WATTS Up—Canada’s Battery Jackpot
- August 3, 2021
The shift toward battery electric vehicles has delivered an astonishing amount of opportunities for mining, manufacturing, the supply chain and everything in between. But is Canada ready to take its rightful position in the global battery sector?
Globally the race has already started. The world’s largest economies are focused on net-zero targets and fast-tracking climate goals. The rapid growth of electric vehicle manufacturing has accelerated a frenzy of activity for countries ramping up manufacturing, adoption of new technologies and, of course, reshoring the supply chain for minerals and metals in an effort to break free from their reliance on Asian countries, which currently dominate the battery cell manufacturing sector.
North America, on the other hand, is pretty far behind in terms of establishing its place as a global player, but there has been some progress. Last fall, Canada’s major OEMs all announced big investments in manufacturing battery electric vehicles (BEVs). The federal government strengthened its climate plan commitment with a “mines to mobility” battery development strategy, and included $36.8 million to advance critical battery mineral processing and refining expertise in the 2021 budget. Earlier this year, in a partnership plan, the U.S. and Canada identified the battery supply chain as a collaborative opportunity. And at the end of June, Transportation Canada announced that it is setting a mandatory target for all new light-duty cars and passenger trucks sales to be zero-emission by 2035. To help Canada achieve this goal, the Government of Canada will provide a combination of investments and regulations, according to a Transport Canada press release.
“Canada is really starting from behind with electric vehicle (EV) batteries and the supply chain,” says Joanna Kyriazis, senior policy advisor for Clean Energy Canada. “Right now, the majority of EV batteries are produced in three countries—Japan, China and South Korea. China is also home to the vast majority of raw materials and refining capacity, as well as the EV battery component manufacturing. Cathodes and anodes are high value pieces of the batteries, and again, the majority of that production is happening in China. That’s where a lot of the global production is happening.”
Kyriazis continues, “in the past five years, the European Union (EU) has made incredible strides building up its own EV and battery industry. It has economic ambitions to transition to a fully green economy. And five years ago the EU commission took a step back and realized that batteries are really the linchpin of this transition.”
If the EU wanted to electrify buildings, vehicles, and the economy, it needed to make sure it had the batteries to do just that and not be overly dependent on international sources.
“But in North America the battery industry is pretty nascent,” says Kyriazis. “In Canada, we do have the raw material deposits of the key metals and minerals needed for BEVs—nickel, lithium, cobalt and graphite—on the upstream portion of the supply chain. But of those raw materials, virtually none of the metals and minerals that we are producing are being fed into the battery supply chain. Mining companies are feeding into incumbent industries like steel making or aluminum and continuing with business as usual because to bring new mining projects online is a really expensive and high risk process that takes five to ten years to get through all of the levels of regulatory approvals. What we’re hearing from mining companies is that until they have some definite downstream buyers for those ingredients, they’re not ready to pivot away from what’s already working for them.”
To take a couple of steps back and look at Canada’s economics regarding mining natural resources, Alan Arcand, chief economist for Canadian Manufacturers and Exporters (CME), says this situation lines up with Canada’s history of always being known for extracting resources to foster economic prosperity, which directly leads to the creation of the manufacturing industry.
“The clean technology economy is going to grow very strongly over the next decade in Canada, but also in other countries too,” says Arcand. “There’s definitely a huge opportunity for Canada and we have the resources and an already established auto sector, so I think we’re well positioned to take advantage of it.”
Of course, to build up this industry, businesses in Canada will face the same issues as any other industry. “It’s about manufacturing investment in Canada. The productive capacity in the manufacturing sector decreased over the last 15 years. Output and exports haven’t been strong. We once had a trade surplus of manufacturing goods, but now we have a pretty significant trade deficit. That is something the CME has been sounding the alarm on,” says Arcand. “We know what needs to be done and we know that we need to be in a competitive place for investment.”
To attract global companies and foster new startups in this sector will depend on the tax environment, according to Arcand. “We need to think about having more smart regulations, and we need to think about one of the biggest issues manufacturers face—a lack of skilled labour. We also need to think about linking the education system to what the industries need. There’s a lot that needs to be done in Canada to achieve this ambition.”
CME is considering net-zero commitments by manufacturers in Canada and how it will affect small and mid-sized enterprises (SMEs). In regards to the battery sector supply chain there will be opportunities that will trickle down to SMEs. But through a CME survey that asked questions about climate targets, Arcand says that it was definitely the larger companies that are thinking about it and adjusting their processes. And while smaller companies might not be focused on net-zero yet, as big firms make more climate commitments, they will be looking to buy from suppliers that are producing environmental focused products as well.
“It’s going to get to the SMEs sooner than they might think,” says Arcand. “These are things the government needs to think about and what it needs to do to help these companies adjust. It really needs a focused SME strategy for net-zero not just because of the carbon tax, but the demand from customers.”
As for current battery cell manufacturing, Canada already has some players that are considering entering the BEV market. According to Kyriazis, E-One Moli in BC makes batteries for power tools and is looking to build a larger scale factory to feed the auto market. And there is ElectroVaya, based in Mississauga, Ont., which produces batteries for forklifts.
The federal government and the province of Quebec also recently announced a $100 million investment in Lion Electric’s battery module production facility in Quebec.
But for Canada to really establish itself in the battery sector, Kyriazis says it has two options. “Cell manufacturing is really the anchor. The first option is to court a big player to set up shop here. Often those companies already have a good relationship with automakers
and they might already have some contracts in place. The other option is for Canada to build a more homegrown industry by helping companies like E-One Moli,” she says.
To complete the supply chain, Canada’s natural resources and mining are critical. With a downstream demand, projects could start up to feed into the sector. But the key risk for Canada, according to Kyriazis, is that regardless if it’s lumber or oil, we extract and supply raw materials but there’s no value added or we don’t capture any of the downstream opportunities in the supply chain.
It’s true that both the U.S. and EU are looking to reduce their dependence on China and Canada is a prime trading partner. “President Joe Biden, interestingly, is trying to navigate a sticky situation. The clean energy proponents are saying they need to transition the economy to net-zero by 2050. They need to decarbonize the electricity grid, and deploy new technologies, including BEVs and the batteries. But then you have the environmentalists and conservation folks saying that’s well and good, but we don’t want new mining projects to have negative impacts on our environment, drinking water or endangered species,” says Kyriazis. “Biden is wiggling out of this by looking to allies to secure raw materials and then build processing and refining capacity in the US to manufacture EV cells there.”
Canada’s mining industry contributes $109 billion to national GDP and is responsible for 19 per cent of Canada’s total domestic exports.
“The Canadian mining sector has one of the strongest track records on environmental social and governance standards in the world. While mining projects absolutely have impacts on local communities and indigenous communities, we’ve shown leadership in undergoing these projects in a responsible, informed and environmentally sensitive way,” says Kyriazis. “There’s, of course, room for improvement. But how we go about bringing new mining projects online, I think there are three key considerations.”
The first is that we need to decarbonize mining operations as much as possible, according to Kyriazis. This means electrifying those operations where electrification is an option, or deploying other types of technology to reduce emissions where mining sites are so remote that it doesn’t have grid access. The second consideration is engaging, consulting and involving indigenous communities in a meaningful way. And lastly, Canada needs to leverage the battery recycling leadership that already exists.
“We’re home to two of North America’s top three battery recycling companies—Li-Cycle in Mississauga, Ont., and Lithion Recycling in Quebec. They’ve found a way to recover up to 95 per cent of the materials in batteries at the end of their life and recycle them back into the supply chain,” says Kyriazis. “The better we get at battery recycling the more we can offset the need for new raw materials.”
Already having such capabilities could open more collaborative opportunities like Sweden-based Northvolt’s partnership with Volkswagen and Umicor. Northvolt is a battery cell manufacturer that is feeding Volkswagen with battery technology. And Umicor, which recycles the batteries at the end of life, feeds recovered materials back to Nothvolt.
There are endless opportunities for Canada to be a global leader in this quickly growing industry. But, while federal budget acknowledgements and talk of support are fine, Canada must act fast to gain its foothold or this window of opportunity will close just as rapidly as it opened. SMT