Northvolt is a Sweden-based start-up, which is founded by former Tesla employees, Peter Carlsson and Paolo Cerruti, is planning to build a massive lithium battery manufacturing plant in Europe.

Swedish energy giant, Vattenfall has extended its support for Northvolt in the construction of a lithium battery-manufacturing plant in Sweden with an investment of €525,000. Besides Vattenfall, Vinnova, the Swedish public innovation agency will also be offering financial support for the project.

The factory’s construction will begin in second half of 2018 and the production of batteries is expected to start by the end of 2020. The start-up is aiming to build the factory with a capacity of 32GWh by 2023 and the initial estimated cost is $4.25bn.

Northvolt CEO Peter Carlsson said: “Of course, it's very valuable for us to have one of the Nordics biggest energy companies involved and investing in Northvolt's plan to construct Europe's largest battery factory.

“Our investment aims to enable the fossil-free energy systems of the future. We are very happy that Vattenfall wants to join us on this journey and we believe it is a win-win situation for society as a whole.”

The lithium battery factory will cater to the needs of the transport and energy storage industries and it is being considered as the largest of its kind in Europe.

Vattenfall Strategy head and Northvolt's advisory board member Andreas Regnell said: "Vattenfall has a clear strategy of supporting the energy transition and climate-smart solutions.

“Electricity storage will be a significant factor in the transition, mostly in the transport sector and also the energy system at large. Northvolt is today the most interesting and exciting battery project in Europe.”

Vattenfall will own a minor share in the start-up. The company stated that electrification is now an important strategy for it and claims that for several years now, it has been working on electrification of the automotive sector in Sweden, Germany and the Netherlands.

Northvolt’s battery factory will help the region’s electric car makers to reduce the dependence on Asian battery manufacturers.

With an annual cell production equivalent to 32GW hours by 2023, the new battery plant is expected to employ between 2,500 and 3,000 skilled workers, Reuters reported.