INTERVIEW: Rising trade protectionism threatens energy transition: Faraday Institution

Rising trade protectionism from the US and EU, aimed at reducing reliance on Chinese imports, poses a significant risk to the pace of the energy transition, Stephen Gifford, chief economist at Faraday Institution, told S&P Global Commodity Insights in an interview.

"China has a dominant role in refining key battery materials such as lithium, nickel, cobalt and graphite, with control extending across all elements of the battery supply chain," Gifford said.

"Any trade disputes could disrupt supply chains and could slow electric vehicle adoption, particularly if substantive additional tariffs are imposed on EVs to and from the UK."

Faraday Institution projects the UK will require nearly 110 GWh/year of battery capacity by 2030, the equivalent of six large gigafactories producing 20 GWh/year of batteries.

He said this projection assumes a stable transition from internal combustion engine vehicle sales to EVs, in accordance with the proportion of EV sales defined under the Zero Emission Vehicle mandate.

Under the mandate, the UK aims for 80% of new cars and 70% of new vans sold in the country to be zero emission by 2030, rising to 100% by 2035.

In late 2024, the UK government launched a consultation to reinstate a 2030 phaseout date for new ICE vehicles and shape the transition to zero-emission vehicles.

"On the upside, the government's EV strategy, particularly the commitment to the ZEV mandate, has strengthened the robustness of these demand-side projections," Gifford said.

However, he said there are still challenges on the supply side in securing adequate UK-based battery manufacturing capacity to meet this potential demand.

Optimism

Gifford said developments over the past year had generated optimism about the UK's potential to develop a successful battery manufacturing industry, with Agratas, a Tata Sons venture, investing GBP4 billion ($5 billion) in its 40 GWh gigafactory, expected to start production in 2026.

"Recent developments included confirmation of Gravity Smart Campus near Bridgwater, Somerset, as the site for the plant, the appointment of a lead delivery partner and the starting of construction work," he said.

In the northeast, Gifford noted that AESC is developing a second 16 GWh/year battery plant in Sunderland near its existing facility, with the planning application also submitted for the expansion of the new gigafactory at the site as part of a strategic feasibility study.

"The government has adopted the UK battery strategy and plans to publish a new critical minerals strategy in 2025. The recently launched UK National Wealth Fund has also been cited as a potential investment source for public investment in UK gigafactories," he said.

The UK Battery Industrialisation Centre has also been actively supporting manufacturers in battery development, while Faraday Institution is driving discovery in application-inspired research across 10 large-scale research projects.

"Skills initiatives such as the Electrification Skills Network and National Battery Training and Skills Academy are progressing well," he said.

In January, Faraday Institution and Agratas signed a multiyear agreement to partner on talent development for the UK battery sector, with the latter funding a pilot of three Ph.D. studentships, with the Ph.D. researchers embedded in Faraday Institution projects.

Key actions

Gifford said a strategy and key initiatives are already in place to encourage more battery development in the UK, but a concerted effort is needed to ensure these are implemented quickly.

He said key actions include attracting inward investment to establish new gigafactories and expand existing ones, strengthening UK component manufacturing to improve efficiency and trade compliance, and investing in refining and processing facilities for key battery materials.

Other key actions are securing critical raw materials through international agreements, establishing a robust battery recycling industry and accelerating domestic mineral extraction.

"UK efforts should particularly focus on attracting inward investment to establish new gigafactories and developing domestic component manufacturing. Critical investment and location decisions must be made within the next two to three years to meet 2030 targets," Gifford said.

In the field of research, he said priority should be given to committing to long-term research into cheaper and safer batteries, investing in next-generation battery technologies, such as solid-state and sodium-ion, and enhancing commercialization initiatives to bring innovations to market more rapidly.

Platts, part of S&P Global Commodity Insights, assessed battery-grade lithium carbonate at $10,000/mt and hydroxide at $9,900/mt CIF Europe on Feb. 4, down 37% and 38% since the start of 2024.