Britain should be wary of joining Europe’s gigafactory stampede
Technology is vaulting far ahead of lithium-ion batteries. The UK must back the next big thing
‘Either the EU strategy will prove a white elephant, or there will be plenty of locally made batteries for sale in Europe’
Solid state batteries for electric vehicles will start to enter our consciousness within two or three years. Hi-tech pioneers will be rolling out the first commercial products by the late 2020s.
Progress will be jerky but this leap-frog technology promises a radical improvement in the range, weight and cost of EV batteries, disrupting the global car industry and its existing supply chains.
The US energy department’s national blueprint is targeting EV pack costs of $60 per kwh by 2030 without the need for cobalt or nickel. This demolishes the business model for petrol and diesel cars, but it also renders today’s gigafactories obsolete in short order.
The frenetic dash for subsidised gigafactories in Europe, America and Asia is likely to lead to a glut of generic batteries, just as the parallel dash for semiconductors will lead to a chip glut. Much taxpayer money will be sacrificed on the altar of industrial sovereignty.
As this newspaper has reported before, the US Argonne National Laboratory has found a way to quadruple energy density with a lithium-air battery using a solid electrolyte based on nanoparticles, able to charge and discharge for over 1,000 cycles. It does not require expensive materials. It can switch to sodium-air if need be, and salt is ubiquitous. Britain has ample rock deposits in Cheshire and Dorset.
There are such breakthroughs almost every month. I cite this only as caution that we should not overreact – or react in the wrong way – to this week’s fracas over Britain’s lack of gigafactories and warnings by Stellantis, owner of Vauxhall, Peugeot and Fiat. Stellantis says it may have to shut plants at Ellesmere Port and Luton unless the terms of the Brexit trade deal are changed, stoking fears that the whole British car industry could vanish along with 180,000 jobs. (The 800,000 figure bandied around is propaganda: it includes dealers).
Neither Stellantis nor Ford can meet the 45pc national content requirement for EVS from 2024 onwards under the Brexit accord since the batteries are mostly made in China or Korea. Stellantis buys its batteries from China’s CATL, a superb company that has stolen a march on global rivals. Read Henry Sanderson’s Volt Rush for details. Failure to meet the rules of origin threshold would trigger a 10pc tariff on exports to the EU.
Europe is in the same trouble. Its car manufacturers cannot meet the 45pc rule either and would therefore face the same 10pc tariff trying to sell into the UK’S market. The European car lobby, ACEA, has called for a three-year delay.
The last thing that Europe needs as it scrambles to fend off a tsunami of Chinese EV imports, and ultimately to avert a death spiral for the west European auto industry, is a fraternal fight with the UK over an arbitrary rule imposed by Commission officials who did not know what they were doing. The 2024 deadline will be postponed.
This scare has, however, shone light on Britain’s failure to deliver on chest-beating plans to turn the country into a global hub for EV batteries by the early 2020s, always a big ask given the voracious energy needs of lithium-ion manufacturing colliding with the UK’S nose-bleed electricity prices.
Britishvolt went belly up in January. Orral Nadjari, its founder, said the Government dragged its feet at a critical moment when power and commodity prices were spinning out of control. “We lost that window of opportunity. We already are behind East Asia. We’re already behind continental Europe. The UK, unfortunately, has lost out, or is losing out, on the gigafactory economy,” he told Sky News.
Prof David Bailey, from Birmingham Business School, said policy has been a sorry saga. “You would have thought they’d seen this coming. You can’t build a gigafactory without the Government playing a role but they scrapped the UK’S industrial policy,” he said.
Prof Bailey said the state needs to mobilise billions, not hundreds of millions, offering cheap long-term credit from the UK Infrastructure Bank, and taking a direct equity stake if need be. It should copy Germany’s energy compensation scheme to hold down power costs for industry. “If we don’t make batteries in the UK at scale, we won’t have a car industry,” he said.
I share his frustration but I do not think the UK should join the subsidy auction and spend billions trying to play catch-up at this late stage. Nor do I think that the picture is as dire as it looks.
Britishvolt has been rescued by Australia’s Recharge and may yet come back to life. Nissan has a small gigafactory in Sunderland. Jeremy Hunt, the Chancellor, hinted this week that a deal may be imminent with Tata Jaguar Land Rover for a gigafactory in Somerset, citing battery production as a strategic sector targeted for “maximum possible support from the Government”.
Furthermore, Europe is scarcely in better shape. The European Federation for Transport and Environment says 70pc of Europe’s gigafactories risk being cancelled, scaled down or delayed because of bureaucracy, or because companies are pulling out to chase better pickings in America. The Inflation Reduction Act offers subsidies and unlimited tax credits that can amount to $10bn (£8bn) per gigafactory.
Volkswagen and Freyr Battery have both switched to the US. Tesla has scaled back plans in Germany to concentrate on its expansion in Nevada. If Tesla’s Elon Musk really told Emmanuel Macron that he would build a gigafactory in France – and the mercurial Mr Musk changes his mind twice a day – he must have been offered an American-sized bung.
French taxpayers will have to pay for that (if allowed under state aid rules) since the EU does not have serious money. Its Net Zero Industry Act has proved a damp squib. The Brussels think tank Bruegel said it was rich on pieties but short on delivery. “Those who oppose the proposal will possibly be relieved when they understand that it will cost nothing and achieve nothing,” it said acidly.
Either the EU’S strategy will prove a white elephant, in which case Britain should avoid the same mistake. Or it will succeed and there will be plenty of locally made batteries for sale in Europe, in which case we can buy them.
On a trade point, carmakers in the UK can still comply with the 45pc rule under the Brexit deal if they buy batteries from an EU gigafactory, or the 65pc rule for battery cells after 2027.
The UK is undoubtedly in an awkward position as the US, EU and China retreat into fortress blocs. But the post-war trading system is not yet dead – and may not die – and we should not lose sight of Ricardo’s comparative advantage. Industrial sovereignty is bad economics.
There is a happy medium between Gallic dirigisme and free market fundamentalism. The UK should pursue a surgical industrial strategy targeting only what it is very good at and where there is a chance of world class clusters: compound semiconductors and chip design; artificial intelligence; nuclear fusion and small modular reactors; and futuristic batteries beyond lithium-ion.
Our battery money is best spent beefing up the Faraday Institute and focusing on the coming trio: solid state, sodium-ion and lithium-sulphur technology.
We should leave low-margin status quo stuff to those infatuated with gigafactories: we should back new precious stuff to the hilt. After botching it last time, let us get in right next time.