UK closes £800M battery manufacturing incentive package! The net zero journey is back on track, but it’ll take an army (and government support) to keep up.

UK closes £800M battery manufacturing incentive package! The net zero journey is back on track, but it’ll take an army (and government support) to keep up.

Things have been looking bleak recently on the net zero front: Following the recent collapse of Britishvolt, AMTE Power – one of the UK’s few homegrown battery producers – is considering relocating to take advantage of US government support. And we’ve seen Jeremy Hunt shun subsidies, telling Sky News only last month that “it’s wasteful to spend money subsidising factories that would have been built anyway”. 

He’s wrong, of course. 

And I’m pleased to say there seems to have been a change of heart, as last week the UK government closed a deal with Tata owned Jaguar Land Rover, including £800M worth of incentives to bring a multi-billion-pound electric car battery plant to Somerset. 

And when it comes to battery manufacturing, the word on everyone’s lips is gigafactories.

The first and perhaps only time most people will have heard about gigafactories is from Elon Musk. 

In 2016, he took Leonardo DiCaprio on a tour of one of his mammoth new sites and wowed the actor with some back-of-a-napkin calculations that you’d only need 100 of these battery factories to transition the entire world’s population to sustainable energy.

Now, Musk is not a man known for his aversion to hyperbole. But he’s right on at least two counts in this clip.

First, that these spaces, and battery storage in general, will be vital for the future of energy provision. 

And second, when he says that the point of a gigafactory is to bring the cost of battery production down to a point at which it’s affordable. 

In fact, outside of the Teslaverse, ‘gigafactory’ simply refers to any factory that’s producing at least a gigawatt-hour’s worth of batteries each year — whether they’re destined to end up beneath the bonnet of a car or not.

In 1991, when Sony and Asahi Kasei first commercialised battery technology, production costs worked out to around $4,000 per kilowatt hour. Building batteries is still phenomenally expensive, and the only current way to make those costs competitive is to operate at huge scale — hence, gigafactories.

But talk, unlike battery manufacturing, is cheap. 

Successfully achieving gigafactory scale is an enormous feat, and requires not just considerable financing and landmass, but experience and expertise that cut across both manufacturing and business operations too.

Take just one example: a roll-to-roll calender machine — used to roll the inside of a lithium-ion cell, and just one of countless devices required in a gigafactory — comprises at least 2,000 different input points. That’s 2,000 separate points to optimise around. In one machine. Among thousands.

So when Leo DiCaprio says that spinning up 100 gigafactories to solve all the world’s energy supply challenges sounds “manageable”, he’s perhaps naively underplaying the challenge. It’s not a case of building one and then copying and pasting the rest.

Scale, then, and the costs associated with reaching it, remains the biggest barrier to innovation in our sector. And a lack of opportunity for innovation has huge knock-on effects as our delicate supply chain approaches the inflection point of battery mass adoption.

Exacerbating the challenge is the fact that the UK has lagged a long way behind its competition in China and the US – both of which have pumped their battery sectors with big government subsidies. Musk too, among the richest men in the world, admitted to DiCaprio in 2016 that government support would be required to get more gigafactories up and running.

The model previously adopted to build out North Sea oil and gas extraction (slashing royalties and pushing allowable capital relief to the extreme) has proven a great success, and following the JLR news I’m confident that wiser heads will prevail to provide something similar for the battery market. 

But in the meantime, we also have to keep working on shifting the status quo, so that when the inflection point of mass adoption does arrive we are in a strong position to capitalise.

For me, the three key ways to achieve this will be: 

  1. Finding ways to bring down the raw materials bill associated with producing batteries (the cost of lithium carbonate is extremely volatile, hitting an all-time high in November last year; we should seek structural commodity cost advantages);
  2. Leveraging expertise from outside of the battery sector — engineers previously focused on internal combustion engines (like JLR) and oil and gas players who can see the need to prepare for a different future all have something to offer here;
  3. Continuing to drive innovation in battery performance. The largest factor behind cost reduction for batteries over the past decade came from improvements in energy density rather than manufacturing — and yes, I’m thinking of solid-state sodium here.

Now, before I come over all Leo DiCaprio and made this look a lot easier than it is: this isn’t going to be straightforward.

It’ll take an army (and government support) to raise more gigafactories. But smart, collaborative new thinking about our approach to manufacturing in general — and how to make achieving scale a more manageable ambition — will pave the way forward.