Nextstar Energy Ltd. will produce batteries for energy storage, not electric vehicles, when its gigafactory in Windsor, Ont. begins commercial production next month.

Expanding into the growing market for energy storage production will keep the plant busy until EV sales pick up again, said Danies Lee, chief executive of Nextstar.

“The EV market is slowed down,” said Lee, chief executive of Nextstar. “It’s like a trend that will come soon, but it does not come as soon as we expect it, so while we are waiting, we have this opportunity from the (energy storage system) ESS market.”

ESS batteries are essentially large, rechargeable batteries that store energy during off-peak hours and release it at times of need. They can provide backup during power outages and can range in size from residential to industrial.

The $5 billion battery factory in Windsor marks Canada’s first large-scale lithium ion manufacturing facility. Hailed as an anchor for Canada’s emerging EV supply chain when it was announced in 2022, it has received an estimated $1 billion support from the federal and Ontario governments.

After three years of planning and construction, Nextstar — a joint venture between multinational automaker Stellantis NV and South Korea’s LG Energy Solution Ltd. — last month wrapped up construction on the 4.23-million-square-foot facility, which includes 11 buildings and stands out as Canada’s first and only large-scale battery production plant.

More than 1,000 people work at the plant, and the company has committed to hiring an additional 1,500 workers as it reaches full capacity.

But it enters commercial production next month amidst sluggish EV sales, which declined to 9.2 per cent of all new vehicle registrations in the second quarter of 2025, according to S&P Global Mobility, a research firm.

That’s down from 18.9 per cent in the fourth quarter last year.

U.S. President Donald Trump has also slapped 25 per cent tariffs on Canadian-made autos, and his administration had made clear that it will continue to enact policies designed to pull Canada’s auto sector into his country.

Those dynamics have put a cloud over Canada’s auto sector that has left its future size and end-market uncertain.

In contrast, Canada and the rest of the world are experiencing a period of rapid progression and widespread adoption of artificial intelligence technologies.

That’s made “everyone thirsty for electricity,” Lee said.

In turn, greater electricity demand is driving demand for energy storage system batteries (ESS), which make electrical grids more efficient and help operators manage demand and electricity load.

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Batteries can store energy from renewables such as solar or wind farms so it can be deployed as needed. Similarly, power plants that may ramp down during off-peak periods, such as nighttime, can continue to operate at full capacity and store potential energy until peak hours.

“Just think about it,” said Lee. “It takes about 15 years to set up one nuclear power plant but when it comes to ESS, it is a matter of one or two years. So we can more effectively bump up the capacity for the electricity using the ESS.”

BloombergNEF is forecasting 23 per cent growth in global battery energy storage system installations in 2025 and 14.7 per cent compound annual growth through to 2035.

But the chemistries differ for batteries used for energy storage versus EVs. To tap into the storage market, Lee said Nextstar will change out some of its equipment to produce lithium iron phosphate (LFP) batteries rather than producing the nickel-rich batteries used in most vehicles.

LFP batteries use iron phosphate as its cathode material while electric vehicles generally use NMC batteries, which contain cathodes made from nickel, manganese and cobalt. LFP batteries are also heavier and less energy dense, making them better suited for stationary uses where weight is not a key factor in performance.

“We pretty much have a flexibility and the capability to respond to where the opportunity is,” Lee said.

LG Energy, the majority owner of Nextstar, has a long history of producing and innovating in LFP batteries, he added.

On that note, LFP batteries are playing an ever larger role, according to Bentley Allan, a professor of political science at Johns Hopkins University, who studies the energy transition and industrial strategy in Canada and is also a principal at the Transition Accelerator, a Canadian non-profit.

Allan said LFP batteries were initially disregarded because they were considered unsuitable for EVs.

But there has been a reappraisal of their value in recent years, as their energy density increased and as costs came down. Plus, there may be other beneficial characteristics such as greater durability, and longer lifespan, he said.

“Batteries create efficiency, so they improve the overall performance of your grid,” said Allan. “They can directly lower prices, and they reduce volatility and volatility is something that utilities spend a lot of time quantifying, because it actually has a cost.”

As a result, LFP batteries are being deployed in far greater numbers, than many analysts were predicting, particularly as demand for grid-scale energy storage has grown, he said.

In addition, there may be various synergies and economic opportunities that arise from producing LFP batteries in Canada. For example, supply chains for some of the main raw materials including phosphoric acid or iron phosphate and lithium already exist or can be sourced within Canada, he said.

Vancouver-based Nano One Materials Corp. recently received $5 million from the federal government so it can ramp up its pilot plant in Candiac, Que. where it hopes to prove out and scale up its patented process for making LFP cathodes, which it says is 30 per cent more cost efficient. Its business plan is to license the technology.

“Having LFP batteries made in Canada is a huge win from an industrial strategy standpoint,” Allan said.

There are already clear signs of demand for energy storage batteries in Canada.

In 2024, for example, Ontario announced the largest battery procurement in its history, totalling 1,784 megawatts — enough to power 1.7 million homes.

According to a press release, the cost of battery storage is also declining — with Ontario citing an average price per megawatt of $672.32 in 2024, which represents a 24 per cent decrease from a similar procurement it undertook in 2023.

Lee did not say who Nexstar’s first clients will be, or even how large its first orders for energy storage batteries will be. For now, he said the company is aiming to ramp up its first line of production in mid-November by producing LFP batteries.

Eventually, it aims to start up second and third production lines too, one of which is likely to produce the nickel-manganese-cobalt batteries found in electric vehicles, he said.

According to the Parliamentary Budget Office, the plant received $1 billion in direct support split evenly between the federal and provincial government, and could receive as much as $17.6 billion in production subsidies through to 2032 — but the exact amount will vary based on how many batteries are produced.

Lee said producing LFP batteries, whether for energy storage or vehicles, should not affect its agreement with the governments as long as the company continues to hire people and operate the plant.

Nextstar is far from the only battery plant in North America that is expanding beyond EVs into the energy storage market.

In 2024, for example, Tesla’s revenue from energy generation and storage business, which includes the sale of grid scale batteries, rose 67 per cent to $10.1 billion from the prior year.

“Not that many people appreciate just how gigantic the scale of battery demand is,” Elon Musk, chief executive of Tesla Inc. said in an earnings call in July.

He calculated that power plants only generate half of their capacity. “If you add batteries to the mix, you can run the power plants 24/7 at full capacity, thus doubling — more than doubling the energy output,” Musk said.

But Nextstar would mark the first and only Canadian battery plant that could produce batteries for energy storage at scale.

“We have a great opportunity here in Canada,” said Lee. “The size of the market has been growing and being sensitive from an energy security and national security perspective, I believe that having a made-in-Canada battery will be a huge value to Canadian industry.”

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