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Energy Storage

US battery incentives push Canada to offer more

The country is highlighting its access to battery minerals and renewable energy

by Matt Blois
June 8, 2023 | A version of this story appeared in Volume 101, Issue 19


A facility for producing battery cathodes being built by a joint venture between General Motors and Posco in Quebec, Canada.
Credit: Posco
General Motors and Posco are increasing their investment in a battery cathode joint venture in Quebec.

Canada is attracting lithium-ion battery manufacturing projects by increasing subsidies while highlighting its access to renewable electricity and battery raw materials. The success comes despite billions of dollars in incentives from the Inflation Reduction Act (IRA) designed to lure projects to the US.

Canada’s latest success came in May when a joint venture between General Motors and the South Korean chemical firm Posco decided to increase its investment in a battery cathode plant already under construction in Quebec. The governments of Canada and Quebec offered $300 million in financing for the plant.

Canada is also negotiating with Umicore to determine how much support it will provide for a planned cathode manufacturing facility in Ontario. And the government told Volkswagen in April that it would match the tax credits offered by the US to attract a battery cell plant to Ontario, a deal worth billions of dollars.

The Canadian Critical Minerals Strategy, a plan to turn the country into a key supplier of battery materials, is backed by $2.8 billion in government funding. But that pales in comparison to the $142 billion the US will provide through the IRA, according to estimates from RMI, a clean technology think tank.

It’s hard for Canada to compete with the amount of funding in the IRA, acknowledges Daniel Silverman, vice president of foreign direct investment at Investissement Québec, Quebec’s economic development and investment arm. When the IRA was passed, Silverman says, some projects that Quebec was vying for immediately came off the table. “It has significantly upped the ante,” he says.

But financing isn’t the only consideration. Manufacturers of battery components want to minimize their greenhouse gas emissions, so they’re looking for sites with renewable energy, which Quebec has in abundance. Silverman says securing access to the province’s hydroelectric power is usually the first order of business for an economic development project.

Reed Blakemore, who covers the energy transition at the Atlantic Council, a think tank, agrees that government subsidies are only part of the picture. Battery manufacturers also want a skilled workforce and access to raw materials, such as lithium and nickel. “Those are areas where a country like Canada can be incredibly competitive,” Blakemore says. “It already has a pretty robust mineral supply chain for a lot of these batteries.”

Despite the huge amount of money behind the IRA, Aaron Brickman, a researcher at RMI’s US program, says he’s not surprised Canada has managed to snag several large battery projects. He says factors like ease of permitting, strength of local universities, and robust infrastructure are often more important than subsidies.

But Canada’s window for securing these projects won’t stay open forever. The tax incentives in the IRA phase out over the next decade, so battery manufacturers are making decisions about North American investments now. “It’s clearly a daunting moment for places competing against the US,” Brickman says. “We’re seeing this in real time.”


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