On Friday 30 June, Industry Minister Jan Christian Vestre presented five measures to stimulate the green transition. Unfortunately, it did not live up to expectations.
Vestry deserves credit for his pedagogical skills and infectious enthusiasm when he presented the promise of green manufacturing as the next great industrial venture after fertilizer production, the oil industry and carbon capture.
The initiative is commendable and it is difficult to be negative. But as is so often the case with this government, they are coming too late and too slowly for a party that has already been there somewhere else for some time. It’s a partisan brake that the Biden administration’s Inflation Reduction Act (IRA) gives US green businesses a $391 billion boost. This tempts world leaders, including the Norwegian ones.
I think the Norwegian package is better than the US package
In order to prevent Norwegian companies like Yara or Freyr from moving their operations to the US, the Minister of Industry must offer them more than just government loans, investments, and a billion for battery production. But other factors make Pfister’s new industrial venture a risky venture.
The Export Letter 2022 report points to three challenging conditions for the success of Norwegian battery production. First, the actors must have access to labor, about 8,100 people, who are currently employed elsewhere. Secondly, the workforce does not have the skills to produce batteries efficiently. Finally, access to cheap electricity is uncertain or delayed. According to Pfister, it could compete with Norway on production costs. It’s hard to see how.
In each EV battery pack, there are several interconnected units consisting of dozens to hundreds of rechargeable Li-ion cells. This is a standard product whose price in the world market is on the way down. Cells make up about 75 percent of the total cost of an average battery pack. The manufacturing process, which includes producing the electrodes, assembling the various components, and completing the cell, accounts for the rest of the costs.
According to Pfister, Norway can have a cost advantage if producers get cheap energy and efficient labor in the last 25 percent. With our connection to Europe and the ACER agreement, we have to assume that European electricity rates will also apply for the foreseeable future.
Overall, I think the green industry venture is a high-risk venture with significant downsides. Some would argue that it is important to bet and take risks. In this regard, I would say that there is probably more potential for sustainable and profitable growth in the export of digital services.
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