A subsidy competition between Europe and America?

• Daniel Heeringa

  Teacher

Batteries are critical to a clean future. But where will those batteries for electric cars be made, for example in China, the US or Europe? The European Commission last week introduced plans to protect battery production for Europe. But do they work?

“This building has just opened and is already very small.” Elio co-founder Jeroen Blecker points to a building site next to his brand new battery factory in Helmand. “So we’re in the process of expanding so we can start scaling here.”

Seven years later, what started as a student project at Eindhoven University of Technology has grown into a company with seventy employees. “We’ve built an electric motorcycle,” says Blecker. “Then we thought: now let’s focus on electrification and the most important component, the battery.” Elio now develops battery systems for electric construction machinery.

The company is still relatively small, but the ambitions are big. Because there is a future for battery makers, says Morten Steinbuch, professor of automotive engineering at Eindhoven University of Technology. “The battery is the most important part of a car these days.”

But it goes further, says Steinbuch. “If there is more sunlight during the day, the batteries can collect energy and use it for heat pumps and heating at night. So batteries are an essential part of the whole energy transition.”

Lithium metal is essential for batteries. But there are no mines in Europe now. If we don’t want to depend on other countries, we should do the following:

For batteries, Europe is still dependent on China. China produces more electric cars. This applies even more to their batteries. Steinbuch: “We all know about Russia’s dependence on gas and oil. If we don’t have our own battery factories, the same thing will happen with batteries. In terms of energy, the battery will be a very essential part of future society.”

So the battery is now part of geopolitical warfare. With billions in subsidies and tax breaks, US President Joe Biden wants to keep up Inflation Act Attract manufacturers of sustainable technologies to the US.

This has consequences in Europe. So-called Giga battery factories are now planned everywhere to make batteries for electric cars. More ambitious plans are in Germany, where Tesla, among others, wants to build a battery factory.

But last month, Tesla decided to put the plans on hold as the US offered billions in subsidies for green investments. Volkswagen now opts for a battery factory outside Europe: Europe’s largest automaker will produce batteries in Canada.

from one Analysis The Brussels ecosystem for transport and environment has shown that more than two-thirds of planned battery production capacity in Europe is at risk of being delayed or canceled if nothing happens.

“There is a lot of pressure on the European Commission to increase production capacity for clean technology and batteries,” says David Kleiman, a trade expert at Brussels think tank Bruegel. “This is the result of high subsidies on clean technology in the US and China.”

Is Europe in danger of losing the battery war? The European Commission counterattacked last week with two pieces of legislation: The Essential Ingredients Act, We need to ensure that the EU is less dependent on rare resources such as lithium and cobalt. Net Zero Industry ActIt should ensure that Europe does not miss the boat when it comes to the development and production of clean technologies such as solar cells, wind turbines and therefore batteries.

The European Commission wants at least 40 percent of manufacturing in Europe to be sustainable technologies by 2030. For batteries, the ambition is for Europe to produce 90 percent by 2030. State aid rules are being relaxed, for example, to prevent companies from moving to the US.

But critics fear it will lead to subsidy competition, mainly between Europe and the US. Kleiman: “It’s really a worst-case scenario where companies are trying to maximize subsidy amounts.

Trade expert warns against waste of taxpayers’ money He believes governments should not be held hostage by companies like Tesla and Volkswagen. “Investment decisions depend on more than money on the table. And it’s not easy for these companies to reinvest or build factories elsewhere.”

Elio, backed by a major Japanese shareholder, is now looking beyond Helmand’s municipal boundaries. Co-founder Blecker’s ambition is to one day build gigafactories for batteries. “Our big factories have to be all over the world. There are a lot of them in Europe.”

What if America’s big grant money keeps ringing? “The US market is also very interesting for us. We want to keep production close to demand, so looking at the US is also appropriate.”