Battery plant location considering the balance between knowledge and cost: A comparative study of the EU-28 countries

Abstract

The selection of an optimal location for manufacturing plants is a topic of high strategic interest, as their construction is associated with a significant amount of irreversible capital and a substantial number of new job opportunities can be created in that region. Currently, the site selection of such plants is being intensely discussed in politics and industry in the context of battery cell production. Driven by an increase in battery demand, numerous new battery manufacturing plants will be built in the next decade. Thus, a profound understanding and a systematic discussion of the location of such plants are of crucial importance for researchers, industry leaders and policy makers. The present study introduces a methodology to systematically evaluate the location selection for such plants, considering the most relevant parameters, namely cost and knowledge. The application of the proposed methodology to the 28 countries within the European Union (EU) revealed that the parameters “building”, “energy” and “labor” can result in country-specific battery-cell cost differences of up to 6.4 US$ kWh−1. The lowest cost was found in Bulgaria (91.5 US$ kWh−1) and the highest in Denmark (97.9 US$ kWh−1). The highest knowledge level was found in Germany (knowledge score of 7.9) and the lowest level in Malta (knowledge score of −4.3). Furthermore, the results showed that no European country is unequivocally attractive in terms of cost and knowledge, resulting in the development of a new framework that considers these parameters contextually. By applying the framework to the 28 EU countries, we identified two different groups for location selection: the “knowledge leaders”, which comprise Germany, France, and the United Kingdom, and the “cost leaders”, which are mainly located in Eastern Europe and include Bulgaria, Latvia, and Poland. Additionally, we found that optimally running production processes have higher impact on total cost than location specific factor costs. As a high knowledge level can support the optimization of production processes, technologically lagging firms should opt for a location in a knowledge-leading country to pursue a strategy of catching up. By contrast, technically leading firms can choose between knowledge-leading and cost-leading countries in accordance with their innovation strategy. This study makes theoretical contributions to the field of manufacturing plant location through the introduction of a novel framework for the systematic evaluation of location by factoring in the cost and knowledge dimension. In terms of practical contributions, the findings support the selection of an optimal location for a battery cell plant within Europe. Further the findings can be used to provide support for policy design and planning.