As a charged calendar year for the Canadian battery and electric vehicle (EV) supply chain has come to an end, we take a look back at the highlights of 2023 and project that the best that is yet to come in 2024. Over the past year, significant advances have been made in: 1) the Canadian EV regulatory framework; 2) public and private initiatives; and 3) consumer trends that have all contributed toward the growing trajectory of electrified transportation in Canada. Enthusiasm for the electrification of transportation was experienced across the country and around the globe in 2023, and the contributions of Canadian institutional and private investors demonstrated a significant commitment to service both current demand and anticipated targets.
Below are some of the key developments from the last year that will strengthen Canada's position and role in the global supply chain for batteries and EVs.
1. Notable Regulatory and Policy Updates
On December 19, 2023, Canada's Minister of Environment and Climate Change, the Honourable Steven Guilbeault, announced the publication of the Regulations Amending the Passenger Automobile and Light Truck Greenhouse Gas Emission Regulations (the Regulations) establishing annual zero-emission vehicle (ZEV) sales targets for new vehicles (click here to learn more about the new sales targets). The Regulations establish that, by 2026, 20% of all new vehicles sold in Canada must be ZEVs. This rate gradually increases until 2035, when 100% of new vehicle sales must be ZEVs. The Regulations include a compliance credit system for manufacturers that will incentivize and enforce the respect of the newly established sales targets. The Regulations also provide for the possibility of obtaining credits via investments in fast-charging infrastructure.
Effective on October 5, 2023, the Regulation to amend the Regulation respecting the application of the Act to increase the number of zero-emission motor vehicles in Québec in order to reduce greenhouse gas and other pollutant emissions (A-33.02, r. 1) increased the credit requirements for vehicle manufacturers to be able to reach 100% ZEVs sales in 2035, and aims to achieve 2 million EVs in Québec by 2030, instead of the previous target of 1.6 million.
2. Public and private EV and battery initiatives
- Québec's Electric Vehicle Charging Strategy: In 2023, Québec further bolstered the future of its supply chain with the introduction of the Electric Vehicle Charging Strategy (2023-2030). The strategy aims to accelerate the deployment of charging solutions to meet the growth of EV fleets. Québec is a Canadian leader in the deployment of charging infrastructure, home to 39% of all public charging stations for light vehicles that have been installed in Canada, and is the only Canadian province to date to have adopted a charging-specific strategy. A budget of CA$514 million has been allocated by the provincial government to implement this strategy, in particular by installing 116,700 public chargers and providing 600,000 parking spaces for EVs in multi-unit residential buildings. This allocation was in addition to the CA$249 million already announced in Québec's 2030 Plan for a Green Economy. With the Québec government officially designating Bécancour, Shawinigan and Trois-Rivières as the Vallée de la Transition Énergétique innovative zone in May 2023, Québec is now better equipped than ever to make the most of its strategic advances as a leader of the electrified future.
- The Critical Minerals Infrastructure Fund: On November 20, 2023, Minister of Energy and Natural Resources of Canada, the Honourable Jonathan Wilkinson, launched the Call for Proposals of the Critical Minerals Infrastructure Fund, a CA$1.5 billion fund to support, over the course of a 7 year program, the critical minerals industry, which is an essential pillar of clean technologies.
- A federal budget supporting the battery and EV sectors: The federal government announced Budget 2023, which aims to promote a concerted government effort to support various investments and incentives in the battery and EV sector (read more about the 2023 federal budget here).
- Electric Buses in Québec: The government of Québec announced it will be adding more than 1,229 electric buses to public transit, making it the most important bus project in North America, at a cost of over CA$2 billion, of which CA$780 million will be borne by the federal government. The electric fleet will be manufactured by Nova Bus in Québec.
- Significant financial support by provincial and federal governments to major battery and EV projects: Many new investment projects have been launched in Canada in 2023. These investments, from both the public and private sectors, are essential to meet market projections. It should be noted that we have only highlighted a few of these projects below, in order to limit the scope of this article to an overview of the batteries and EVs market in Canada.
| Projects | Details |
|---|---|
| Umicore | The federal government and the province of Ontario finalized a CA$2.1 billion cathode factory deal with Belgian-based Umicore. The factory, which will begin to operate in Loyalist, Ontario in 2025, is expected to create more than 600 jobs. Evidence of Canada's attractive nature for foreign EV industry investment, Umicore will receive financial support of up to CA$1 billion from the federal government and the province of Ontario. |
| PowerCo | The federal government granted CA$13.2 billion in subsidies, tax credits and investments to support Volkswagen and Volkswagen-owned battery company PowerCo SE's CA$20 billion battery cell gigafactory in St. -Thomas, Ontario. The gigafactory, which will be the largest in Canada, will potentially be able to produce a volume of up to 90 gigawatt hours, which has been touted as enough volume for approximately 1 million EVs per year. |
| NextStar Energy | In 2023, it was announced that NextStar Energy, the joint venture between Stellantis and LG Energy Solution, will benefit from up to CA$15 billion in production incentives per unit of production (up to US$45 per kWh) and in tax breaks from Ontario and the federal government to set up an EV battery cell plant in Windsor, Ontario. |
| Ford | The federal government and Investissement Québec will support up to CA$644 million of a CA$1.2 billion Ford EV battery plant project in Bécancour, Québec. The plant will be operational as of 2026 and will eventually produce 45,000 tonnes of battery materials per year, thus supporting around 225,000 EVs per year. The project will create more than 345 jobs. |
| Northvolt | The Québec and federal governments together will lend CA$2.7 billion to support Sweden-based Northvolt's CA$7 billion battery gigafactory just outside Montréal, Québec. Québec and Canada will also mirror the Advanced Manufacturing Production Credits set out in the US Inflation Reduction Act to match up to US$35 per kWh for cell manufacturing, which equates to CA$4.6 billion in government incentives over the next years, of which CA$1.5 billion will be provided by Québec. The project represents the largest private investment in manufacturing in Québec history, attracted in part by public financial support that mirrored the favourable conditions available in the US via the Inflation Reduction Act. The gigafactory will produce battery materials and will include facilities for battery recycling, creating over 3,000 jobs. |
| Volta Energy Solutions Canada | On September 5, 2023, Québec announced the launch of Volta Energy Solutions Canada's CA$750 million copper foil factory in Granby, Québec, of which CA$150 million will be provided by the Québec government. The plant will start producing copper foil as of 2026, with a production capacity of 25,000 tonnes per year and up to 63,000 tonnes per year in 2027. |
| General Motors and -POSCO Future M | On May 29, 2023, the Québec and federal governments announced that they would provide financial support to the joint venture between US-based General Motors and POSCO Future M, a Korean-based company, for the construction of a cathode active materials facility in Bécancour, Québec. The provincial and federal governments will each provide CA$150 million in financial support for this CA$600 -million project. |
| E-One Moli | On November 14, 2023, the BC provincial and federal governments announced a CA$1 billion lithium-ion battery cell production plant to be built in Maple Ridge, British-Columbia, of which CA$80 million will be provided by the BC government, while CA$204.5 million will be supported by the federal government. |
| Flo | The Canada Infrastructure Bank committed CA$500 million for the launch of its Charging and Hydrogen Refuelling Infrastructure Initiative. Québec-based Flo, a leader in EV charging, will be the first to benefit from this initiative by borrowing CA$235 million to fund its project of delivering about 1,900 charging stations across Canada. |
3. Consumer trends
Québec ranks first of all the provinces with 40,164 new battery electric vehicles (BEV) registered in 2023, and Ontario ranks second with 27,490. This represents a significant increase in the rate of new BEV registrations compared to 2021, when Québec had 22,412 new registrations and Ontario had 14,748.
New ZEV registrations in Canada reached 13.3% of all new vehicle registrations in Q3 2023, of which 76.0% involved the registration of BEVs, marking the biggest quarterly jump in BEV registrations in Canada to date.
4. Other recent policy updates
Under Canada's Clean Fuel Regulations, major fuel suppliers are required to reduce the carbon intensity of the fuels they import into Canada. Culminating in 2030, companies will be required to meet progressively more stringent annual reduction requirements. This regulation will establish a carbon credit-like market for compliance units, where fuel suppliers will be required to meet the reduction targets by retiring the required number of compliance units corresponding to a reduction in CO2 emissions. Fuel suppliers will be able to benefit from the installation of charging stations, which can earn them compliance units that can be resold to other suppliers to help them meet their targets, thus providing a certain degree of profitability for fuel suppliers.
According to Québec's Electric Vehicle Charging Strategy (2023-2030), the Québec government is planning to introduce regulations in 2024 to mandate the installation of infrastructure for charging stations in new multi-unit residential buildings of five units or more.
What to expect in 2024
2023 was a pivotal year for Canada's clean energy supply chain, marked by unprecedented advances, significant government initiatives and major investments. Canada ranked first in BloombergNEF's recently published Global Lithium-Ion Battery Supply Chain Ranking, topping a list of 30 countries (and dethroning China, who had previously held the top ranking in all previous editions) with the greatest potential to build a secure, reliable and sustainable lithium-ion battery supply chain. In a recent interview with Electric Autonomy 1, the Honourable Victor Fedeli, Ontario Minister of Economic Development, Job Creation and Trade, predicted that 2024 will be an "absolute banner year" for the industry.
"There's a window that's opened up and everybody's going to find a dance partner. This is the year that everybody will end up somewhere...because the [federal sales] mandates kick in. The only way you're going to make those mandates is if you start producing cars in the very near future. The only way you're going to do that is if you produce the batteries in the very near future."
As will be demonstrated throughout 2024, the best is likely yet to come with regards to the electrification of transportation in Canada, and all stakeholders will stand to benefit. The highlights referenced throughout this article and developments over the course of 2023 have laid the ground for many more exciting years to come.
That said, to successfully establish a brand new industrial base, much work remains to be done. Canada is playing catchup in the establishment of its EV supply chain, particularly vis-à-vis its Asian counterparts that have invested heavily in the past few years to establish their own supply chain. Private and public investment is needed more than ever to support rapid growth in what is amounting to be an international industrial race.
The exploitation of Canada's critical minerals that are essential for the battery industry is one of the key opportunities that must be effectively harnessed. However, such opportunities and the overall industrial revolution of electric transportation are not without obstacles. Challenges are particularly present in Canada with regards to the financing of mining projects, securing the requisite permits and juggling associated delays while seeking to become a global industry pioneer. Further investment and regulatory frameworks pertaining to the end of the EV battery life cycle are also necessary to complete the supply chain and to ensure holistic success; EV batteries that have reached the end of life represent a potential logistical and environmental waste management issue that requires concerted action.
A strong battery and EV supply chain will also require further strengthening of the supporting research and development ecosystem. In these challenging and uncertain economic times, startups and emerging technology companies in the green economy are facing funding challenges, and company valuations have experienced volatility amidst increasingly conservative investor attitudes. Many companies in the battery and EV supply chain will need to demonstrate resilience during this challenging economic cycle and persevere with the ambition of being better prepared for long-term success in the battery and EV innovation ecosystem.
The past year was a successful one for the Canadian EV industry and 2024 will likely continue to generate positive momentum. However, much work remains to be accomplished and many challenges persist as Canada seeks to establish its EV supply chain as a global leader. As more exciting news in 2024 continues to develop in the EV industry, stay tuned for further insights provided by Dentons' Batteries and EVs Bulletin.
Footnote
1. https://electricautonomy.ca/2023/12/15/ontario-david-paterson-vic-fedeli/
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