Northvolt is coming to Canada, thanks to the Inflation Reduction Act passed by the US last summer. The incentives in the IRA have put a squeeze on other countries, which are being asked to step up with subsidies of their own to match those available in the US. A lot of those countries are not altogether happy with what the US is doing, but beneath all the grumbling, they feel they have little choice but to offer similar incentives in order to kickstart clean energy job growth for their citizens as well.
That’s exactly what happened in Canada last week, when Northvolt, the Swedish battery manufacturer started by two former Tesla battery specialists, announced it will build a $5 billion battery factory near McMasterville and Saint-Basile-le-Grand in Quebec to the east of Montreal.
When fully operational, the factory will be known as Northvolt 6 and is expected to employ 3000 workers. It will have an annual capacity of 60 GWh when it reaches full production in 2026. Construction of the first phase will begin before the end of this year.
Northvolt Benefits From Canadian Subsidies
To seal the deal, the Canadian government and the government of Quebec province each agreed to kick in about $1 billion. As a result, Northvolt will be the beneficiary of about the same economic incentives it would have been eligible for had it chosen to build the factory in the US.
“Canada is mirroring those measures pretty much one to one,” Paolo Cerruti, a former Tesla executive and co-founder of the Swedish company, told the New York Times in an interview. He also said he will oversee the operation of the factory when it is completed.
The location chosen by Northvolt has other benefits as well. Quebec has an abundance of zero-emissions electricity available, thanks to its access to hydroelectric power. Northvolt is committed to making the “greenest” batteries in the world and using 100% zero-emissions electricity to operate its factories will be a big part of achieving that goal.
Peter Carlsson, CEO and co-founder of Northvolt, said, “In the seven years since Northvolt was founded, we have pursued a singular goal — to establish a new, sustainable model for battery manufacturing. Today, we are expanding our ambitions by bringing Northvolt to Canada.”
Access to lithium is a big part of the equation, too. Paolo Cerruti said, “We would like to have as much lithium as possible from Canada.” A lithium mine near La Corne, Quebec, about 350 miles northwest of Montreal, began operations this year. Of course, the biggest benefit of all is that batteries made in Canada with materials from Canada will help the cars and trucks who use them qualify for the federal EV tax incentives contained in the Inflation Reduction Act.
Cerruti said Northvolt has lined up customers for the batteries made at the new Quebec plant but declined to name them. In Europe, Northvolt makes batteries for BMW, Volkswagen, and Volvo. The Quebec factory will also have a battery recycling component. Northvolt says that eventually half of the lithium, cobalt, nickel, and other raw materials required for making batteries will come from the recycling part of the factory.
In a Northvolt press release, Paolo Cerruti said, “We have in Northvolt Six enormous potential, not only to rapidly expand our ability to bring sustainable batteries into markets of North America, but to accelerate Quebec’s emergence as a key actor in the global energy transition. With its unique access to renewable power and raw materials, we see this as the ideal base of operations for Northvolt’s first gigafactory outside of Europe. We look forward to engagement with all local stakeholders and the province, to make Northvolt Six a textbook example of sustainable investment.”
Canada Becoming A Battery Manufacturing Hub
The Northvolt announcement comes six months after Volkswagen committed to building its first North American battery factory in Saint Thomas, Ontario. In a press release on March 13, Volkswagen Group CEO Oliver Blume said, “Our North American strategy is a key priority in our 10 point plan that we laid out last year. With the decisions for cell production in Canada and a Scout site in South Carolina, we are fast-forwarding the execution of our North American strategy.”
Thomas Schmall, board member for technology at Volkswagen, said, “Our gigafactory in Canada sends a strong message — PowerCo is on track to become a global battery player. With the expansion to North America, we will enter a key market for e-mobility and battery cell production, driving forward our global battery strategy at full speed. Canada and Ontario are perfect partners for scaling up our battery business and green economy jobs, as we share the same values of sustainability, responsibility and cooperation. We are committed to be a reliable partner and good neighbor for the people in St. Thomas and Ontario.”
Coincidentally, the Volkswagen factory is also expected to cost about $5 billion and employ about 3000 workers, but there is more at stake for Canada when it comes to jobs. Each factory will indirectly support as many as 10,000 more workers in ancillary industries. That’s why governments offer such generous economic incentives. They boost the local economy with jobs for everyone, from truck drivers to wait staff at local restaurants. That multiplier effect eventually leads to a higher tax base and more revenue for governments at all levels.
Ontario is close to Detroit and has always played an important role in the North American auto industry. Like Quebec, it offers plentiful clean energy for manufacturers looking to lower their carbon footprint but may have more skilled workers than its neighboring province to the east. Volkswagen has decided to place its new factory in the heart of Canada’s auto manufacturing area, where supply lines to the United States are well established.
Canada may not have a national law like the Inflation Reduction Act, but there is no question the IRA has convinced Canada to match its benefits in order to attract major investments from companies like Northvolt and Volkswagen. Policies matter and the policies of the Biden administration are reinvigorating the manufacturing sector in North America in ways that were not anticipated when the law was passed a year ago.
A disgraced former president and Snarlin’ Ron DeSantis both pledge to shut down the EV revolution and deep six the IRA. If that happens, all those investments and the jobs they create will go right down the toilet. Please vote responsibly.