The massive subsidies offered to Northvolt, Volkswagen and Stellantis to convince them to build mega-battery factories in Quebec as well as Ontario could come with an unexpected bill of several billion dollars for taxpayers.
This warning appears in an analysis released Friday by the Parliamentary Budget Officer (PBO), which puts the total cost of helping levels of government to attract these multinationals at $43.6 billion. That’s almost $6 billion more than government projections.
The taxpayer watchdog’s calculation, however, does not take into account the public debt charges incurred by governments to subsidize Northvolt, Volkswagen and Stellantis. The bill could thus rise by 6.6 billion by 2032-2033 if the subsidies widen government deficits.
The PBO report does not provide a breakdown between Quebec, Ontario and the federal government. Still, debt costs should be part of the equation when trying to calculate the recovery time, emphasizes Mr. Giroux.
“Including other costs (i.e. construction support, lost revenue and debt service) would further extend break-even points,” the PBO report points out.
Mr. Giroux’s team also estimates that Quebec and Ottawa will have to wait two years longer than expected before recovering the total amount of production subsidies of 4.6 billion offered to Northvolt for its battery cell factory. By confirming the arrival of the Swedish company in Montérégie last September, the two levels of government dangled a horizon oscillating between five and nine years.
Why this discrepancy between government calculations and PBO calculations? The director’s method takes into account the ramp-up in production which will have to take place when the Swedish start-up’s factory starts up, around 2026. For its part, the Federal Ministry of Innovation, Science and Economic Development tables on “full production” from the start of activities.
With Northvolt, governments have done their homework, believes Mr. Giroux.
“We were pleasantly surprised to see that our methodology was used for Northvolt,” he says. We do not consider this to be a major deviation [with the government hypothesis]. This is certainly not in the same way as the federal government which announced that everything would be reimbursed in less than five years for Volkswagen and Stellantis when it is closer to 20 years. »
On the sidelines of a speech before the Council on International Relations of Montreal (CORIM), the Minister of Economy, Innovation and Energy did not take formal notice of the gap between his forecast and that of the DPB.
“Nine years or 11 years…I think nine is good,” Mr. Fitzgibbon said. The hypotheses are different. But it’s a project that will pay off in ten years. »
In addition to subsidizing the production of the Northvolt complex – a decision to respond to the Biden administration’s Inflation Reduction Act (IRA) – the Legault and Trudeau governments are also jointly financing its construction to the tune of 2.74 billion per year. through loans and equity investments.
Northvolt will be established on the former Canadian Industries Limited (CIL) explosives site, straddling the municipalities of McMasterville and Saint-Basile-le-Grand, in the southern suburbs of Montreal. The land is 170 hectares in size – approximately 130 football fields.
The first phase of the complex is expected to require nearly 200 megawatts of power, or about half that of an aluminum smelter. In principle, work should begin by the end of the year.
