The UK is in danger of missing out on the global supply chain market for EV batteries, which is projected to be worth $116 to $278bn by 2030.
This is one of the conclusions of a report published today by the Green Finance Institute’s Coalition for the Decarbonisation of Road Transport (CDRT), which highlights the actions that should be taken now for the UK to become a major force in the battery supply chain.
The UK currently produces around 2GWh of battery capacity per annum but will need to ramp up to over 90GWh a year by 2030 to maintain a car industry at its current size, according to the Advanced Propulsion Centre (APC). APC’s Ian Constance said delivering growth on this scale requires a healthy appetite to invest significant capital, and CDRT’s report points out that the right balance of policy and support is essential to secure investor confidence in the UK EV sector.
Supply chain news broke yesterday when Green Lithium announced Trafigura as a supplier of lithium for its UK refinery. As The Engineer reports, this 50,000 tonne a year refinery will produce enough lithium hydroxide to enable the manufacture of over a million EVs per year.
Importantly, without this local supply of lithium hydroxide, the UK's automotive industry would struggle to meet the EU's 'Rules of Origin', resulting in tariffs on exports of EVs to Europe, which is the UK's largest export market.
According to the CDRT report - Powering the Drive to Net Zero - EV battery supply chains represent a significant investment opportunity; with APC finding niches in the supply chain where the UK can compete and capture some of the global value in batteries, power electronics, and electric machines, rather than importing components. This could be worth £24bn (batteries £12bn, power electronics £10bn, and electric machines £2bn) to the UK’s supply chain if properly exploited.
According to APC, up to 78 per cent of UK car manufacturing will be dedicated to EVs by 2030 but CDRT has found organisations across the battery supply chain finding it hard to secure the funding required to scale up because battery developments are often considered high risk.
The report notes: “Banks and institutional investors are cautious about investing in an emerging sector, particularly when future revenues are not certain and offtake agreements to buy batteries have yet to be signed. This means developers have to bridge a funding “valley of death” as they seek to scale up, with challenges around securing investment which matches the risk profile.”
To overcome supply chain barriers, the report highlights financial solutions - including guarantees - along with supportive government policies are essential to unlock the larger sums of capital needed to build battery supply chains. SCI (Society of Chemical Industry) notes that 60 per cent of a battery’s value is in materials and that ‘engineers need to understand that chemistry companies would engage more if they understood the size of the opportunity’.
A current is moving through the battery supply chain, but how can it be supercharged? Do we need a more joined-up, collaborative approach that brings different industry sectors together? Should investors be given incentives? Or should we explore UK mineral exploration, as Cornish Lithium are doing? Let us know by casting your vote and let us know what you think below the line.