Norway’s first lithium-ion (Li-ion) battery factory has taken a key stride toward construction with a NKr142m ($16.4) grant being given to developer Freyr by the Nordic country’s ministry of climate and environment.

The funding, awarded via the government technology development body Enova, clears the way for a pilot plant to be built in the northern city of Mo i Rana starting in the second quarter.

Freyr said the finance was “an important step” in realising its 2025 target of scaling production of its next generation battery to 43GWh .

“It is exciting to see Norwegian businesses lead the way in the global battery race and develop tomorrow’s industry with tomorrow’s technology,” said Enova CEO Kristian Nakstad.

“It is important to Enova that Norwegian battery production is as climate-friendly as possible, and we want to contribute to reducing the risks related to more environmentally friendly technology.”

Freyr CEO Tom Einar Jensen said: “The grant provides enabling financial support for our pilot plant and serves as a strong recognition of [our] ambition to produce battery cells with high energy density at low cost with the world’s lowest carbon footprint.”

In January, Freyr became a publicly listed company through a business combination with Alussa Energy Acquisition, raising some $850m in equity to develop battery manufacturing capacity in Norway.

Bloomberg New Energy Finance said in its latest market forecast that the US and Sweden would in the next five years rise to a place of importance in the global supply chain for Li-ion batteries currently dominated by China.