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UK requires level playing field with Europe to attract gigafactory investment

Highlights

UK in direct competition with Europe for investment

Sociopolitical will, environment, technology, flexibility needed

Already 54 GWh battery capacity shortfall forecast for Europe by 2025

The decisions made by the companies, investors and government in the short term will determine whether the UK battery industry will be on a level playing field with Europe in attracting investment for the number of gigafactories required to sustain the automotive industry, according to the BNEF Summit panelists on transport transition Oct. 18.

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Around 65% of battery capacity is currently located in China, but the rules of origin - which state that 65% of electric vehicle content must be sourced locally by 2027 - is forcing investment into Europe, which is great for waking up the local battery industry, but also meant that the UK was in direct competition with Europe, Palmer Automotive CEO Andy Palmer told the summit.

"The only way we're going to see significant gigafactories being successful in the UK is basically with some degree of help from the government. It won't happen naturally and it's not happening naturally in Europe - there are significant grant aids to attract investors and the playing fields aren't level right now," he said.

"It's skewed significantly towards taking those gigafactories that we need and seeing them invested in Europe and if the UK doesn't address that... and we need around six gigafactories," Palmer said. "If we don't get those, then there will be no automotive industry in the UK in 10 years' time, because the car manufacturers will gravitate to where the batteries are made -- it's really key."

However, Palmer noted that, if the UK was successful, there would be a bright future for the industry manufacturing EVs in the new economy.

Eaton managing director Siobahn Meikle said that to attract investment into gigafactories, a country required the sociopolitical will and environment, as well as the technology and the flexibility of the market.

Looking at Europe, she said that Nordic countries were leading the pack, while the UK was in the middle with France and Germany.

"We're big users of electric, so we're attractive from that point of view and it's fair to say we have good energy policy and government commitment," Meikle said. "They're not always joining together as much as we'd like, which is another barrier, but the thing that we really don't score well and we have to focus on is the open flexible market."

Without enough flexibility, the investment required would not happen, she said, adding that the dream policy for the UK to succeed would be to open up the market and be pragmatic as soon as possible, as the technology already existed.

Funding balance

There was a balance to be had when looking a government funding, Britishvolt chief strategy officer Isobel Sheldon said, saying that if governments gave out grants too freely, there was the risk that companies that had less chance of being successful were receiving funds as the government's due diligence was not as strong as it needed to be.

In the UK, she said she had found that it was quite difficult to get grant funding, which was a good thing in that it meant that companies had to go into a lot of details in their business cases and share that with the government.

"There's a balance," Sheldon said. "Make the money too easy to have can create zombie companies. Get the balance right in your scrutiny, then government money coming in gives a really clear signal [to investors] that a business has been checked out and is pretty robust in its processes and plans."

There is a clear necessity for gigafactories across the UK and Europe, with Shedon saying that she hoped that all the announced gigaplants across the region actually got built, although some would not, due to a number of reasons, including geological location, lack of renewable energy and regional trade agreements.

"I don't think there are going to be a shortage of customers and the automotive industry is continuously adding volumes," Sheldon said. "You do sit back and wonder where all the battery manufacturing is going to happen, because it takes two, three, four years to stand up significant capacity in this field."

A concern was that probably around a third of the announced capacity would not happen, she said, noting that even if all did come online, there would be a shortfall of 54 GWh in Europe by 2025. Take away that third and the shortfall ballooned to 115-120 GWh by 2025.

"That's not good for the ramp up of electrified vehicles and needs to be resolved," Sheldon said.

According to S&P Global Platts analytics, sales of plug-in light duty EVs in Europe, including the UK, are forecast to rise to 4.1 million units by 2025, up from 1.3 million units in 2020 and an estimated 2.3 million units in 2021.

Ideanomics CEO Alf Poor added that, not only were these gigaplants required for EV application, but also for the battery storage systems that were critical to reach zero carbon goals.

He pointed out that the UK had the workforce, intellect and the capabilities to build and run the gigafactories, but required the proper incentives from the government to level the playing field to be competitive.

"With 20% of Europe's vehicles sold in Britain, it makes sense for the batteries to be supplied from Britain as well, even before you consider the needs for energy storage," Poor said.