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Time running out for UK gigafactory investment
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The UK has a limited window in the next three years to attract further investment into an onshore battery supply chain, or it will risk “gradual decline in automotive production in the UK”, according a new report from the UK parliament’s business and trade committee.
The report expresses particular concern that the UK is far off achieving its stated aim for battery production capacity by 2030. “Satisfying demand from the UK’s automotive industry and other sectors will require 100GWh of battery manufacturing capacity by 2030,” it concludes — a requirement that will increase to 200GWh by 2040, according to the Faraday Institution.
But the UK faces a significant shortfall from this 2030 target, without further investment, the report warns.
The UK currently has only one gigafactory, which has less than 2GWh of capacity,” the report points out. And this facility, located proximate to Japanese OEM Nissan’s plant near Sunderland, is run by Chinese battery company Envision AESC.
The report cites data from battery manufacturing firm AMTE Power that finds capacity of planned gigafactory projects in the UK adds up to only 90.5GWh. “At best, announced plans satisfy a little over half the capacity the nation needs by 2030.
“Time is now running short. The UK has a limited window in the next three years to attract further investment into this sector,” the committee warns.
On specific recommendations, the committee calls for incentive legislation in the mould of the US Inflation Reduction Act (IRA), which “has caused investment to flow into the EV supply chain, especially gigafactories, in the US at the expense of Europe”.
“The UK government must urgently respond to intensified global competition with an internationally competitive package of long-term support to attract private investment into gigafactories and the wider battery supply chain within the UK,” the committee says.
Such a measures would go some way to addressing its concerns that “the UK is in a race with other large markets that are offering significant subsidies to boost domestic production of electric vehicles and batteries”.
But the report’s recommendations are somewhat cautious when it comes to the amounts that should be paid out as part of any potential incentive legislation. The UK does not necessarily need to match the scale of subsidies on offer in other markets, the report suggests, as long as the country can instead offer a stable business environment with “conditions that de-risk investments”.
When India’s Tata Motors, parent company of Jaguar Land Rover announced plans for a gigafactory in the UK in July, the UK government was widely reported to have offered the firm £500mn ($623mn) in subsidies. Given a 40GWh capacity for this plant, the UK’s 2040 demand of 200GWh would cost a total close to £2.5bn in subsidies at the same rate.
But that would still mean the UK government paying approximately three quarters less in subsidies than the US on a per GWh basis than the US, which, since the passing of the IRA has made over $70bn available for a pipeline leading to 706GWh of capacity by 2030, according to consultancy Benchmark Mineral Intelligence.
Nor is the UK government being gun-shy in offering incentive to domestic vehicle manufacturing more generally. Earlier this week, Chancellor Jeremy Hunt announced a £2bn investment package for auto industry as part of a wider £4.5bn programme for British manufacturing.
Mike Hawes, CEO of industry lobby the Society of Motor Manufacturers and Traders, which contributed to the committee’s report, welcomes Hunt's “unequivocal vote of confidence in the UK’s critical automotive industry”.
“Coming on the back of almost £20bn committed by the sector in next generation plants and technologies this year alone, it is indicative of the scale of investment such support can leverage and the result of substantial collaboration between government and the industry,” Hawes says.
The UK's left-leaning opposition Labour party, with a strong lead in the polls ahead of an election that must take place by early 2025 at the latest, has also signalled its willingness to support the buildout of an UK EV battery supply chain. And the country's Advanced Propulsion Centre, an organisation set up to support the UK's transition to an e-mobility future, also thinks there is still time left to build a domestic battery supply chain to support a UK EV manufacturing base.
Specifically, the report identifies the midstream battery supply chain as an area where the UK could capitalise. “There are strategic benefits to building the UK’s industrial capabilities across the battery supply chain, but especially in midstream processes such as the refining of raw minerals and the manufacture of cathodes and anodes,” it says.
"The UK must build on its existing refining capabilities as the quickest way to plant its flag in a battery value chain,” the report adds. The country already has some lithium refining capabilities and there are plans to build new lithium refineries in the South West and North East.
In particular, the report identifies a large nickel refinery in South Wales, while cautioning that this plant “does not currently produce battery-grade materials”. Similarly, the Humber refinery operated by US downstream oil firm the Phillips 66 produces synthetic graphite and anode-grade petroleum cokes, a precursor to anode production.
“Onshoring the midstream of the battery supply chains has strategic benefits. The UK has a lot of value to add in these parts of the supply chain, especially given the strength of the UK’s chemical industry and the UK’s research into new cathode technologies,” the report concludes.
“The midstream includes some high value-added parts of the supply chain, which, if onshored, would help the UK to meet rules of origin requirements with the EU and other trading partners.”