As International Competition Increases, Britain Must Act Decisively if it is to Experience the Full Economic Benefits of Net Zero
From Oxfordshire to Ngarla Country
Ngarla country, also known as the Pilbara region, is a massive, arid, and thinly populated region in the north of West Australia (WA). For many readers, it would look more akin to an alien landscape than anything they would recognise as countryside. The region is roughly half a million kilometres of red dirt, deep gorges, bare stromatolites, scarred with veins of basalt and jade. It is also home to a significant chunk of Australia’s mining industry. Across the country, massive quantities of iron ore, lithium, gold, and nickel are torn from the ground each year. Much of this nickel and lithium is exported to China, where it is an essential component in the manufacture of electric vehicle batteries, which are in turn the most crucial element of EV production. As more and more Chinese EV manufacturers enter the UK car market, more and more electric vehicles on British roads will be manufactured in China, and powered by batteries put together using lithium and nickel mined in Australia.
However, these rare earth elements are not the region’s only link to the UK.
A 1.4-MWh prototype electric battery was recently delivered to Perth, Western Australia, from the UK. The battery was received at a Fortescue Metals Group (FMG) facility, and will be installed in a 240-tonne electric mining haul truck developed in partnership between FMG and German manufacturer Liebherr. The battery is cutting edge, and represents an exciting step forward in the development of EV battery technology. It will be trialled in Northern WA later this year and, if successful, will play a central role in FMG’s US$6.2 billion, industry-leading commitment to having "real zero terrestrial emissions" by 2030. Crucially, the group that developed the 1.4-MWh prototype battery that will power the haul truck is a British company - Oxford-based WAE Technologies Limited (WAE).
New Frontiers, New Opportunity
Formed in 2010, WAE was initially an offshoot of Williams Grand Prix Engineering - the company behind the Williams F1 team. The company began life providing a variety of innovative technological solutions across a range of different industries, but quickly established itself as a leader in the development of cutting edge energy storage and electrification technologies. WAE provided the entire Formula E grid with batteries to power the championship for four years between 2014 and 2018, has worked in technical partnership with Jaguar TCS racing, and designed, developed, manufactured and supplied the control modules and EV batteries used in the first ever eTouring Car World Cup. Their electrification credentials, particularly around the small scale production of relatively niche high performance EV batteries, are world class.
Following successful collaboration with FMG subsidiary Fortescue Future Industries (FFI) on several projects, including the conversion of older model mining haul truck to run on a ‘green hydrogen’ and 300 kW/h electric battery, WAE were subject to a £164 million takeover by FMG. FMG’s founder and executive CEO, Andrew Forrest, did not mince his words upon the company’s acquisition of WAE, describing the move as “key to unlocking the formula for removing fossil fuel powered machinery and replacing it with zero carbon emission technology”.
WAE are based in Oxfordshire, and employ over 500 British workers, who carry out genuinely world leading work in cutting-edge, future-proofed roles. The company is a poster child for the opportunities the transition to a net zero economy can and should provide the British economy. Unfortunately, in recent months WAE’s success has stood in stark contrast to the somewhat stunted development of other forward-facing British industries.
Struggles Elsewhere
Late last month, Britishvolt, the UK EV battery manufacturer, filed for administration. This had been a long time coming; the company never made any significant revenue, and for months had been supported by emergency fund raising rounds. The move saw all 232 of the company's staff made redundant and threw into doubt plans to build a giant factory to make electric car batteries in Blyth, Northumberland. Britishvolt’s collapse briefly looked like it might be a final, existential threat to the UK’s efforts to develop an EV battery manufacturing industry. Fortunately, there was no shortage of potential investors keen to snap up the company. Around a fortnight after the Britishvolt filed for administration, it was taken over by Recharge, an Australian battery manufacturing start-up. The move has revived the Blyth gigafactory project, and the hopes of the UK developing a viable battery manufacturing industry. This provides further hope for the prospect of manufacturing EVs in Britain - batteries are heavy and expensive to transport, and automobile manufacturers will require local battery production facilities if they are to produce more EVs in the UK.
Britishvolt’s struggles can be directly linked to a lack of Government support, and this distinct lack of assistance contrasts starkly with commitments in jurisdictions the UK’s battery manufacturing industry will, once established, have to compete with. While the Blyth battery site would be only the second battery manufacturing factory in the UK, there are already 35 such sites across the EU, and the European Commission, along with seven member states, has allocated £5 billion to support the rollout of a further 20 factories. The British Government committed £100 million toward the development of Britishvolt’s Blyth site in early 2022. However, the company was unable to meet the condition’s the Government attached to the commitment, and never received the funding.
Other parallel industries are also facing barriers to growth. In a recent New AutoMotive report on the state of the UK’s EV charging infrastructure industry, sector stakeholders identified a number of barriers to the more rapid growth of the network. These included a lack of certainty around future levels of user demand, difficulty accessing finance and/or funding, and a shortage of required skills and/or labour. Industry was unanimous in the belief that there was more the Government could do to help overcome these barriers, and that this action would be key to accessing the full potential of the public charging network. Stakeholders also believed that, despite these barriers, the sector was well positioned to deliver the Government’s target of 300,000 public chargers by 2030.
Despite recent setbacks and challenges, the underlying confidence within the charging infrastructure sector, along with the plethora of interest in taking over Britishvolt, are indicative that the business community strongly believes that the economic opportunities presented by net zero are still very much there to be had. It is not yet too late for the Government to act to supercharge the growth of the already dynamic public charging infrastructure industry in the UK. Neither is it too late for the Government to act to support the development of the UK’s battery manufacturing sector.
Supporting Success
So, in an ideal world, what would this support look like? The answer for each industry is unique - the needs of the two sectors vary.
For the charging infrastructure industry, the solution is simple. The single most effective means of removing the barriers to growth identified by sector stakeholders and ensuring that the UK’s public charging network is ready to support the increasing number of electric cars on British roads is the timely implementation of an ambitious Zero Emissions Vehicle (ZEV) Mandate.
The Mandate will signpost a minimum level of future demand to the charging infrastructure industry, allowing them to confidently invest in rolling out new infrastructure. To effectively break down the barriers to growth identified in the report, it is crucial that the ZEV Mandate is ambitious - it must drive the uptake of EVs forward, rather than simply acting as a backstop. It must also be limited in its flexibility; whilst a tradable element is a crucial aspect of the Mandate, the banking and borrowing of credits must be strictly regulated to ensure that the Mandate encourages manufacturers to transition to more EVs as soon as possible. Finally, and critically, it must be implemented in a timely manner. The ZEV Mandate was originally planned to be implemented at the beginning of 2024. However, delays to the consultation process threaten this start date. Delaying the implementation of the Mandate threatens the growth of the UK’s infrastructure industry, and the growth of the public network. Given this, it is crucial that the Mandate comes into effect in early 2024 as planned.
The UK’s battery manufacturing industry’s needs are slightly more complex. The sector would benefit from a clear green industrial strategy, which was in turn backed by significant financial resources; policy frameworks and Government commitments must be backed by financial resources if the industry is to get off the ground. Clear and well defined support measures would help massively. The need for such measures is made even more pressing by developments elsewhere.
International Competition: The Policy Environment Overseas
In the United States, the recent Inflation Reduction Act (IRA), which ties tax credits on EVs to the use of domestic extraction and processing in battery manufacturing, is likely to incentivise the roll out of new gigafactories - already new gigafactories are being established in joint ventures between automobile and battery manufacturers. The IRA is a protectionist policy framework; it is fundamentally designed to benefit manufacturers in America. The EU has spent much of the last six months deciding how to respond to the legislation, and this response is now beginning to take shape. In a recent speech to the World Economic Forum in Davos, Ursula von der Leyen, President of the European Commission, outlined how the continent would temporarily loosen rules on state aid, establish a European Sovereignty Fund dedicated to green manufacturing and technology, and implement a regulatory framework, via the Green Deal Industrial Plan, designed to make it easier for companies to develop climate technology and net zero energy production sites, such as EV battery manufacturing factories. In addition to these broad measures, the EU has, as previously mentioned, committed a massive amount of funding specifically toward supporting the establishment of new EV battery manufacturing sites in the short-medium term.
Urgent Action Required
Whilst the EU and the United States have essentially been competing to incentivise the growth of sectors like the battery manufacturing industry within their jurisdictions, Britain has been caught flat footed. This puts the country at serious risk of falling even further behind in this space. To keep pace with these jurisdictions, Britain needs to develop, and then support the implementation of, an effective green industrial strategy. This must be done as a matter of urgency. The Government’s own Net Zero Review supports this; the review identified Government backing for business as a crucial step toward ensuring the country is able to take full advantage of the economic potential of net zero and the energy transition.
There is still time for the Government to provide the necessary support to unlock the true potential of both sectors. Unlocking this potential would provide massive benefits for Britain; future-proofed jobs, the retention of existing and growth of new industry, and accelerating the transition to electric transport. Businesses are eager to invest and grow; it is up to the Government to provide them the certainty and stability they need to do so.