Swedish battery maker Northvolt announced that it has raised $1.6 billion of debt, more than doubling its capital as it readies its first production facility.

Northvolt is in the process of building its first gigafactory, Northvolt Ett, in northern Sweden, with a second, Northvolt Zwei, planned to follow in Germany in a few years. As of last summer, the privately owned startup said it had an order pipeline totaling $13 billion, and earlier this month it added another €2 billion ($2.4 billion) order from BMW.

The new debt funding will be used to help push Northvolt Ett over the finish line and into production by next year, starting with 16 gigawatt-hours of production with the potential to scale to 40 GWh. Northvolt Zwei is targeting commercial operation in 2024.

Since its founding just four years ago, Northvolt has developed close relationships with various partners and potential clients, including ABB, Siemens, Vattenfall and Volkswagen. In May, Volkswagen paid €450 million to take a 50 percent share in Northvolt Zwei. The German auto giant is expected to be the world's largest EV producer by 2030.

Northvolt's new loans came from a consortium of pension funds as well as commercial and public banks, including German development bank KfW and the European Investment Bank (EIB).

“The fact that we have these world-class financial institutions supporting a new industry in Europe is a clear sign of where the markets are headed and the opportunity that brings for sustainable projects," Northvolt CFO Alexander Hartman said in a statement.

EU sends right signals on energy storage

The electric-vehicle sector remains the principal motivation for battery manufacturing investments globally, although the stationary energy storage market is also set for rapid growth. (More here on GTM Squared.)

Recurring support for the EV sector from the EIB, which funds projects aligned with the EU’s policy goals, shows the strength of support among EU leadership. At the same time, battery manufacturing is viewed as essential to protect Europe's 13 million jobs in the auto sector while creating more along the way.

Germany and France are set to provide as much as €1.3 billion of public funds for an ambitious cross-border plan: Saft, a subsidiary of French oil major Total, will make batteries for Groupe PSA, which includes German car brand Opel and France’s Peugeot and Citroen. The project has a total value of up to €5 billion and would see two factories of 24 gigawatt-hours each developed in France and Germany — a scale of investment comparable to Northvolt’s.

A financial decision on Saft's manufacturing facility won’t come until a pilot line has been assessed.

Meeting the EU’s 2050 net-zero target will require not only rapid EV adoption but also massive deployment of wind and solar. With that comes the need for dozens of gigawatts' worth of flexibility from interconnectors, demand response and energy storage.

“The momentum for electrification is stronger than ever,” said Northvolt CEO Peter Carlsson in a statement. “Our customers need large volumes of high-quality batteries with a low CO2 footprint, and Europe must build a fully regionalized value chain to support them."

For a deeper look at Europe's future as a battery manufacturing hub, read GTM Squared here.