new York After Elon Musk, one of his long-time companions could soon be investing in Germany. JB Straubel, Tesla’s fifth employee and long-time head of technology, is examining the possibility of setting up production in Europe with his start-up Redwood Materials, which specializes in battery recycling. A German location is one of the favourites, as the Handelsblatt learned from three people familiar with the processes.
Investment volume: around one billion dollars. The investment would also have symbolic power for Germany. Battery recycling is considered crucial for the long-term success of electromobility and Redwood is one of the pioneers. Volkswagen had recently agreed a partnership with the company in the USA.
However, the investment could fail due to the high energy costs in Germany. That’s why it could also result in a Scandinavian location, as it is said in the circles. The recycling process is very energy intensive. The higher electricity prices in Germany could cause nine to ten-digit additional costs each year.
“Energy costs are a big issue for many companies willing to invest,” says Stefan Di Bitonto, automotive expert at Germany Trade and Invest (GTAI), which supports numerous companies considering investing in Germany.
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The location expert reports high “pressure in the boiler”; only recently a company supported by GTAI called off an investment project in this country because of the high energy costs.
Schleswig-Holstein, Mecklenburg-West Pomerania and Saxony
Earlier this year, Straubel announced the construction of at least two factories for recycling and battery material production in Europe. The plants should be built as close as possible to existing car and battery factories, he told the “Spiegel” and named Germany as an option in addition to Scandinavia, Great Britain and Eastern Europe.
According to the current plan, Redwood wants to make a decision this fall. According to the insiders, who wish to remain anonymous, the search has now narrowed significantly.
Favorites are a location in Scandinavia, for example in central or northern Sweden, as well as the north-east of Germany. The wind power capacities in Schleswig-Holstein, Mecklenburg-Western Pomerania and in the direction of Saxony made the federal states attractive. Car factories such as Volkswagen in Wolfsburg or Tesla in Grünheide near Berlin are also nearby. There are also new battery plants from CATL near Erfurt or Northvolt in Schleswig-Holstein.
However, the recycling of battery materials is particularly energy-intensive, and electricity costs in Germany are significantly higher than in Sweden, for example. Companies have long cited energy prices as a competitive disadvantage. Since the Ukraine war and the gas supply stop from Russia, the difference to Scandinavia has become even greater.
When asked by the Handelsblatt, Redwood declined to comment on the search process.
What counts: green energy and subsidies
The reduction of the CO2 footprint is particularly important to Straubel and part of the company philosophy. With regard to the photovoltaic capacity, a location in Spain was initially discussed. France failed because of the high proportion of nuclear power, Poland because of coal-fired power generation.
There is wind power in north-eastern Germany, and the state levels have also been very supportive here, according to insiders. The problem, however, is that compared to the electricity generated by hydropower in Norway and in central and northern Sweden, electricity in Germany is very expensive.
The energy cost issue drives Redwood, confirm the three people familiar with the search unanimously. The disadvantage of Scandinavia is that politicians there are very aware of their own good position – and have therefore reduced their funding.
The US company is the only recycling partner for VW North America.
(Photo: Redwood Materials)
On the other hand, there is a lack of commitments in Germany to bring the electricity price into a competitive framework. After all, it’s not about costs of ten percent more or less, but about electricity prices, which sometimes differ by a factor of five. “The decision is objectively very clear,” says an insider.
Redwood’s scope is limited. The battery recycling market is competitive. The German copper group Aurubis in Augusta, Georgia, for example, recently announced that it would build a $320 million plant by 2024. In Europe, commodity giants such as Glencore and Umicore, as well as specialized companies with new processes, will soon be entering the market, predict the experts at Arthur D. Little.
Short distances are important with heavy batteries
Redwood has already set up a small office in Mannheim. The team is led by Dirk Demuth, Senior Vice President for European Business since the beginning of the year. The materials scientist, who has a doctorate, has, among other things, managed the business with automotive exhaust gas catalysts at BASF and is to drive forward the European expansion in the coming years.
According to insiders, the first project to be built is a recycling plant. Redwood initially wants to focus on the battery anode side and the necessary copper foils.
According to several insiders, the company is in detailed talks about the location and is currently preparing the final cost estimates. The approval process should then start and the final location decision should be made. A major role is played by whether a customer, such as a car manufacturer or a battery manufacturer, has agreed to work together.
So far, the group has only operated its own test facilities.
The old batteries could be collected at the customer’s site in an interim storage facility. They are then to be transported by truck to the recycling factory. In this respect, short distances would be advantageous. “The batteries in electric cars are heavy, today a battery with an output of 93 kWh weighs more than 600 kilos. For comparison: The first VW Golf weighed only 150 kilos more,” says Christian Koenig, who runs a consultancy for electromobility in Atlanta. Short transport routes therefore play an important role, but at the same time the energy costs of recycling are a factor that should not be underestimated.
Recycling is an important topic for the future of electromobility
Redwood would have a potential partner in Tesla in Grünheide, with whom it has been associated for many years. Another possible partner is Volkswagen. The topic of recycling is relevant, said VW Chief Technology Officer Thomas Schmall recently in an interview with the Handelsblatt. “The goal is a closed material cycle,” says Schmall. On the way there, the main thing is to ensure the quality of the recycled material.
VW has set up its own facility for this purpose in Salzgitter. But they also work together with external experts, according to Wolfsburg. Should Redwood be competitive, one could also cooperate in Europe.
The German-American Chamber of Commerce is also aware of the problem of high electricity prices in Germany. But that’s not all. “Of course, when compared internationally, high energy prices affect the attractiveness of business locations,” says President Simone Menne. “But they are only one factor of many for location decisions. This includes sustainable and reliable framework conditions as well as fast decision-making processes, even in times of crisis.”
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