The U.K. government could have as little as 48 months to support British electric vehicle manufacturing ambitions with the creation of battery gigafactories, experts believe.
“There is a need for the government to act in the next year or two,” said Stephen Gifford, chief economist at U.K. battery research body the Faraday Institution, in an interview. “From what I’ve seen, they are aware of the urgency.”
Automotive manufacturing is a mainstay of the U.K. economy, accounting for £82 billion ($105 billion at today’s rates) in turnover in 2018 and more than 14 percent of exports, according to the Society of Motor Manufacturers and Traders, an industry body. Nissan, Toyota and Jaguar Land Rover are among the biggest producers.
The Faraday Institution expects that importance to grow over the next two decades. In a March 2020 report, it predicted an average annual 1.4 percent growth for the sector, driven overwhelmingly by an increase in electric vehicle production.
The U.K. could be producing 1.6 million electric vehicles annually by 2040, up from less than 100,000 this year, the Faraday Institution forecasts.
And with batteries accounting for around 40 percent of the value of each electric vehicle and manufacturing likely to be co-located with auto factories for cost and logistics reasons, Britain needs to start planning soon for a major ramp-up in battery production.
U.K. battery makers could have clean power edge
The Faraday Institution’s calculations are that the U.K. will need to have around 140 gigawatt-hours a year of battery manufacturing capacity by 2040, up from roughly 2 gigawatt-hours a year currently, just to support the automotive industry.
This would equal around 12 percent of the battery manufacturing muscle forecast for the European Union and would require the development of about seven gigafactories with an average output of 20 gigawatt-hours of storage capacity a year.
For now, the Faraday Institution is upbeat about the U.K.’s prospects of achieving this goal. “We have clean energy,” said Gifford. “That’s increasingly going to be an important branding point. We have a skilled and productive workforce, and we already have automotive companies here.”
The Faraday Institution has compared the potential battery manufacturing cost of cells in China, Germany and the U.K. and "found that the costs are quite comparable,” said Gifford. “We could be quite competitive.”
Battery competition heating up
The problem for the U.K. is that the situation is changing rapidly. European nations such as Germany and France are investing billions into battery manufacturing capacity, and in Asia the sums are likely even higher.
Such investments will not only help these other markets to become more competitive but could also lock up lithium-ion material supply chains, squeezing the U.K. out of the picture. U.K. policymakers know this, Gifford said.
Two initiatives the government has already set in motion are the research-focused £274 million ($352 million) Faraday battery challenge and a £1 billion ($1.3 billion) Automotive Transformation Fund for zero-emission auto manufacturing.
Such moves could help tide things over in the short term since U.K. battery demand over the next two or three years is only likely to be enough to warrant a single gigafactory.
A company called Britishvolt is already looking to fulfill that need, with a planned 30-gigawatt-hour-a-year factory and a prospective manufacturing start date of 2023. But the U.K. market will need plenty more battery makers from the middle of the decade, the Faraday Institute predicts.
“There’s basically a window of opportunity over the next few years,” said Gifford.
How long this window lasts will in part be determined by a government consultation on phasing out internal combustion engines, he said. The consultation, which kicked off in February, centers on pulling forward a phaseout date of new petrol and diesel vehicles from 2040.
The government had already signaled a 2032 cutoff date, and in September there was press speculation this could be brought forward to 2030, in line with calls from opposition parties. As such, the window of opportunity is closing.
“Overall, the U.K. hasn't seen as much battery manufacturing activity as its counterparts, such as the EU, China and the U.S.," said Mitalee Gupta, senior analyst for energy storage at Wood Mackenzie, in an email.
This “may eventually become a bottleneck as the country tries to build and retain a strong position in the automotive sector, including EVs, and also ramps up energy storage deployments,” she said.