One Year in a European Giga Scale LFP Battery Factory
In August 2024, Morrow Batteries opened a giga-watt scale LFP factory in Arendal, Norway. It’s been a rough year for European cell manufacturing in general, and Issy sat down with CEO Lars Christian Bacher to learn what a year at the helm of this ship has taught him.
Lars Christian has a background of 30 years in the oil industry. This still being the same year that Northvolt went bust, and with recent news about Cellforce laying off much of its workforce, I wanted this to be a wide ranging chat about Morrow and European cell manufacturing.
To the uninitiated, the south coast of Norway might seem like an unexpected place for a giga-factory. Yet, this region has been developing and concentrating a collection of companies that supply battery components, or in the case of Morrow, make LFP cells.
It’s hard to get a feel for a place from a website, could you start by telling me what I would see at Morrow when I walked through the doors?
So we have a sales force in Germany, close to the market. We have defined Europe as our home market. Then the beautiful campus of Grimstad where we have the research centre. And then we have the factory, close to the city of Arendal. So when you walk through the factory door, you get to a small section where we have some offices and a canteen. We have rooms for our employees to change from private clothing into work clothing, and a laboratory.
Then you go into the factory area, and that is highly compartmentalised. In certain stages of the production you really need to have low humidity, so there is a dry room area. There are two things that batteries don't like and that is humidity and pollution. Lots of people wearing hazmat suits. We do everything from mixing to formation.
Norway has a population of roughly 5.5 million people, with 1 million of those in the Oslo area. It’s not a densley populated place, which may lead to some accusations of it being sleepy (others may say peaceful). Does this affect recruiting people to live in the south of Norway?
We experience that many young people want to be part of the solution. We have a high number of applications from all over the world, and are more than 30 nationalities today, and a workforce of a little over 210 employees. Manufacturing is difficult, so you need to take down the complexity. One of the levers to reduce the risk is to recruit people that have done it before. So we have recruited from many different countries and companies to make that happen.
For people that move to Grimstad and Arendal, if you travel one hour west, you are in Kristiansand which is the largest city in the area, where you also have an airport. If you travel three hours east, then you are in Oslo. You can go swimming, sailing, boating, fishing, hiking or go and pick blueberries in the forest or mushrooms or whatever. That’s some of the things that this part of the country has to offer. People are very active in their spare time and they take advantage of those opportunities. If you're a big city person and that's the only thing for you, then this region is not for you. But we have a very low turnover.
Last year, during spring, Morrow was one of the most popular companies at a student fair at MIT in Boston. Then all the questions are kind of like, well, so what's it like moving to Norway? For people from New Delhi moving to this part of the country it's clean air. For people from South America, it's safe. So there are so many factors that as Norwegian, I guess I take for granted, but for many others, it's a positive kind of element to the work life situation.
Could you tell me a little more about the history of Morrow Batteries, and how you went from looking at lithium sulfur technology to LFP?
In many ways the lithium sulphur was part of the history before this company. One company focussing on Lithium sulphur merged their ideas with others, and more of us established, and from that came this focus on LFP, NMC and LNMOX, or LNMO. Sulphur was shelved very early partly because it's got a very long way before it becomes reality. We saw that the chemistry that we were closest to bring to the market is LFP. That's when we shelved the NMC chemistry. Then we focussed on enhancing that LFP chemistry in addition to developing this LNMO. Spending this year on R&D is around 20% to our budget. So it's a very R&D focussed company.
I think there were 8 large European battery initiatives back in the day, all of them focussing on NMC. So we thought that that market is going to be crowded, and focussing on LFP would be the differentiator. But it's also the fact that it was the quickest one for us to bring to the market. And that was the key argument for us.
The demands on a start up company and one running a gigafactory are very different. How has the leadership and structure of the company had to evolve?
You know the key reason for me joining this company back in the days when I was given an opportunity was that I liked to build stuff. I liked to build factories and start them up and build culture and organisations. So I've been through that and it's a very good question because it shifts, both the fact that what you're able to recruit is different. As you mature as a company then people are more interested in joining also. So you get able to tap into people with different experiences and that can help you to take the company forward. It is not only the C suite but the whole organisation has evolved with us maturing. Good people want to work with good people and everybody wants to be part of a success story and we are on the verge of actually doing that.
What’s the local community sentiment? How do local people feel living next to a gigafactory?
I think we've been very conscious about the fact that we need to earn that trust. We want to be a good neighbour. We have been very open about how we're going to go about this. We have invited people to open house and on one occasion, 170 people showed up. We have also what we call Morrow Monday, so once a month we have an open call on teams where we give a small update and are open to questions from people dialling in.
Then to your question about what's the sentiment around this, there are people that are very, very supportive, and there are people that are very sceptical. Part of that scepticism is that, well, Norway has never done it before, so why should we succeed? Other European battery companies went bankrupt, so why should you succeed? So all those questions arise from the people that, I guess, are looking at the glass half empty, instead of half full.
Is having this ecosystem, the ‘battery coast,’ important to you, since you import your materials from China?
So when you start out to develop your battery then it's kind of obvious that you want to tap into components, building blocks for a battery, that you know work because that takes down the risk again. So if you want to replace one of these, then we need to find someone else and then we need to sort of test that battery and validate it so you have to go through that whole cycle again, before you bring it to the market. So it's quite time consuming to change. But we will enhance all these batteries as we acquire operational experience and we see the progress at our research centre. But I think you see so many ripple effects.
It is this culture of producing and manufacturing as we evolve. We help each other and we test some of their products to help them in their startup and so on. So it's kind of a nice symbiosis where people are supportive and help out.
How do you think that the Norwegian work attitudes, of working between say 8-4 and taking proper holidays, factor into your competitiveness when the companies in China work much longer weeks? Is it possible to compete?
Of course the aim is to compete and I like to win. I've always liked to compete and win. I guess you have to have that attitude as an organisation too, to be able to succeed when starting up something like this. I think that we do our way. Many of the people that we recruit are people that would like to have that work life balance.Then if you're at work 8 hours or 10 hours and you are at work, 8 hours or 10 hours and you really put in all your effort.
We also see that people chip in because there is a situation that needs to be resolved or an issue. People skip vacations, people stay a few hours extra, they show up the next morning very early. We look at it as a competitive advantage, because then you attract people that would like to have that work life balance and way of life. People tend to be loyal to you because they know that there’s not many other places that they get that.
I think that Norwegians and many countries in the West are good at solving difficult tasks. If you look at Norway, you have companies today that you could argue that it's impossible for them to compete because there is someone over there works more hours or someone in another location that gets subsidies or whatever. But they are making it because we are very efficient. High degree of automation and very short communication lines between the operators and the senior management.
It doesn't take a long time to get hold of someone or fix it or address it and we delegate also a lot of accountability in Norway. You always have variation, but there's a high degree of trust in the workplace and you are accountable and responsible for doing a lot of your job. I don't mind how they solve it as long as they solve it, you know? Why should I interfere? As they say in British football, never change a winning team, so let them keep on.
How are your prospective customers responding to the low price and high quality of Chinese cells? How do you see that?
I think that if you take the big picture, from a climate point of view, the world needs all the batteries they can get from China, but they also need more batteries than China can provide. Right now, perhaps that climate argument is a little bit out of fashion, but the climate has not been solved just because as a topic it has disappeared from pages of papers or television.
This trend of globalisation is a little bit under threat. So you see more regionalisation and globalisation, which means that Europe wants that domesticated production. So we fit nicely into that, then again, if it's a gigawatt factory we are not the threat to the big actors because we are not at that scale, production volume wise. I know these big producers, they want high volume customers and so there is untapped potential in the market today. Now we see that from the discussion that we are having, also from a diversification from their supply chain.
What we are targeting is more heavy duty vehicles, rail, marine segment, stationary storage, critical infrastructure and defence industry. So this is where we get a lot of interest and many companies testing our batteries and we'll see how this evolves into concrete offtake agreements. We got feedback a few weeks ago from a company that tested our batteries. You're going to compete with consistency, good quality, high yield, low scrap rate, because that's what you have to succeed with when you have a little bit more, you know, perhaps another sort of cost base, which is somewhat a little bit higher.
We reported last year on how Morrow had some problems with the immigration authorities around the workers who were supposed to come and set up the equipment from South Korea. This led to tens of people being made redundant due to 4 months delay and around 100 million NOK in costs.
Could you tell me a bit about the trouble you had last year with the immigration authorities for importing the equipment from South Korea?
All the production equipment is from South Korea and some from Japan. When Norwegian companies are exporting production equipment, then usually the buyer wants to have representatives from that company to come and install the production equipment and help you to get it up and running. It's the same the other way around. It would have been very, very easy for us to support those technical experts if the company had been European. But since this was from South Korea and Japan, then they need to apply for a work permit. Then the border police suddenly found interest in this. The outcome of this has been that they have reported, I think, 15 cases to the Department of Immigration in Norway. The Department of Immigration ruled in our favour in all cases so far. And it cost us four months delay and 100 million Norwegian kroner in costs.
We have learned from it. I hope that Border police have learned from it and the immigration authorities, who are I understand in the process of making some clarification to how these rules are meant to be interpreted and practised to avoid this from happening again. We understand it now that when we are going to build the next factory, this is not going to be the case again.
Are there wider questions here about the barriers to importing knowledge in Europe, especially in the context of tighter immigration controls in this political moment?
I think that the Europeans understand that if you need to import a technology that you can't buy in Europe for different reasons, then people understand that you need to have representatives from that company to help you to get this into operations and that kind of temporary immigration.
In the future there might be some clarifications that need to be done, but I don't think that that is going to be something that they will put obstacles in the way for, because it's kind of like shooting yourself in the foot because you don't get that industrial development that Europe is in need of. Politicians tend to be practical, too, when it comes to this kind of situation and so I don't think that is going to be an issue.
What are your reflections on supply chain stability and do you worry about China restricting exports?
I think that to have a friend, you need to be a friend. And I hope that the climate issue is not going to stay under the carpet for too long, because it is very vivid and a challenge that we're facing, all of us. In business, you have a plan A and a plan B, but we have only a planet A, you don't have a planet B, so we need to fix this planet A. I hope that this topic actually can join forces and open some channels, or dialogue that we see are under stress today.
On your personal level or professional level, when you have some challenges in a relationship, that's not when you should start talking less to each other. You should start talking more. What we see now in the stress on geopolitical and security issues, whether it is, you know, Russia, Ukraine, the West and China or the Palestinian situation, all these have huge stress in the system. I hope that we continue to talk to each other because that's the only way to solve this and end up being at a better place in the end.
So I wanted to ask how do you go from 30 years in the oil industry to a CEO of a battery company? And what do you think Norway itself can learn from that because they wish to go from oil to clean energy and your journey?
I think that for the green transition to work a lot of people are needed in that space. Even though that I have worked in oil and gas for 30 years or someone else has worked in some other industries for many, many years we have a lot to bring to the table. And ultimately, regardless of what kind of industry you're in, for it to work, it is about the people. You have to get the people, your employees, to work together so you have to recruit good people and build a good culture for it to work. I like building factories and I like to start them up.
I didn't know that much about batteries before I started, AA batteries, all that kind of stuff like everybody else. But I've learned tonnes. We have an internal Morrow operational training academy, so all new employees that are joining the operations have to go through many different modules. I have participated in a few of them, I want to participate in many others. Partly because I'm kind of a nerd in whatever I do. But it's also about paying respect to the employees, show that I also spend the time to learn this stuff. It helps me in communicating with our employees, but also with customers and even the investors or potential investors and politicians.
Out of interest, how is Norway itself set up for investing in batteries, from its history of oil and gas investment?
The Norwegian state has an oil and gas company that they own 100% of Petoro, which owns a stake in many producing fields. The Norwegian state owns 67% of Equinor and the tax part of it ends up in the sovereign wealth fund on a yearly basis. But the sovereign wealth fund are not allowed to invest in Norwegian domestic companies. Back in the days the Netherlands were ahead of Norway on the development curve. They experienced what they called a ‘Dutch disease’, because they injected too much of that revenue stream into the Dutch economy, so it spiralled into cost deflation, wage inflation, you know, all that kind of stuff. It was somewhat devastating to the Dutch economy. So the Norwegian politicians learned from this, and they saw what happened.
And in addition, they are not allowed to act as venture capital or private equity capital. So they are allowed to invest a certain portion of it in property around the world, outside Norway, and they are allowed to own public listed companies. So you have to be a public listed company to have the sovereign wealth fund as an owner. I think today that sovereign wealth fund owns between 1.5 or 2% of all the shares in the world. So they can invest in battery companies in Europe, but they can't invest in us. But the Norwegian state has a climate venture fund called Nysnø, new snow or fresh snow in English. They have invested in Morrow, and we also have Innovation Norway that provided grants to support the development of the company.
With that, it was the end of our hour chatting, and I’d like to thank Lars Christian for chatting, and wish Morrow Batteries the best of luck in a tough market.
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