MO I RANA, Norway — In Mo i Rana, a small Norwegian industrial town on the edge of the Arctic Circle, a cavernous gray factory remains unfinished — a monument to unfulfilled economic hope.
Electric battery company Freyr was halfway through building these massive facilities when the Biden Administration's sweeping climate bill passed in 2022. Perhaps the most important climate legislation in history, the Inflation Reduction Act promised approximately $369 billion in tax breaks and subsidies for clean energy technology over the next decade. Its incentives for battery production in the United States were so generous that they ended up helping prompt Freyr to pause its facilities in Norway and focus on moving to the state of Georgia.
The startup is still raising money to build the factory as it tries to demonstrate the viability of its key technology, but has changed its commercial registration to the United States.
Their shift was symbolic of a broader global tug-of-war as countries compete for the companies and technologies that will shape the future of energy. The world has moved away from decades of emphasis on private competition and into a new era of competitive industrial policy—one in which nations are offering a patchwork of favorable regulations and public subsidies to try to attract green industries such as electric vehicles, solar energy and hydrogen.
Mo i Rana offers a clear example of the ongoing competition. The industrial town is trying to establish itself as Norway's green energy capital, so Freyr's decision to invest elsewhere was a blow. Local officials originally hoped the factory could attract thousands of employees and new residents to their town of about 20,000 — a tantalizing promise for a region struggling with an aging population. Instead, Freyr employs only about 110 people locally at its test facility focused on technology development.
“The Inflation Reduction Law changed everything,” said Ingvild Skogvold, administrative director of Ranaregionen Naeringsforening, a chamber of commerce group in Mo i Rana. She criticized the national government's response: “When the world changes, you have to adapt, and we have not been efficient enough in our response to the LRI.”
The implications extend beyond Mo i Rana. There is a growing sense that both the European Union and Norway, which is not an official member but follows many of the EU's policies, could fall behind in the race toward clean energy.
China has 80 percent of the world's capacity to produce the batteries that are essential for green energy grids and electric cars. That has left nations with a “sense of vulnerability from the concentration of supply,” said Antoine Vagneur-Jones, head of trading and supply chains at Bloomberg New Energy Finance.
For countries like Norway, falling behind could mean remaining economically dependent on the oil and gas sector. “We see on the horizon that oil and gas will decline,” said Ole Kolstad of Rana Utvikling, a business development office in Mo i Rana. “We have to be part of that transition.”
Mo i Rana is no stranger to changes in global industrial development: the oscillations between state aid and free market principles have been fundamental in its history.
The town's industrial legacy began in earnest in the early 20th century, when a company linked to American inventor Thomas Edison developed infrastructure and built a railroad to what was then a small mining settlement.
After World War II, the Norwegian government built a large parastatal steelworks in Mo i Rana, generating jobs and a population explosion. But the era of state-subsidized industry ended in the 1970s, when overproduction caused steel prices to plummet. By the end of the 1980s, the Norwegian government had decided to privatize production in the town. The population never grew much beyond its peak in the 1970s.
As local development authorities try to attract young people and ensure future growth, they see sustainable energy as crucial. “We want to be the green energy capital of Norway,” said Mayor Geir Waage.
Mo i Rana officials are talking to national authorities to come up with a framework to compete with US policies — part of a broader push underway in Europe and the world. But some fear that the Norwegian government will not respond.
Most capitalist countries have spent the last few decades tearing down barriers to trade. But then the Trump Administration imposed steep tariffs, including some targeting allies in Europe. And the Biden Administration went further with its climate bill, giving preference to some American-made products and trying to stimulate domestic production.
The recent shift toward more protectionist policies aimed at propping up domestic industries has presented a conundrum for the European Union, which sees the principles of fair and open trade as critical to its European integration project.
European officials have long tried to discourage member countries from competing for business investment and unleashing a subsidy war. But the resurgence of targeted subsidies in the United States is testing those commitments. Other nations have offered incentives, including tax credits in Canada and proposed battery subsidies in India.
In response to the Inflation Reduction Act, Europe loosened its tight restrictions on state aid last year, allowing national governments to offer more subsidies to the clean energy industry. Countries are now offering packages on a case-by-case basis: Germany is giving battery producer Northvolt around $980 million in state aid.
But even such a package would struggle to compete with the U.S. tax credit, said Birger Steen, Freyr's chief executive.
“It wouldn't be equivalent, but it would be a very good start,” he said. Freyr has kept his half-built factory ready so he can put production in Norway in case politics changes in his favor.
European subsidies add up to perhaps 20 to 40 percent of a company's investment cost, compared with more than 200 percent in the United States, said Jonas Erraia, a partner at Menon Economics, who studies the battery industry. The Norwegian government has rejected requests for more, he added. “The Norwegian government basically said that subsidizing industries is not their thing,” he said.
There are reasons for hesitation. Countries do not want to prop up companies that cannot stand on their own.
“The market decides which of the projects will survive,” said Anne Marit Bjornflaten, Norwegian Secretary of State to the Minister of Trade and Industry. “Our ambition as a Government is to mobilize as much private capital as possible.”
Freyr is still working to prove that its key energy storage technology is scalable.
It will receive production tax credits in the United States if it successfully produces batteries, but any favorable loans it takes out to enable construction of a factory in Georgia may not yield much if the company is not successful. It had received $17.5 million in public aid to build the Norwegian factory.
In Mo i Rana, business groups fear being left behind.
Skogvold of the Chamber of Commerce group interviewed Jan Christian Vestre, Norway's Minister of Trade and Industry, on January 26. He asked why the Government had not been more aggressive with green incentives.
“We will not reintroduce production subsidies,” he said. But he later added that the world would have a lot of demand for battery factories and that he hoped that “if we can make it profitable in Norway, and if private capital leads the way, we can be successful with this in Norway.”
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