Battery strategy goes flat: Net-zero target at risk Contents

Chapter 4: Strategic issues facing the UK

137.The development and deployment of batteries and fuel cells have to be viewed in an international context. Their applications (as set out in chapter 2) are being pursued by many countries, some with long-term strategies and significant funding. Similarly, the potential improvements in performance and cost (as described in chapter 3) are being investigated by researchers around the world, some with considerable resources. This chapter compares the UK’s battery and fuel cell sectors with those of its main international competitors, and identifies strategic issues that the UK will have to address if it is to succeed in these sectors.

Battery sector

138.The rise of batteries has been a global trend. Starting in the early-2000s, vehicle manufacturers have been exploring various routes towards decarbonisation, including biofuels, fuel efficiency, hybridisation, batteries and fuel cells.238 Their plans tended to focus on incremental changes to internal combustion engine technology and did not propose a switch to batteries or fuel cells for many years to come. Dr Chamberlain suggested that major manufacturers “were not taking electric vehicles seriously” at that stage.239 Then, in the late-2010s, various developments increased the pace of the transition, with a focus on batteries. The ‘diesel-gate’ emissions scandal over air pollution tests cast doubt on whether ICE technology could deliver the forecast reductions in greenhouse gas emissions.240 Batteries were shown to offer sufficient performance, and Tesla’s entry into the market showed that BEVs could be popular in the mainstream. Fuel cell vehicles are available on the market,241 but have not been prioritised by most manufacturers.

Automotive sector

139.The automotive sector around the world is now investing heavily to build battery manufacturing facilities (dubbed ‘gigafactories’) to supply their manufacture of BEVs; more information can be found in box 4. The International Energy Agency published a report in May 2021 forecasting that “Annual battery production for EVs leaps from 160GWh today to 6,600GWh in 2030, the equivalent of adding almost 20 gigafactories each year for the next ten years”, assuming output of 35GWh per year, per factory.242 Dr Colin Herron, Managing Director at Zero Carbon Futures, told us about global plans for gigafactories, saying that “China has 149 planned by 2030, [the EU] 19, the USA 11, and UK two”.243 Analysis by T&E in June 2021 identified 17 confirmed projects across Europe, with a combined production capacity of 474GWh per year.244

Box 4: Gigafactories

A ‘gigafactory’ is a large factory that manufactures battery cells or fuel cells. A battery gigafactory may also assemble cells into battery packs, or this may be done by another company in the supply chain.

A battery gigafactory’s annual output is measured in gigawatt-hours per year (GWh/yr). For example, if a factory produces cells or batteries that can each store 25kWh of energy, and it has an annual production output of 2GWh/yr, then it is manufacturing around 80,000 batteries per year. However, once installed in their applications, those batteries could be charged and discharged many times per year; doing so on average once a week would mean that the total amount of energy stored would be around 100GWh/yr.

Fuel cells tend to be referred to in terms of their power, because they do not store energy. If a factory manufactures fuel cells that each have a power rating of 500kW, and it produces 4,000 units per year, then its manufacturing output is 2 gigawatts per year (GW/yr). However, the energy produced by those fuel cells each year would depend on how often they operated; if used for half the time on average, then they would produce 8,760GWh/yr.

140.The UK currently has two major battery manufacturing facilities. The Envision AESC gigafactory at Sunderland was originally built to manufacture cells and battery packs for the neighbouring Nissan car plant. It has an annual production capacity of 2GWh and was the largest plant in Europe when it opened in 2010. Hyperdrive Innovation’s HYVE facility purchases cells and assembles them into battery packs for a range of customers.245

141.The Faraday Institution predicts that UK battery demand will necessitate at least one new gigafactory from 2022, and another from 2025. Assuming an average production capacity of 15 GWh pa, it estimates that the UK will mostly likely need eight gigafactories by 2040.246 The Society of Motor Manufacturers and Traders (SMMT) estimates that, by 2030, the UK will need battery manufacturing capacity of at least 60 GWh per year (enough for 1 million electric vehicles).247 Some vehicle manufacturers are making commitments that will contribute to that demand for cells. For example, in July 2021, Vauxhall announced that it would invest £100 million in its Ellesmere plant (supported by the Government) to produce electric vans and passenger equivalents. It will assemble the battery packs but not manufacture the cells.248

142.Nissan made a series of announcements in May and July 2021 about its operations in Sunderland, including that it would build a new gigafactory with Envision AESC (with an undisclosed level of financial support from the Government) that will have a production capacity of 9GWh per year (200,000 batteries per year), potentially rising to 25GWh per year.249 Britishvolt is constructing a gigafactory at Blyth, which is expected to begin manufacturing in 2023 and reach a production capacity of 24GWh per year.250 AMTE Power is currently considering building a new cell manufacturing facility, with plans to announce their final decision in 2022.251 These announcements are welcome, but do not amount to the level of manufacturing capacity required by 2030, as estimated by the automotive industry.

143.We heard that building gigafactories is just one part of the challenge. The UK then has to ensure that the automotive industry places sufficient orders to justify the gigafactories. The Advanced Propulsion Centre explained that a country seeking to build a gigafactory needs “Aggregate local demand that is high enough to justify a gigafactory investment”. It said: “For a 15GWh factory to land in the UK, Nissan or JLR would need to fully commit their entire UK production facilities to full BEVs immediately. Alternatively, numerous vehicle manufacturers could pool their short-term demand to justify the initial investment. Both strategies require ambitious planning and co-ordination on behalf of UK vehicle manufacturers.”252 David Wong from the Society of Motor Manufacturers and Traders suggested that “the Government could step in to facilitate some offtake agreements” to “get around the chicken-and-egg problem of whether batteries and fuel cells or vehicle manufacturing come first.”253

144.We heard that vehicle manufacturers prefer to have their supply chains, which now include battery manufacture, close to their factories. Jeff Pratt, Managing Director of UK Battery Industrialisation Centre, told us that the capital cost of a 30GWh gigafactory is around £2.5 billion, but that this accounts for only 20% of the cost of battery. He said: “The other 80% of the value is in the materials supply chain. You need the automotive industry initially to be the draw for the gigafactory, but once you have the gigafactory you need to follow on and get the supply chain into the UK to maximise the value. Currently, there is no established supply chain in the UK.”254 Rob Millar said that the “principal vulnerability that we see … is with the supply of cells”, but “It appears that many of the other supporting industries are already here in some format, whether directly involved in battery manufacturing or in something that can easily be adapted.”255 David Wong said that “government needs to create the right conditions and have a proper, fully costed and well-supported comprehensive transformation plan for the entire industry and the supply chain.”256

145.Dr Jeffrey Chamberlain suggested that the coordination of supply chains might become simpler in the automotive sector because of greater involvement by vehicle manufacturers. He said that manufacturers were controlling “who makes their cells for them and … the innovations underneath the cell manufacturing”. He recommended that governments should support these moves in order to secure gigafactories, “because … cars are made where they are used. If you support the [original equipment manufacturers] in the moves they are making now, ultimately the batteries will be made there as well.”257

146.The UK automotive sector faces an urgent need for significant change. In just over eight years, the ban on the sale of new petrol and diesel cars and vans will come into force. The sector must arrange sufficient manufacturing capacity and supply chains to maintain its market share in the face of competition from overseas. Before that, the ‘Rules of Origin’ will come into force in 2027 as part of the UK-EU Trade and Co-operation Agreement. David Wong told us that these rules will mean “55% of the value added has to be local content—originating content—from either the UK or the EU” and “the battery has to originate from either the UK or the EU.”258 Non-compliant vehicles will be subject to import duty of 10%.

147.Battery gigafactories will take time to reach the stage of manufacturing. David Wong told us that “it takes something like 30 to 42 months to get everything off the ground, including development, construction, test runs and, finally, the commissioning of a gigafactory.”259 Similarly, it takes time to adapt car manufacturing plants. Ian Constance told us that car manufacturers update their “platform designs, the basis on which they build their vehicles” every 10–12 years, and that the transition to electric vehicles would add to this, such that the cycle could take up to 14 years.260

148.We heard that manufacturers need close relationships with research partners. Professor Patrick Grant of the University of Oxford told us that researchers contribute to the development of battery chemistries and to the optimisation of manufacturing processes.261 Professor Emma Kendrick of the University of Birmingham explained the process of scaling up from proof of concept to industrial manufacturing. She said that scale-up was difficult in the UK due to a lack of companies that could produce intermediate quantities of new materials, which instead had to be sourced from overseas.262

149.The UK is competing with other countries to attract automotive battery manufacturing. Failure to do so would likely lead to vehicle manufacturing moving elsewhere. Recent announcements of future increases in the manufacture of cells and electric vehicles are welcome, but are still insufficient to meet anticipated demand. The Government will need to commit further funds for gigafactories, supply chains and training ahead of the 2027 and 2030 deadlines, to ensure that the UK’s automotive sector can maintain manufacturing at its current scale. These resources will have to reach from research through to manufacturing, and will have to be commensurate to those of international competitors.

150.Despite the urgency of the 2027 and 2030 deadlines, the UK also needs to plan on longer timescales. Manufacturing and supply chains require ongoing innovation in order to remain competitive, and need to be future-proofed to allow improvements in battery technology to be implemented with minimal cost and disruption.

Stationary storage

151.We heard of the importance of not neglecting other applications of batteries. At a research level, the Faraday initiatives focus on the automotive sector. There would be merit in expanding its remit to include batteries on power grids and in buildings. At a policy level, there are few drivers for the deployment of batteries in these applications. The upcoming decarbonisation strategies for buildings and for transport offer opportunities to encourage greater use of batteries.

152.James Sprinz, Vice President of Strategy and Business Development in Europe at Energy Impact Partners singled out the UK as “one of the largest markets for stationary storage systems” due to “market opportunities that were developed by National Grid, such as the enhanced frequency response products”.263 It is not clear whether that success could be replicated on the much larger scale of storage deployment required for decarbonisation. Beverley Gower-Jones, Managing Partner of the Clean Growth Fund, said that such investments are hindered by two factors: “the Government [does] not have a formal target for storage”; and “Storage is currently considered a subset of generation under Ofgem’s regulation … which can create difficulties in planning, licensing and … network usage charges”.264

Fuel cell sector

International context

153.The uptake of fuel cells is lower than for batteries, in the UK and most other countries; but we heard that demand has grown by “40% to 50% per year over the last five years”.265 Several countries are making strong commitments to hydrogen. For example, Germany is spending €9 billion on hydrogen technologies; South Korea aims to install 15GW of fuel cell power by 2040 and to produce 6.2 million FCEVs by 2040; Japan aims to have fuel cells in 5.3 million homes by 2030; and China aims to deploy 1 million FCEVs by 2030.266 In contrast, the UK Hydrogen and Fuel Cell Association said that “In the context of hydrogen and fuel cell innovation specifically, (and from a cash perspective) the UK is ‘orders of magnitude’ behind”.267

154.Manufacturing is led by companies in Asia, but several UK companies have strong reputations in the manufacture of fuel cells (such as Ceres Power and Intelligent Energy) and electrolysers (such as ITM Power). Jo Godden explained that fuel cells and electrolysers involve two types of manufacturing and that the UK should seek to do well at both aspects. She said that “manufacturing at scale for the components … is more of a modular approach … . We are pretty much at that scale now.” She added that the next step was “improving the automation, improving the process and getting to a lower cost of production so that we can scale as the market scales.” By contrast, she said that the assembly of components into ‘the stack’ (the core of a fuel cell or electrolyser) is well-served by mass production in a gigafactory.268 For example, in January 2021 ITM Power opened a new electrolyser gigafactory in Sheffield with a production output of 1GW per year.269 Also in January 2021, Intelligent Energy announced plans for a new collaboration with GKN Aerospace to develop a hydrogen fuel cell propulsion for aircraft, including creating a gigafactory in the East Midlands.270

155.The UK’s small market for hydrogen technologies poses two challenges for the sector. First, most of the UK’s manufacturing output and expertise is used abroad, with a risk that manufacturing could move overseas. The UK Hydrogen and Fuel Cell Association said that major markets are “courting UK companies to establish subsidiaries there”.271 Ceres Power told us that manufacture on the scale required overseas was “much more commercially attractive”, but UK fuel cell manufacturing “has not been offshored yet”.272 Second, some UK companies cannot expand as rapidly as their overseas markets are growing. Fuel cells are not currently manufactured at scale in the UK.273 We heard that developing the processes to manufacture at scale is a key challenge, although innovations are being developed.274 As such, Ceres Power said that “The UK is experiencing real-time technology loss as global appetite for fuel cells soars”.275 Without sufficient government support to UK companies internationally, those companies could be overtaken by competitors. In that case, if in future the UK wanted to increase its use of fuel cells and electrolysers, that demand would be met by overseas suppliers instead of UK manufacturing.276

156.Several witnesses portrayed a more positive future for the UK fuel cell and electrolyser sector. The UK Hydrogen and Fuel Cell Association said that “the UK could become amongst the leaders in the global market. Unlike batteries, there is still ‘plenty to play for’ in this space … there is a ‘window of opportunity’ remaining for the UK to scale up and build on its current activities to take a leadership role.”277 Some felt that overseas companies could be attracted to the UK by the manufacturing expertise there; for example, ITM Power said “The UK could easily manufacture [polymer electrolyte membrane] fuel cells in volume for vehicles, especially if the Asian manufacturers wanted to establish production here as the size of the UK/European FCEV market grows.”278 Others noted the potential for UK companies to succeed elsewhere in the sector, for example in the supply chain for components and in the production of software for integrating fuel cells into wider systems.279

UK market expansion

157.As per the evidence discussed in chapter 2, there are several applications to which fuel cells are well-suited. It seems likely that the UK will need to use fuel cells in heavy road transport and rail. Fuel calls may have applications in shipping (possibly using ammonia if the issue of nitrous oxide pollution can be addressed) and in aviation (if safety issues with hydrogen can be addressed).They may also be used in buildings and for grid balancing. We heard that products for each application could be manufactured in the UK.280 However, the growth of the UK market is being held back. The Government’s policy of ‘technology agnosticism’ has arguably persisted too long, such that the heavy transport sector has no clear policy direction. Relatedly, the lack of strong regulatory pressure has meant that the heavy transport sector has had little incentive to make the decision itself. The Committee on Climate Change recommended a ban on the sale of new diesel HGVs from 2040,281 and at the end of our inquiry the Government launched a consultation on proposals to phase out diesel HGVs between 2035 and 2040.282 A similar ban for car and vans was credited by witnesses as an important driver for change, but the Government has yet to decide on this for HGVs.

158. We were told about an added problem: “the delay in publishing the hydrogen strategy is actively delaying investment into UK-based projects and in a number of cases is forcing investment abroad”.283 We note that decarbonisation strategies for buildings and for transport are pending, as well as the Treasury’s Net Zero Review. Each of these reviews will have implications for low-carbon energy resources such as hydrogen, and coordination will be needed if these resources are to be used in the optimal manner in sectors that need them the most. Hydrogen applications could have regional aspects, such as storage in offshore gas fields near to coastal counties, which links to the Government’s levelling-up agenda.

159.The UK’s fuel cell and electrolyser manufacturers have done well to establish themselves internationally despite being largely neglected by UK policy and public funding. These companies need support to expand manufacturing in the UK, compete internationally and contribute to the UK’s hydrogen ambitions.

160.The development and uptake of fuel cell technologies by the transport sector will be aided by clear regulatory signals, in particular the ending of the sale of new diesel HGVs, on which the Government is currently consulting.

161.The Government should publish its hydrogen strategy this summer. This strategy must be coordinated with the Government’s other decarbonisation strategies to enable use of hydrogen in those sectors for which it is the most viable option. The hydrogen strategy should make effective use of the UK’s expertise in fuel cells and electrolysers, both to support UK decarbonisation efforts and to seek a leading role internationally.

Cross-cutting issues

Skills and training

162.The battery and fuel cell sectors require similar types of skills at the different levels of development through to manufacture. These skills are in short supply in the UK. This is not a new issue; the Government’s Build Back Better strategy refers to the UK’s “persistent technical skills shortage”.284 We note that training and upskilling in areas of higher unemployment will support the Government’s levelling-up agenda. At the end of our inquiry, the Green Jobs Taskforce published its report. It noted that “there are gaps in the automotive sector workforce that will need to be overcome at a relatively fast pace, with a focus on retraining and upskilling of the current workers, and a push in new recruitment”.285

163.Regarding research, Professor Russell told us that electrochemical researchers can apply their expertise to batteries or fuel cells, and have tended to switch between the two based on availability of funding.286 She thought that, whilst the UK was “world-leading” in training electrochemists, it was more limited in teaching electrochemical engineering, which was needed for integrating batteries and fuel cells into systems.287 Professor Thomas agreed, saying that the Faraday Institution needed to improve engagement by electrochemical scientists with engineers in academia and industry.288

164.Regarding the automotive sector, the skills required for battery and fuel cells are different to those traditionally used in the transport sector. Supply chains, manufacturing, maintenance and recycling roles will shift from largely mechanical engineering to more electrical engineering, electronics and digital engineering. There will be a need for widespread training and upskilling. David Wong outlined the scale of the challenge. For manufacturing, “The Automotive Council estimates that about 10,000 workers currently need reskilling. This number is likely to grow to about 50,000 by 2025 and 100,000 by 2035.” For engineering skills, he said that the skills gaps “is around 5,000 workers”.289 Training programmes were established as part of the automotive industry’s ‘Sector Deal’ under the (former) Industrial Strategy.

165.The scientific community and advanced manufacturing sectors have tended to rely to some extent on international movement of skilled workers. Recent changes to immigration rules may affect the availability of these workers. Engineering professions are included on the Government’s list of ‘shortage occupations’. This scheme makes it easier for employers to offer jobs to overseas workers, by automatically contributing 20 points towards the 70 required for eligibility, and by reducing the salary threshold by 20%.290 The Global Talent Visa291 has been broadly welcomed as a route to employing overseas researchers. However, its costs can pose a barrier, particularly to researchers on lower salaries or with dependents who live with them in the UK, and for short-term contracts. Each applicant and any dependents moving with them must pay one-off fees of £608,292 plus the healthcare surcharge of £624 per year (or £470 per year for those under 18 years of age).293

166.The Government should take action to ensure that there are sufficient skilled workers in the automotive sector and conducting research into batteries and fuel cells. 1) There needs to be more support for training to enable the automotive sector’s transition to electric vehicles. 2) There need to be pipelines for training more researchers and engineers and supporting their longer-term careers. 3) There needs to be greater flexibility for recruiting international staff for research and manufacturing, including by reducing the costs associated with visas, particularly for short-term contracts.

Critical raw materials and recycling

167.One of the main limiting factors for manufacturing batteries (and to a lesser extent fuel cells) is the availability of materials. In particular, critical raw materials are those that are essential for national objectives. The Department for Environment, Food and Rural Affairs commissioned a report into critical raw materials across the economy, which was published in 2020.294 The report’s recommendations were echoed by several witnesses in the points discussed below. It appears that many of these recommendations are yet to be implemented.

168.Lithium-ion batteries have the disadvantage of containing several critical raw materials. Professor Richard Herrington of the Natural History Museum told us that “Every single [BEV] will need 75 kilograms more copper than an internal combustion car, and it will need rare-earth metals, 8 kilograms of lithium, 7 kilograms of cobalt and about 25 kilograms of graphite.”295 Dr Evi Petavratzi of the British Geological Survey said fuel cells require “platinum, and potentially cobalt”, and electrolysers require nickel and zirconium. She explained that none of the elements used in batteries or fuel cells are inherently rare; the term ‘rare earth elements’ applied to some of the minerals can be a misnomer.296

169.Availability of these critical raw materials is affected by geopolitics more than by geological or technical issues. Resources are concentrated in a relatively small number of countries. For example, around half of global reserves of lithium are in the South American ‘lithium triangle’.297 China has a long-running strategy of securing access to critical materials. Newcastle University told us that “China dominates the raw material supply chain … and there is a risk that it may exercise some controls.”298 ZeroAvia wrote that “Significant shortages of [lithium] and other materials might be expected globally and might adversely impact global and UK supply chains.”299 Shortages of supplies have already elicited responses on the international stage. For example, the Advanced Propulsion Centre UK said: “In the wake of semiconductor shortages and rare earth price scares, Joe Biden has issued an Executive Order into the United States’ position on critical supply chains like batteries, semiconductors, and the rare earth supply chain.”300

170.Extraction of critical resources can be detrimental to the environment, and to the health of workers and wider communities. Onshore mining can pollute air and waterways with toxic metals such as mercury and cadmium, open-pit mining removes ecosystems. Extraction of lithium from brines (as in the South American ‘lithium triangle’) uses significant volumes of water (approximately 500,000 gallons per metric ton of lithium), and can lead to contamination of water, soil and air.301 Cobalt is toxic in larger quantities, and studies show harmful effects upon miners who are exposed to dust.302 It is particularly damaging in terms of the greenhouse gas emissions due to the energy used for extraction and processing, and in terms of eutrophication (the enriching of water by nutrients so as to change the ecosystem).303 The emerging field of seabed mining can cause long-term damage to ecosystems.304

171.There are situations in which human rights are violated; for example, cobalt mining the in the Democratic Republic of Congo has attracted significant criticisms. The Warwick Manufacturing Group told us: “Cobalt is primarily sourced in the Democratic Republic of the Congo, a region historically characterized by political instability, social impacts in the mining sector, and lack of supply chain transparency.”305 These issues mean that safeguards are lacking against the environmental and health impacts of cobalt extraction. Protection Approaches highlighted the risk that expansion in the use of cobalt in the UK will likely exacerbate the problem.306

172.Witnesses said that the UK could struggle to secure access to other countries’ mineral resources, but it could offer its processing expertise, which is where most value exists in the mineral supply chain, for the benefit of both parties.307 Witnesses proposed two alternative approaches to sourcing critical raw materials: UK indigenous resources and recycling. Professor Herrington told us about Cornish lithium, saying that estimated resources were over 30,000 tonnes per year, compared with the UK’s forecast demand of 75,000 tonnes per year.308

173.Dr Paul Anderson highlighted findings from a recent report by the Birmingham Centre for Strategic Elements and Critical Materials,309 including the opportunity to use recycling of batteries as a source of materials. However, he explained that difficulties in extracting some materials led to widely differing recycling rates, saying “it is estimated that the figure for cobalt and nickel is quite high, maybe 70% to 80%”, whereas “for lithium [it] is much lower, perhaps only around 10% or less”. He said that “by around 2040, we might be able to source somewhere between 25% and 35% of our lithium and cobalt from secondary sources”.310 The main challenge facing the UK is that it does not recycle any lithium-ion batteries; they have to be sent to a facility in Belgium. Unless the UK develops its own facilities, recycled materials would be another import. Another cross-border issue is that recycling may have to be undertaken in line with standards such as the EU battery recycling directive.311

174.Fuel cells require less in the way of critical raw materials. The main issue is to reduce the amount of platinum in the catalyst. Nonetheless, there is interest in recycling materials. The Advanced Propulsion Centre UK told us that the sector is “focusing on closed-loop solutions due to the high value of raw materials”, primarily platinum, carbon fibre, ionomers and stainless steel.312

175.The Government should produce a critical raw materials strategy. This strategy should make use of the UK’s natural resources such as Cornish lithium, and should utilise the UK’s expertise in mineral processing to incentivise collaboration from countries with larger natural resources.

176.The Government should set out clear plans for developing industrial-scale recycling in the UK. As part of this, it should require manufacturers to incorporate ‘sustainability by design’ and to conduct full life-cycle analyses of the environmental and social impacts of batteries and fuel cells. The Government should introduce incentives and regulations to speed the transition to more sustainable technologies.

Investment

177.New technologies in any sector require funding at the various stages of development, from research to large-scale manufacture. Each stage can attract different types of funding. Research at low technology readiness levels is usually funded by the public sector. Once a technology has been proven in the lab and is at the latter stages of technological development, venture capital funds may provide funding in exchange for a stake in the business. These early investors tend to sell their stake once the company has grown to a certain size, at which point larger funds will invest. Ultimately, a successful technology company needs to find project finance for large-scale manufacturing. In the case of capital-intensive products such as batteries or fuel cells, this would likely involve large corporate funds, such as pension funds, automotive manufacturers or multinational oil companies.

178.Witnesses discussed the key factors that affect investment decisions. James Sprinz said investors look for companies with global potential and are more interested in “the company’s technology, the business model and the team that manages that company”, whereas the “policy environment and the country within which they are operating are very much secondary”.313 We heard concerns that the UK’s reputation had been damaged by earlier policy changes (on carbon capture and storage, feed-in tariffs and buildings’ energy efficiency) that had caused investors to lose money,314 but Beverly Gower-Jones said the UK was attracting investment at each stage of development for batteries and fuel cells.315

179.There was general agreement that governments had an important role in de-risking investments, via the various means discussed in this report. John Bromley, Head of Clean Energy Strategy at Legal and General Capital, spoke about how investors might approach a gigafactory proposal, saying they “would be very keen to understand how the supply chain, the research, the development and the engineering and then ultimately the product will fit together” to give “confidence that there will be an offtake for that product.”316

180.Dr Jeffrey Chamberlain talked about the merits of long-term government strategies. “In the US, the Government started deploying capital … into research back in the 1990s … As a result, those technologies that were seeded back then are now maturing.” He added: “The United Kingdom has just lagged a bit in overall funding into research, but … it is not too late. … This boom will last for decades, not years. Therefore, it is not too late to ramp up your research dollars, so that five to 10 years from now those research projects are turning into companies. It is already happening in the United Kingdom.”317

181.Finally, we heard that it is important for the Government to communicate its plans in a manner that is understood on the international stage. All the UK’s major competitors have had industrial strategies for many years. The UK’s Industrial Strategy was launched in 2017 but ended in 2021 with the introduction of the ‘Build Back Better’ strategy. Dr Jeffrey Chamberlain said: “the removal of the industrial strategy signals a decrease in seriousness by the UK Government … relative to others.” He added: “It may not be an accurate perception, but it is a perception.”318

182.The Government should explain to industry what will replace the industrial strategy, and should promote its industrial objectives clearly, both domestically and internationally. Its objectives should be supported by investments in the battery and fuel cell sectors, commensurate with those of the UK’s international competitors, including de-risking expansion of manufacturing and supply chains in order to attract the significant private sector investment that is required.

Progress of the transition

183.Ministers and officials who gave evidence were optimistic about the prospects of the UK overcoming challenges in order to decarbonise and transform its industries—in contrast with other witnesses. Anne-Marie Trevelyan MP, Minister for Business, Energy and Clean Growth at the Department of Business, Energy and Industrial Strategy, gave us her perspective on how industry views the challenges: “It is not easy; some of the challenges are technically very real. But everyone in every industry tells me that they are more enthused than they ever thought they would be if you had asked them even two or three years ago. I find that very encouraging.”319 Regarding research to meet the 2035 target for 78% cuts in emissions, the Minister said:

“We have brought everything forward by 15 years. That is cohering an incredible energy requirement, and a real energy, from across R&D and innovation with businesses. Businesses are leaning in. … There is great energy there. Carbon budget six has created much greater enthusiasm as well as necessity for us to push that forward. It is very exciting to see.”320

184.Ministers told us about funding in the UK for research and innovation, and investments in manufacturing and supply chains, and seemed unconcerned about comparisons suggesting that the UK Government is investing less than its competitors. Rachel Maclean MP said: “quite often stakeholders will come up with figures of various investments which they claim other countries are ahead of us on. All I will say is that it is always a fair challenge, but often they are counting completely different things.” She explained that the Government is primarily relying on the use of regulatory levers (such as phasing out the sale of particular technologies) to stimulate industry investment: “The Government have a huge role to play, but those dates, those policy frameworks and those signals to the market are critical to this.”321

185.The Government’s Decarbonising Transport plan was published at the end of our inquiry. It provides further detail about issues that were discussed with Ministers in our inquiry, but does not fully address concerns raised by many of our witnesses. Regarding automotive supply chains, the strategy reiterates previous spending commitments but does not announce additional support. Furthermore, the plan does not address the issue of supplies of critical raw materials, nor does it set out further resources or incentives to introduce industrial-scale recycling of batteries.322

186.The evidence we heard showed that the UK faces a series of very tight deadlines in its efforts to achieve its 2050 net-zero target. These are listed below and noted on the timeline in figure 5.

187.All these activities need to be underpinned by Government, with long-term strategies, clear regulations and effective policies. Several strategies are overdue and key decisions have yet to be made. These are listed below, and their urgency is noted on the timeline in figure 5.

188.The UK’s current trajectory of battery manufacture risks missing the Government’s target for the transition to electric light road transport, such that the UK may not be able to retain its automotive industry at its current scale. The situation is similarly serious for heavy transport and stationary energy systems, where lack of regulations and incentives have hindered decarbonisation using batteries and fuel cells.

189.The Government’s plans for decarbonisation and industrial growth lack detail about how it will overcome significant challenges to achieve ambitious targets with short deadlines. There was a stark disconnect between the optimism of Ministers and officials that UK industries can transition in very tight timescales, and the concerns of our other witnesses that the UK is far behind its competitors and faces significant challenges with innovation, supply chains and skills.

190.The Government should publish its decarbonisation strategies as a matter of urgency, and make a series of key decisions by the end of 2021, as set out above. We ask that the Government explains in its response to this report how it will meet each of the deadlines that we have discussed, with details of how it will ensure that the UK has the necessary research, skills, supply chains and finance.

Figure 5: Timeline of key deadlines and decisions

Timeline of key deadlines and decisions
.

Blue arrows indicate interactions between major topics.


238 In the UK, the Automotive Council and UK Advanced Propulsion Centre publish Technology Roadmaps covering a range of automotive technology, including internal combustion, battery electric and fuel cells. The most recent versions, published in 2020, are available via this webpage: Automotive Council and Advanced Propulsion Centre UK, ‘Technology Roadmaps’ (2020): https://www.apcuk.co.uk/technology-roadmaps/ [accessed 28 June 2021]

239 Q 143 (Dr Jeffrey Chamberlain)

240 Energy Research Partnership, Energy Options for Transport: Deployment and Implications (April 2016) pp 20–22: https://erpuk.org/wp-content/uploads/2016/04/54541_ERP_Transport_Report_Main-18-Apr-16.pdf [accessed 28 June 2021]

241 Examples of hydrogen fuel cell cars available in the UK are the Toyota Mirai and the Hyundai Nexo. Toyota (GB) plc, ‘Hydrogen-powered Mirai’ (March 2017): https://www.toyota.co.uk/new-cars/new-mirai/ [accessed 12 July 2021]. Hyundai Motor UK Ltd, ‘All-new Nexo’ (2018): https://www.hyundai.co.uk/new-cars/nexo [accessed 12 July 2021]

242 International Energy Agency, Net Zero by 2050: A Roadmap for the Global Energy Sector (May 2021) p 21: https://iea.blob.core.windows.net/assets/ad0d4830-bd7e-47b6-838c-40d115733c13/NetZeroby2050-ARoadmapfortheGlobalEnergySector.pdf [accessed 28 June 2021]

243 Q 81 (Dr Colin Herron CBE)

244 Transport and Environment, ‘UK auto industry left behind as carmakers focus EV production in EU countries’ (11 June 2021): https://www.transportenvironment.org/press/uk-auto-industry-left-behind-carmakers-focus-ev-production-eu-countries [accessed 28 June 2021]

245 Q 81 (Chris Pennison)

246 The Faraday Institution, UK electric vehicle and battery production potential to 2040 (March 2020): https://faraday.ac.uk/wp-content/uploads/2020/03/2040_Gigafactory_Report_FINAL.pdf [accessed 29 June 2021]

247 Q 132 (David Wong). See also Society of Motor Manufacturers and Traders (SMMT), ‘Full Throttle: Driving UK Automotive Competitiveness’ (29 June 2021) https://smmt.publicfirst.co.uk/ [accessed 20 July 2021]

248 Vauxhall Corporate News, ‘Ellesmere Port will support sustainable mobility through the production of an all-electric vehicle, starting in 2022’ (6 July 2021): https://gb-media.vauxhall.co.uk/en-gb/07-06-ellesmere-port-electric-lcvs [accessed 8 July 2021]

249 Nissan Motor Corporation, ‘Nissan unveils EV36Zero—a £1bn Electric Vehicle (EV) Hub to accelerate the journey to carbon neutrality’ (1 July 2021): https://uk.nissannews.com/en-GB/releases/release-10e81128ff45380ddab0a113f8007bb5-nissan-unveils-ev36zero-a-1bn-electric-vehicle-ev-hub-to-accelerate-the-journey-to-carbon-neutrality [accessed 7 July 2021]

250 Q 81 (Isobel Sheldon). See also BritishVolt, ‘Britishvolt selects Blyth, Northumberland, as the site of its first battery gigaplant’ (11 December 2020): https://britishvolt.com/news/britishvolt-selected-blyth-northumberland-as-the-site-of-its-first-battery-gigaplant/ [accessed 7 July 2021]

251 AMTE Power, ‘Announcement of intention to float on AIM’ (8 February 2021): https://amtepower.com/wp-content/uploads/2021/02/AMTE-Power-ITF-Final.pdf [accessed 7 July 2021]

252 Written evidence from the Advanced Propulsion Centre UK Ltd—Batteries (BAT0018)

253 Q 130 and Q 136 (David Wong)

254 Q 77 (Jeff Pratt)

255 Q 136 (Rob Millar)

256 Q 136 (David Wong)

257 Q 143 (Dr Jeffrey Chamberlain)

258 Q 132 (David Wong)

259 Q 133 (David Wong)

260 Q 99 (Ian Constance)

261 Q 73 (Professor Patrick Grant)

262 Q 72 (Professor Emma Kendrick)

263 140 (James Sprinz)

264 Q 145 (Beverley Gower-Jones)

265 Q 37 (Professor Anthony Kucernak)

266 Written evidence from Ceres Power (BAT0016)

267 Written evidence from UK Hydrogen and Fuel Cell Association (BAT0008)

268 Q 93 (Jo Godden)

269 ITM Power, ‘Manufacturing Commences at the ITM Power Gigafactory’ (4 January 2021): https://www.itm-power.com/news/manufacturing-commences-at-the-itm-power-gigafactory [accessed 29 June 2021]. The factory is rated as ‘1GW per year’, which is the combined power rating of the fuel cells it can manufacture in one year. The amount of hydrogen energy produced by those electrolysers each year would depend on their operating duration.

270 Intelligent Energy, ‘Intelligent Energy collaboration partner of GKN Aerospace in development of ground-breaking hydrogen propulsion system for aircraft’ (January 2021): https://www.intelligent-energy.com/news-and-events/company-news/2021/01/27/intelligent-energy-collaboration-partner-of-gkn-aerospace-in-development-of-ground-breaking-hydrogen-propulsion-system-for-aircraft/ [accessed 29 June 2021]

271 Written evidence from UK Hydrogen and Fuel Cell Association (BAT0008)

272 Written evidence from Ceres Power (BAT0016)

273 H2FC Supergen, Opportunities for hydrogen and fuel cell technologies to contribute to clean growth in the UK (May 2020): http://www.h2fcsupergen.com/wp-content/uploads/2020/04/2020_04_H2FC_Supergen_Hydrogen_Fuel_Cells_P_Dodds_DIGITAL_W_COVER_v05.pdf [accessed 29 June 2021]

274 Q 12 (Professor Nigel Brandon OBE) and Q 37 (Professor Anthony Kucernak)

275 Written evidence from Ceres Power (BAT0016)

276 Written evidence from UK Hydrogen and Fuel Cell Association (BAT0008)

277 Written evidence from UK Hydrogen and Fuel Cell Association (BAT0008)

278 Written evidence from ITM Power (BAT0013)

279 Q 48 (Professor Anthony Kucernak)

280 See, for example, 35 (Professor John Irvine) and Q 100 (Paul Stein)

281 Q 77 (Rachel Maclean MP). See also Committee on Climate Change, The Sixth Carbon Budget: The UK’s path to Net Zero (9 December 2020) p 29: https://www.theccc.org.uk/wp-content/uploads/2020/12/The-Sixth-Carbon-Budget-The-UKs-path-to-Net-Zero.pdf [accessed 2 July 2021]

282 Department for Transport, Consultation on when to phase out the sale of new, non-zero emission heavy goods vehicles (July 2021): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1002124/consultation-on-when-to-phase-out-the-sale-of-new-non-zero-emission-heavy-good-vehicles.pdf [accessed 14 July 2021]

283 Written evidence from UK H2Mobility, Element Energy (BAT0022)

284 HM Treasury, Build Back Better: Our Plan for Growth (March 2021) p 45: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/968403/PfG_Final_Web_Accessible_Version.pdf [accessed 29 June 2021]

285 Green Jobs Taskforce, Report to Government, Industry and the Skills sector (July 2021) p 22: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1002112/green-jobs-taskforce-report__1_.pdf [accessed 14 July 2021]

286 Q 45 (Professor Andrea Russell)

287 Q 39 (Professor Andrea Russell)

288 Q 19 (Professor Pam Thomas)

289 Q 137 (David Wong)

290 UK Visas and Immigration, ‘Skilled Worker visa: shortage occupations’ (6 April 2021): https://www.gov.uk/government/publications/skilled-worker-visa-shortage-occupations/skilled-worker-visa-shortage-occupations [accessed 8 July 2021]. See also discussion at Free Movement, ‘How to apply for the UK’s Global Talent visa’: https://www.freemovement.org.uk/uk-global-talent-visa/ [accessed 15 July 2021]

291 The Global Talent Visa is a UK immigration category for talented and promising individuals in specific sectors wishing to work in the UK. It replaced the Tier 1 (Exceptional Talent) visa in February 2020.

292 HM Government, ‘Apply for the Global Talent visa’: https://www.gov.uk/global-talent [accessed 8 July 2021]

293 HM Government, ‘Pay for UK healthcare as part of your immigration application’: https://www.gov.uk/healthcare-immigration-application [accessed 8 July 2021]

294 Department for the Environment, Food and Rural Affairs, Review of the Future Resource Risk Faced by the UK Economy (17 July 2020): http://sciencesearch.defra.gov.uk/Document.aspx?Document=14982_EunomiaFutureResourceRisk-FinalReportv3.pdf [accessed 8 July 2021]

295 Q 121 (Professor Richard Herrington)

296 Q 121 (Dr Evi Petavratzi)

297 Q 7 (Professor Mauro Pasta). The ‘lithium triangle’ is a region of the Andes around the borders of Argentina, Bolivia and Chile that is rich in lithium reserves in the form of salt deposits.

298 Written evidence from Newcastle University (BAT0035)

299 Written evidence from ZeroAvia (BAT0032)

300 Written evidence from Advanced Propulsion Centre UK Ltd—Batteries (BAT0018)

301 Institute for Energy Research, ‘The Environmental Impact of Lithium Batteries’ (12 November 2020): https://www.instituteforenergyresearch.org/renewable/the-environmental-impact-of-lithium-batteries/ [accessed 18 May 2021]

302 Farjana et al., ‘Life cycle assessment of cobalt extraction process’, Journal of Sustainable Mining, vol. 18, Issue 3 (August 2019) pp 150–161: https://doi.org/10.1016/j.jsm.2019.03.002 [accessed 18 May 2021]

303 Farjana et al., ‘Life cycle assessment of cobalt extraction process’, Journal of Sustainable Mining, vol. 18, Issue 3 (August 2019) pp 150–161: https://doi.org/10.1016/j.jsm.2019.03.002 [accessed 18 May 2021]

304 Nature News Feature, ‘Seabed mining is coming—bringing mineral riches and fears of epic extinctions’ (24 July 2019): https://www.nature.com/articles/d41586–019-02242-y [accessed 18 May 2021]

305 Written evidence from WMG (Warwick Manufacturing Group) (BAT0014)

306 Written evidence from Protection Approaches (BAT0044)

307 Q 122 (Professor Richard Herrington) and Q 122 (Professor Magda Titirici)

308 Q 122 (Professor Richard Herrington)

309 Birmingham Centre for Strategic Elements and Critical Materials, Securing Technology-Critical Metals for Britain (April 2021): https://www.birmingham.ac.uk/documents/college-eps/energy/policy/policy-comission-securing-technology-critical-metals-for-britain.pdf [accessed 15 May 2021]

310 Q 127 (Dr Paul Anderson). See also footnote 6 in that transcript.

311 Proposal for a Regulation of the European Parliament and of the Council concerning batteries and waste batteries, repealing Directive 2006/66/EC and amending Regulation (EU) No 2019/1020, COM(2020) 798/3

312 Written evidence from the Advanced Propulsion Centre UK Ltd—Fuel Cells (BAT0019)

313 Q 142 (James Sprinz)

314 Q 118 (Dr Keith MacLean OBE)

315 Q 140 (Beverley Gower-Jones)

316 Q 141 (John Bromley)

317 Q 143 (Dr Jeffrey Chamberlain)

318 Q 146 (Dr Jeffrey Chamberlain)

319 Q 177 (Anne-Marie Trevelyan MP)

320 Q 170 (Anne-Marie Trevelyan MP)

321 Q 177 (Rachel Maclean MP)

322 Department for Transport, Decarbonising Transport: A Better, Greener Britain (July 2021): https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1002285/decarbonising-transport-a-better-greener-britain.pdf [accessed 14 July 2021]. The strategy reiterated spending commitments of £1.5 billion for 2015–21 to support uptake of EVs, and £2.8 billion during the current Parliament (£1 billion for automotive manufacturing and supply chains, £1.3 billion for charging infrastructure, and £582 million for plug-in vehicle grants). These had been discussed previously by the Government, for example in the Ten Point Plan published in 2020.




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