(Bloomberg) -- Stora Enso Oyj is preparing to invest about €100 million ($110 million) in a pioneering project to use wood in electric vehicle batteries and offer an alternative to components currently made in China, according to its chief executive officer. 

The funds would be used for a “demonstration-scale unit,” which is significantly bigger than the current pilot facility, Hans Sohlstrom said in an interview in Helsinki where Stora is based. No final investment decision has been made yet, he said.

The Finnish forestry company is developing a sustainable material that can used as anodes in batteries, helping Europe reduce its reliance on non-renewable, mined or synthetically produced Chinese imports. The ingredient, lignin, makes up as much as a third of a tree and is one of the biggest renewable sources of carbon, Stora says. 

However, the company, which generates its revenue from pulp, packaging materials, and wood products, is still “several years” away from mass-scale production after starting in 2021, according to the CEO. After the demonstration facility, Stora plans to build a commercial-scale unit, which would require “a big capital investment of hundreds of millions” of euros, he said, adding Stora will need to invest about two euros to create one euro of revenue.

“We also need to see whether we do it ourselves — a big investment into the commercial-scale unit — or whether we do it as a joint venture with, for instance, a battery manufacturer,” said Sohlstrom, who was appointed as CEO in September. 

Stora said earlier this month it has partnered with Swedish sodium-ion battery developer Altris AB to drive the commercialization of sustainable batteries using a hard carbon derived from lignin, which is a by-product of pulp manufacturing. In 2022, it announced a collaboration with Swedish battery maker Northvolt AB. 

Stora Enso is producing the substance, named Lignode, in its pilot factory in Sunila, Finland, with the aim of replacing mined graphite or synthetically produced graphite in batteries. Originally the development focused on lithium-ion batteries but as the technology evolves Stora has started to collaborate with sodium-ion battery developers too. 

“We want to have a solution which works everywhere — and it works,” the CEO said.

(Updates with CEO comment in second paragraph.)

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