Financial predicament at Northvolt reveals unexpectedly elevated exposure for taxpayers
German Taxpayer Exposure to Northvolt Crisis Soars Beyond €1.3 Billion
The financial risk to the German taxpayer related to the Northvolt crisis has grown significantly, with the potential loss to public funds surpassing the previously assumed €600 million. According to reports, the total exposure could exceed €1.3 billion, including the previous commitments.
In March 2025, Northvolt, a Swedish battery manufacturer, filed for bankruptcy due to production quality issues and high costs, surprising the market and raising concerns about the viability and risks of government-backed battery projects in Europe.
Germany had already granted a legally binding subsidy amounting to around €600 million to a Northvolt subsidiary. Reports suggest that this grant could be transferred to Lyten, a California-based startup that recently acquired Northvolt’s European assets, including facilities in Germany and Sweden.
The EU and German authorities appear open to continuing support via the Temporary Crisis and Transition Framework (TCTF), which includes approximately €700 million more potentially available to Northvolt, or by extension its new owner Lyten, to promote climate-neutral industry projects.
The Federal Ministry for Economic Affairs of Germany has confirmed that subsidy transfers are possible under certain conditions but do not occur automatically, indicating an ongoing risk to taxpayer funds due to bureaucratic and political incentives to maintain European battery production capacity.
Robert Habeck, the German Minister for Economic Affairs and Climate Action, confirmed that the potential damage at Northvolt could be around 300 million euros higher. This potential loss is referred to in a protocol from a meeting marked as "for official use only."
The acquisition by Lyten is said to be at a substantial discount on Northvolt's previous €5 billion valuation, but Lyten plans to rely heavily on subsidies and further government support to revive operations, extending exposure to public funds.
Auditor warnings from June 2023 already noted a lack of market potential for Northvolt, underscoring concerns that taxpayer money may be funnelled into a high-risk venture with shaky economic fundamentals.
As of December 2024, the German state's risk position amounts to currently 376 million US dollars plus financing costs. However, the newspaper does not provide any information on whether the construction of the factory in Heide will continue, and Northvolt did not respond to a request for comment.
The situation illustrates broader challenges in balancing ambitious climate industrial policy goals with prudent fiscal risk management in subsidizing battery manufacturing in Europe.
The potential loss to German taxpayer funds due to the Northvolt crisis might exceed €1.3 billion, considering the previous commitments and the possible transfer of subsidies. The EU and German authorities are contemplating continuing support via the TCTF or other means, potentially increasing the taxpayer exposure to finance the climate-neutral industry projects of the new owner, Lyten.
