundant raw materials, mainly located in the far north.

The local governments who are already the most indebted in Europe due to high healthcare and social costs say that they will bear a large part of the cost for new infrastructure to support and attract these investments. According to the Agency for Economic and Regional Growth, around 1.1 trillion crowns (104 billion dollars) in investment are in the pipeline for northern Sweden. The region has a wealth of high-grade iron ore and gold, as well as zinc and copper. Nickel and rare earth metals are also important for battery, smartphone, and catalytic converter technologies.

According to the Swedish association of local authorities (SKR), local governments in Sweden will have to invest around 100 billion crowns over the next 10 years in infrastructure such as roads, railways, and ports for the planned project, further straining the finances.

Annika Wallenskog is the chief economist at SKR. She said that if local authorities fail to deliver on their promises, it could be taxpayers who end up footing the bill.

SKR, on Dec. 4, presented a five point programme to Elisabeth Svantesson, Minister of Finance. The program demanded more financial assistance for communities struggling to accommodate new industries.

Wallenskog stated, "We did not receive any response."

Svantesson pointed out, however, increased infrastructure spending, financial assistance for new homes and subsidies from the government for climate-friendly new technologies. She said, "I know it's difficult. Especially for Skelleftea which has very large challenges," after presenting her new economic forecasts. "But the government does a lot for creating the right conditions around Sweden and in the regions." The risks and costs have already been shared.

The officials in Lulea are not convinced. SSAB, the steel company, is building a 'green' 52 billion crown steel mill, and Australia's Talga has plans to invest in a 3 billion crown battery anode factory.

Lulea needs to invest more than 30 billion crowns into public infrastructure over the next decade in order to support industries.

Carina Sammeli said, "Our challenge is many of these costs will come now but... the benefits for us won't be for another 20 years."

Sammeli stated that Lulea's debt has increased by around four billion crowns in the past two years and will continue to increase to finance an expansion of the port of Lulea worth 10-15 billion crowns. The town of 80,000 residents cannot take on the financial risk, he added.

GREEN GOLD VS GREEN BUBBLE Northvolt faces a number of challenges, such as a slowing growth in EV sales. These are not isolated issues. Swedish miner LKAB postponed its plans to produce CO2-free iron at its Kiruna mining by at least a decade. It warned that future growth of the mine could be affected due to problems with rail links between Lulea in Sweden and Narvik, Norway. Orsted, of Denmark, has canceled plans to produce biofuel at Ornskoldsvik in Sweden's eastern coast due to low demand.

These developments show some of the obstacles to the country's ambitions to be a leader in green industry transformation.

According to Eurostat, Sweden's electricity, which is 98% free of fossil fuels, costs around half as much as the rest of Europe. However, the heavy industry association SKGS believes that businesses will require 99 terawatt-hours of renewable energy by 2030 – more than double the current need – to be able to switch to fossil fuels. The construction of new nuclear power plants is too expensive and slow, and local voters are opposed to wind power, the fastest and cheapest alternative.

Henrik Henriksson is one of those who remain positive, despite the fact that they see no signs of a slowdown in customer demand. Henrik Henriksson is the CEO at Stegra, a Swedish steelmaker building Sweden's biggest steel factory powered by hydrogen green in Boden, near Lulea.

Henriksson said in one of the hundreds of portacabins that overlooked the vast construction site, "We have already sold 50% of our product on a contract for seven years."

The production is expected to begin in 2026, and will reach a 5 million metric-tonne annual output by 2030.

Boden, a nearby municipality that SKR estimates will need to invest around 5 billion crowns over the next few years in infrastructure, is trying to keep pace with Stegra. It is expecting a deficit of 500 million crowns in the next three year.

Claes Nordmark, the mayor of Oslo said: "We're taking a big risk. No doubt about it." If we don't, the people will go elsewhere.

(source: Reuters)