Northvolt, Europe’s largest battery manufacturer, has confirmed it will build its next gigafactory in Heide, Germany, following the federal government’s commitment to provide state aid.

The announcement comes after several months of uncertainty. In March 2022, the Swedish manufacturer and the German state of Schleswig-Holstein signed a memorandum of understanding to build a factory in the region. But in October 2022, Northvolt said it could postpone the plan and prioritize a US expansion instead — unless the EU was willing to IRAs higher subsidies for green technologies.

In response, the German government has now confirmed that it will fund the gigafactory under the Temporary Crisis and Transition Framework (TCTF) — a new EU state aid plan designed to support the development of green projects in view of the respective subsidies from the US and Russia’s energy monopoly.

The funding must first be approved by Brussels, but the federal government said it is already in “first constructive talks” with the European Commission.

“Supported by this commitment from the federal government, Northvolt has decided to take the next steps toward our expansion in Heide,” said Peter Carlsson, founder and CEO of the company.

The gigafactory will have an annual production volume of 60 GWh of battery cells, aiming to supply approximately 1 million EVs. It is expected to generate multibillion-euro private investment and create 3,000 direct jobs, with thousands more estimated to be in surrounding industry and services.

“With the next steps regarding Northvolt, Germany can look forward to one of the most important lighthouse projects of the energy and transportation transition,” said Robert Habeck, Vice Chancellor and Minister of Economic Affairs of Germany.

In addition to Commission approval, the gigafactory still requires preparatory work on site for construction and final planning permission. Deliveries of the first battery cells are expected in 2026.