MIRU.com conducted an interview with Mr. Kawaguchi, CTO of FREYR, a growing Norwegian LIB battery start-up in February 2021 (→ ノルウェーのスタートアップ電池企業フレイル（FREYR）CTO、川口氏に聞く）.
We met again online at the end of the year and asked about the progress of the company since then. FREYR is now listed on the New York Stock Exchange and continues to grow further. What lies behind its strength?
Q1: Since we spoke in February 2021, your company has largely expanded its business. Could you tell us about major changes?
Mr. Kawaguchi
We have been listed on the NY Stock Exchange since July 2021 (NYSE:FREY), and received $704 millions of funds. In October 2021, we announced our plans to build additional battery plants in the US as well as in Finland. In the latter country, they have mines and refineries for nickel since before and new projects for lithium mine development have been in progress while some cathode makers are entering into the country’s market. Finland has the potential to become a hub to cover the whole value chain of batteries from raw materials, batteries cells, systems, to BEVs. We are also considering entering various markets from raw materials to battery systems with the premise to use renewable energy in all facilities.
Currently, the headquarter of FREYR is situated in Luxembourg. The Norwegian subsidiary takes charge of our core business and is the base for business operations in other courtiers.
To be competitive in the battery industry, FREYR is focusing on a large-scale production. Our policy is to expand our business through partnerships in the battery value chain. It is not our focus to develop new technologies from scratch. I think this is a characteristic of our company.
Our partners provide us with their technologies[KB1] , and we take care of project development, fund procurement and the building of plants. As for factory operations, sales and customer support, we work together with our partners. This policy is applied to battery cell production as well as other sectors such as raw materials or battery systems. Also, we think that recycling batteries is very important as our mission is to produce sustainable batteries. First, we will focus on production scrap. We are currently in discussion how to tackle this. As for recycling, too, we will look for a partnership that will bring us recycling technologies.
Q2: Your pilot line is scheduled to be operating in 2022 and full operation in 2023. Any change in this schedule?
Mr. Kawaguchi
The project has been in progress as initially scheduled. The mass production start will be toward the end of 2023. We are currently building a customer qualification plant in Mo i Rana, located in the north of Norway which will be in operation by the end of 2022, with the construction of several gigafactories to follow.
Q3: Currently, the EU is finalizing the proposal for a new Battery Regulation which will impose the life-cycle management of batteries by setting targets for recycling or recovery of battery materials. For instance, a battery maker like Northvolt is entering into the recycling business. What about your company?
Mr. Kawaguchi
As I mentioned, our initial focus is on recycling production scrap. Normally, it takes some time to increase the yield rate of battery production. Even after the yield rate becomes stable, a certain amount of production scrap will always be generated. While we will work on optimizing the production, we are also in discussion with our partner 24M Technologies to directly use some of production scrap as raw materials. For the rest, which is not suitable for direct use, we will find a solution with recyclers.
Q4: If you engage in recycling, would you develop your own recycling system or would you start through partnerships with recyclers?
Mr. Kawaguchi
As our basic strategy is to find the best partners in all areas where we have business interests, we are also looking at partnering with other battery makers for recycling.
Q5: For recycling, would you treat only production scrap from your own facilities? What about end-of-life batteries?
Mr. Kawaguchi
We are looking at end-of-life batteries as well. The first step is to design batteries to be more recyclable. However, as for end-of-life batteries from ESS, EVs or other e-mobility on which we are focusing, they will become available in 20 years. Over this timeframe, recycling technologies will surely be improved. For this reason, we are not really planning to start with end-of-life batteries so soon. I think we will look for appropriate partners following the trend of recycling technologies.
As for end-of-life batteries of large size which are treated as dangerous goods, the costs for collection and transport are high. In addition, there will be a problem of CO2 emission for long-distance transport. It is not a cost-effective and environmentally friendly way at all to transport a large battery form a country where it became end-of-life to another where batteries are recycled. I think batteries should be recycled within a country or region where they become end-of-life.
In the EU, OEMs or importers are responsible for EV battery recycling. The current issues for lithium-ion battery recycling lie not only in its collection or transport but also in the low price of recovered materials relative to its recycling cost. We know that lead battery recycling is profitable. But even for NMC lithium-ion batteries whose metal value is relatively high, the recycling cost remains about 1500 euros/ton, after subtracting the value of recovered materials. Someone must cover this cost in addition to the cost of collection and transport.
Basically, OEMs responsible for recycling have to pay, so this cost will be reflected into the price of products.
Q6: Many of Japanese makers are reluctant to use secondary materials. How does you company see the use of recycled materials?
Mr. Kawaguchi
As I mentioned earlier, we are thinking of direct use of production scrap. We also signed a purchase agreement for recycled cobalt. A battery pack from an end-of life EV will be recycled by 80 to 90%.
In the recycling process, in addition to iron copperand aluminium used for the exterior and electronic connections of a battery pack can be separated, and all active materials (cobalt, nickel, lithium, manganese, etc.) can be extracted at high purity . Moreover, with the latest chemical processes, it is possible to recover the reusable form of graphite, plastic materials and solvents. However, as of now, the recycled materials usable for battery production are limited to metals which can be recovered at high purity.
The major constrains of recycling are its profitability and economic viability. In order to tackle these, legislations will play an important role. However, I think they should be realistic. For instance, the demand of LFP for ESS and EVs is increasing rapidly because of its durability and safety as well as its stable and low material price. On the other hand, the value of metals used for LFP is low as well. If a new battery regulation sets up a single target for minimum content of recycled materials for all types of new batteries, then battery price would be drastically increased. It would end up promoting batteries containing high value metals which have resourcing constrains.
Besides, for example, cars used in a developed country are not recycled within the country but exported overseas as used cars. (e.g., from Europe to Africa, from East Asia to Southeast Asia/South Asia, from North America to Central/South America). Unless we change this diagram, end-of-life batteries from EVs would not be available in the countries of their origin for recycling. While there has been a move to tighten export regulations for used cars, we need to consider if it is truly an environmentally friendly manner to reuse or recycle these car batteries which can still serve for its original purpose as a car.
Q7: Do OEMs want battery makers to engage in recycling business?
Mr. Kawaguchi
So far, we haven’t received such a request. European car makers are building their own recycling infrastructure. Even for raw materials for battery production, they are taking initiatives for supply procurement. In China, however, it is different. There, it is the battery makers that construct their own supply chain from resource extraction to recycling.
Q8: By the way, what is the impact of drastic rise of electricity price in Europe on the industry?
Mr. Kawaguchi
I think it is a serious issue that could topple the industrial structure of all of Europe. It is caused by the supply reduction of natural gas from Russia, and energy shifting to electricity to keep targeted CO2 emission reduction. Moreover, this harsh winter increased electricity demands even further while wind power generation suffers from the weather with high air pressure. In France, several nuclear power plants are currently not in operation due to some issues. Such short-term issues are adding another blow in addition to the structural problems of energy supply. While the situation may be easing in spring, the structural factors would remain so that the price is expected to remain high. As of now, the spot price of gas has gone up by a factor of 3 to 4 times compared to the previous year in the major European states.
In Norway where hydro power is the main source of electricity, we have the same situation. In the south, with very little rain in the last year and the completion of power transmission cables to Germany and the UK, the electricity price which was so far much lower, has increased to the level of the European continent. As normally the industry has long-term supply contracts, you don’t see an immediate impact. However, in a long run, some may lose their competitiveness and face a difficulty in continuing their business.
In the Northern Norway, they have sufficient rain and water reserve and their power transmission capacity to the south is limited. This fact enables them to reserve surplus capacity in hydro power generation, which kept the electricity price low. As we are currently building a plant in the north, this fact will give us an advantage in competition.
The price rise of electricity will generate further incentives to increase wind power and solar power capacity and the installation of stationary battery facilities. This will be another driver to boost battery demands.
As the electricity price soared to oil price, the price difference between fuels for ICE vehicles and electricity for EVs has become small. On the other hand, I think the need of “vehicle to grid solutions (V2G)” that shares EV batteries with the social infrastructure will increase. If EV owners can profit from V2G, this can be a driver to further boost EV sales. In addition, it can accelerate the transition to sustainable society.
(The article by Yuji Tanamachi first appeared in Japanese in MIRU.com, translated by Y. SCHANZ)
