Private investment in building a battery supply chain could make the UK a global player in electric vehicle batteries but the window of opportunity is fast disappearing.

The APC says UK gigafactories and their supporting supply chains are essential to maximise economic growth

A new report from the Green Finance Institute’s Coalition for the Decarbonisation of Road Transport (CDRT) says investment is urgently needed to increase battery production and secure a major share of the rapidly growing global battery supply chain market, which is forecast to grow from $46bn (£37.4bn) in 2021, to projections ranging from $116bn-278bn (£94bn-226bn) by 2030.

It points to research from the government-funded Advanced Propulsion Centre (APC), which says the value of the transition from ICE to EV powertrains could benefit the UK economy by upwards of £24bn by 2025.

The UK currently produces around two gigawatt hours (GWh) of battery capacity a year 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 APC.

Ian Constance, CEO, Advanced Propulsion Centre, outlined: “The UK battery supply chain presents a real opportunity. Our forecasts show that demand will reach over 90GWh by 2030 but delivering growth on this scale requires a healthy appetite to invest significant capital. To maximise green jobs and economic growth, gigafactories and their supporting supply chains are essential. The right balance of policy and support, as outlined in the CDRT report, is essential to secure investor confidence in the UK EV sector.”

The Society of Motor Manufacturers and Traders (SMMT) backed the findings – it called for a binding target on UK battery capacity in its report last year on UK auto sector industry competitiveness and called for a binding target of 60GWh of battery capacity to be built by 2030.

Mike Hawes, chief executive at the SMMT, said: “UK automotive manufacturing and its supply chain has benefited from decades of significant investment to make it successful. At least £10.8bn has been committed to EV production since 2011, but as the transition to zero-emission motoring gathers pace so too does the need for fresh investment. To ensure the UK remains globally competitive as an EV manufacturer we need urgent backing to help transition our supply chain, bolster retraining and skills programmes and, crucially, increase our domestic battery production capability.”

In the UK, work is currently underway on two gigafactories. Electric battery start-up Britishvolt is pushing ahead with plans for a gigafactory in Northumberland after securing £1.7bn in funding earlier this year and a further £40m investment from mining firm Glencore.

Meanwhile, Nissan is transforming its Sunderland plant into a flagship Electric Vehicle Hub that will build its new-generation electric crossover and encompass a new gigafactory.

The CDRT report on Powering the Drive to Net Zero concludes that only the private sector can provide finance at the pace and scale needed to enable the transition to cleaner road transport. Yet, at present, organisations across the battery supply chain find it hard to secure the high levels of funding needed to scale up because battery developments are often considered high risk.

The report finds that innovative financial solutions including de-risking mechanisms such as guarantees, along with supportive government policies, are essential to unlock the larger sums of capital needed to build battery supply chains.

Without seizing the opportunity now, the UK may lose out to other countries, because investment lead times and construction periods for battery facilities can extend to several years.

Public capital could be used to de-risk private investment and the CDRT is exploring several mechanisms that could support a Battery Investment Facility, including an Investor Showcase, a Battery Value Guarantee and Battery Passports; which would help support the rules of origin standards following Brexit.

Lauren Pamma, programme director, CDRT, stated: “The global EV market is racing to scale up the battery supply chain. This demand means new opportunities for investment in the UK, but only if the barriers to realising these opportunities are removed. Cross-sector collaboration has been critical to identifying the solutions that will de-risk investment, and unlock the capital required to build the battery supply chain that will secure the future of the UK’s automotive industry.”