Commission approves €902 million German State aid measure to support Northvolt in the construction of its battery production plant Heide, Germany

The European Commission has approved a €902 million German measure to support Northvolt in the construction of a plant for the production of batteries for electric vehicles to foster the transition towards a net-zero economy, in line with the Green Deal Industrial Plan. The aid was approved under the State aid Temporary Crisis and Transition Framework, adopted by the Commission on 9 March 2023 and amended on 20 November 2023, to support measures in sectors which are key to accelerate the green transition and reduce fuel dependencies.

The German measure

Germany notified to the Commission, under the Temporary Crisis and Transition Framework, a € 902 million measure to support Northvolt in the construction of a production plant for advanced and high-efficiency electric vehicle batteries in the city of Heide. The plant will have an annual capacity of 60 GWh. This translates to 800,000 to 1 million electric vehicles per year, depending on the size of the battery. The plant will start producing in 2026 and will reach full production capacity in 2029.

Under the measure, the aid will take the form of a €700 million direct grant and a €202 million guarantee. Without the aid, Northvolt would establish the plant in the United States, where support was offered in particular under the Inflation Reduction Act.

The Commission found that the German measure is in line with Article 107(3)(c) TFEU and the conditions set out in the Temporary Crisis and Transition Framework, in particular Section 2.8, which enables Member States to support accelerated investments in sectors strategic for the transition towards a net-zero economy.  

More specifically, the Commission found that:

• The measure concerns the production of batteries, therefore it is aimed at an investment project with strategic importance for the transition towards a net-zero economy. In addition, the project is carried out in Heide, a city in a disadvantaged area as defined under the German regional aid map. The aid has an incentive effect, as without the aid the plant would have been established outside the EEA.
• The beneficiary has set itself the goal of building the world's most environmentally friendly battery, which produces significantly less CO2 emissions than other companies when measured on produced level including recycling at the end of life. The reduction of the carbon footprint is in particular achieved using fossil free energy in the production and a circular design of the production process, including recycling of battery cell materials.
• The measure has a limited impact on competition and trade within the EU. In particular, it is necessary and appropriate to ensure the establishment of the battery production plant and it will not lead to overcapacity in the market.
• The aid is proportionate and limited to the minimum necessary to trigger the investment in Europe: it does not make the investment in Germany more profitable than the investment in the United States. It will also not exceed the amount of the subsidy that Northvolt could demonstrably receive for the equivalent investment in the United States.
• Finally, the aid will be granted no later than 31 December 2025.

On this basis, the Commission approved the German measure under EU State aid rules.

“This €902 million German measure is the first individual aid being approved to prevent an investment from being diverted away from Europe, under the new possibility offered by the Temporary Crisis and Transition Framework since March 2023. It enables Germany to support the construction of Northvolt’s production plant of batteries for electric vehicles. This is an important step for the electrification of transport in Europe, while preserving the level playing field in the Single Market.” Margrethe Vestager, Executive Vice-President in charge of competition policy