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Biden’s IRA plan pushes battery-maker Northvolt to plan new factory in Canada

Northvolt AB CEO Peter Carlsson speaks during a press conference in Montreal, Quebec, Canada, Thursday, September 28, 2023.

Bloomberg | Bloomberg | Getty Images

U.S. inflation-cutting legislation prompted Swedish battery maker Northvolt to announce a plant in Canada earlier than initially expected, a concrete example of how Biden’s policies are affecting business decisions.

“This definitely accelerated our decision to expand to North America,” Northvolt co-founder Paolo Cerutti told CNBC.

“We always thought we were going to do this at some point, and early last year we really decided this needed to happen faster.”

Northvolt announced on Thursday that it will build a fully integrated lithium-ion battery gigafactory in the Canadian province of Quebec, the company’s first outside Europe. The plant will have an annual battery production capacity of 60 GWh and first operations will begin in 2026.

The $300 billion US Inflation Reduction Act, commonly known as the IRA, is a landmark climate and tax deal that includes green subsidies for businesses. For example, electric vehicles with at least 50% of their parts made in North America (and Canada) are eligible for tax credits, making them more attractive to consumers. Canada is also providing its own support in the form of loans to the Swedish battery maker.

Northvolt co-founder discusses opening new gigafactory amid IRA backdrop

“Canada is very clear that if they want to maintain a place in this race – batteries are going to play an important cornerstone role in the energy transition economy… they need to match or build a mechanism,” former Tesla employee Cerutti told reporters on Wednesday CNBC said: “This bill is close to or similar to the Inflation Reduction Act. “

“So I would say it was a catalyst, not the cause itself.”

The project is expected to cost US$5 billion, with Northvolt investing US$3.2 billion and local and federal governments each contributing US$1 billion.

Earlier this year, the German automaker Volkswagen It was also announced that it would open its first battery factory outside Europe in Canada. If it chooses to do so, Volkswagen will also be eligible for subsidies in Canada and the United States.

Europe and North America

Earlier this year, Northvolt was evaluating where to prioritize expansion; choosing between North America and Germany.

Now Europe’s largest battery maker is making progress on both fronts. German authorities pledged state support to Northvolt back in May, prompting it to move forward with plans to build another plant in the north of the country. It is expected to be completed and operational by 2026.

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Asked whether the US inflation-cutting bill announced in August 2022 played a role in pushing the German authorities to take more steps to support Northvolt, Cerruti said: “Honestly, I don’t know what the IRA is doing. What a role that plays.”

“As I mentioned before, there is a growing awareness that the energy transition and the shift to a decarbonized society need to be much faster than organic companies can afford to invest in this type of investment,” he said. “Building battery factories is incredibly capital intensive and technically complex, and governments are increasingly stepping in to ensure this happens.”

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