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Quebec has high hopes of becoming a player in the global lithium market with Hydro-Québec moving into the battery-storage industry, but experts say the challenges are immense and the province’s track record doesn’t bode well.

On Wednesday, Hydro-Québec announced plans to design and sell lithium iron phosphate batteries. The public utility aims to sell large numbers of the industrial energy storage units to transmission providers, distributors and other power producers. Hydro-Québec says the global lithium iron phosphate battery market could generate $3-billion in sales a year by 2030, and the utility hopes to gain about 10-per-cent market share. Hydro’s research centre has developed many promising technologies over the years, but so far the utility hasn’t achieved large-scale commercial success on any.

Joe Lowry, founder of Global Lithium LLC, which advises industry, governments and investors, is skeptical that Hydro Québec’s battery technology will be a gamechanger based on the province’s track record in the lithium industry.

“Quebec, over all, has been the poster child for unfulfilled lithium potential,” Mr. Lowry said.

The move into lithium batteries is part of a wider strategic push in Quebec to build a bigger footprint in the lithium market and eventually develop its own lithium sources. Canada has no operating lithium mines, and two Canadian companies that attempted to get new projects off the ground in Quebec have flamed out over the past decade.

In 2014, Canada Lithium Corp. went into creditor protection after spending $350-million on the construction of a lithium mine in Val d’Or. A Chinese state-controlled company, Jilin Jien Nickel Industry Co. Ltd., eventually acquired the assets. Jilin pledged to move the project forward, but the mine, now owned by North American Lithium Inc., has yet to go into production.

In recent years, the Quebec government took a big swing on Nemaska Lithium Inc., investing $80-million into the junior in 2018. Nemaska had plans to develop a lithium project in the northern part of the province, and said it had a new technology that would enable it to process lithium in Quebec, in addition to mining it. In 2019, Nemaska went into creditor protection after its capital costs soared, and after encountering problems with its manufacturing process. As recently as August, Quebec Economy Minister Pierre Fitzgibbon called Nemaska a poorly designed project and a “financial disaster.”

Despite Quebec’s significant losses on Nemaska, the provincial government not only stuck with it, but a few months ago pledged to put an additional $95-million into the company, calling it a strategic project. Mr. Fitzgibbon told The Globe and Mail in August that it was essential to establish “as many links as possible in the value chain, ranging from the extraction of minerals to the manufacture of batteries, so that Quebec can reap the maximum benefits.”

Globally, the lithium market has gone through a boom bust cycle over the past few years.

In 2016 and 2017, lithium prices exploded after investors bet that battery demand for electric cars would cause a shortfall in supply. Companies ramped up production, although not by as much as they promised. Still, the move precipitated a market crash, knocking back prices by about 75 per cent.

“People got overexcited on the demand side,” said Ahmad Shaath, equity analyst with Beacon Securities Ltd.

“The demand side was more of a nice ramp-up, as opposed to a hockey stick.”

Three large companies in the United States and two in China dominate the lithium industry, and Australia, Chile and China have the most mines.

Despite excitement over the move to greener energy sources, making money in the lithium industry has been elusive for even the large producers. Mr. Shaath said the industry requires investors who can remain committed over extremely long time frames and aren’t put off by short-term volatility.

“You need long-term investors to be by your side and believers for 10, 15, 20 years,” Mr. Shaath said. “That’s what Quebec is really supporting.”

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