HS Analysis | Sweden has a green investment hangover – What does it mean for Finland?

in Sweden ten years ago, we started investing in the green transition with enormous speed. In Finland, we watched green with envy how both state-owned companies and startups launched billion-dollar projects.

Now Sweden’s green industry is in a hangover, and it makes you think about the fate of many projects planned for Finland.

The industry’s biggest star in Sweden has been the battery company Northvolt, which quickly raised billions in financing for the construction of battery factories. The investors did not mind that the company did not have an industrial background.

Second a giant startup started almost from scratch is Stegra, formerly H2 Green Steel, which plans to build a large factory complex producing green hydrogen, iron and steel in Boden near Luleå in northern Sweden.

The company has said that it has acquired a total of 6.5 billion euros in funding for the project. 365 million euros are coming in public support.

The state-owned mining company LKAB and the Swedish-Finnish steel producer SSAB have also invested large sums in the development of green steel production. LKAB is SSAB’s largest owner.

in Northvolt it has since been noticed that making the batteries was not easy. The company has completely abandoned the production of the important component, i.e. the cathode material, and the ramp-up of the actual battery production has taken much longer than promised anyway.

Now the company is in a cash crisis. On Monday, it announced that it would lay off 1,600 employees and investment projects in Sweden have been frozen.

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Zero interest rates blew a bubble in the green industry.

Northvolt is not the only one affected by a hangover.

In August, the Danish energy company Ørsted canceled the construction of an e-methanol plant planned for central Sweden.

The company wrote down expenses of more than 200 million euros and said it would take more time to develop green fuels.

E-methanol, produced from carbon dioxide and green hydrogen, has been envisioned as a fossil fuel replacement for shipping. However, according to Ørsted, the shipping companies were not yet ready to enter into long-term supply contracts.

For the same reason, St1 has also postponed the planned e-methanol plant in Lappeenranta until well into the future.

What Should we think about the situation in Sweden? It is certain that the green transition does not end there. Climate change is becoming a very concrete fact.

In the EU, the will to continue reducing emissions is solid, even though the political moods vary.

However, zero interest rates blew a bubble in the green industry, of which Northvolt’s difficulties are a symptom. The rise in interest rates and the recession of the economy have exposed the problems, as usually happens when bubbles burst.

Multi the project on the planning table will surely come true before long, but it is equally clear that some entrepreneurs have gone to war calling.

Even though the development of the green steel manufacturing process has taken experienced experts in the mining and steel industry years. How believable is it that a company founded from scratch could overcome the same challenges with purchased technology in a few years?

Industry veterans in Finland smiled in disbelief in January 2023, when the Norwegian newcomer Blastr Green Steel announced that it would build a green steel factory in Inkoose.

Production was supposed to start in 2026. The schedule was obviously completely unrealistic. Blastr’s project is still moving forward, and of course it should not be condemned as a premature failure.

Western neighbor however, the hangover has shown that the normal legalities apply to green investments as well. Industrial processes cannot be made to work without deep expertise.

Investments also cannot be made unless there is genuine demand for the products. Its development, on the other hand, seems to take longer than was imagined just a few years ago.

Low-emission fuels and materials based on hydrogen produced by electrolysis are also clearly more expensive than old fossil-based ones.

Politicians are wary of increasing voters’ living costs through regulation, when the energy crisis and rising interest rates have already strangled consumers’ finances.

Startups and in the world of the sharing economy, it has been customary to think that the fast eats the slow and the first to come captures the market.

In the world of green industry, the rule may rather apply that it is better to come a little behind. Equipment and investments become cheaper when volumes grow. Scholarships can be expensive.

Single-project startups are also vulnerable. Everything is put on one card and it is held to the last.

On the other hand, for example, Ørsted, which was planning a methanol plant, could take an early extension of time in making green fuels and continue with its other businesses.

Oh it’s good that when technologies mature, costs go down and demand wakes up, we will see more projects started by traditional industrial players in Finland as well.

There are many hydrogen and its further processing projects on the planning table. For example, Neste is preparing to build a large green hydrogen plant.

The state-owned Finnish ore refining has prepared factory projects in the battery industry. The technology would come from a Chinese partner.

The forest industry is already preparing to capture the wood-based carbon dioxide emissions coming out of the chimney. They can be a raw material for fuel liquids in the future.