UK calls last orders on combustion engine, but needs to spend $20bn on four EV battery gigafactories by 2027 – Benchmark Comment

By Simon Moores, Managing Director, Benchmark Mineral Intelligence

The UK has placed electric vehicles (EV) and lithium ion batteries at the heart of a new “Ten Point Plan for a Green Industrial Revolution” and with it announced intentions to ban new sales of the internal combustion engine by 2030.

This aggressive move on climate change is setting the tone for COP26 in Glasgow next year, but the lack of progress on a mass-scale, commercial battery industrialisation plan risks the collapse of a major pillar in Prime Minister Boris Johnson’s UK decarbonisation plan.

Benchmark Mineral Intelligence anticipates that the UK will need at least four gigafactories / battery megafactories to be built in the next 6 years at a cost of $20bn.

The Prime Ministers’ Office said: “[The UK intends to commit] nearly £500 million to be spent in the next four years for the development and mass-scale production of electric vehicle batteries, as part of our commitment to provide up to £1 billion, boosting international investment into our strong manufacturing bases including in the Midlands and North East.”

In a conservative forecast, Benchmark expects these four battery cell plants will need to be a combined capacity of 175GWh and to be ready and ramped up to full capacity by 2035. This will be enough to build little over 3m pure EVs a year with zero additional cells for energy storage systems and any new EVs.

With significant battery production, the UK needs to ensure the supply chains of critical raw materials are secured. After all, 175GWh will require 155,000 tonnes of lithium, 210,000 tonnes of graphite anode, 18,000 tonnes of cobalt, and 140,000 tonnes of nickel.

In an ever increasing competitive landscape for raw materials, this is some challenge for what are specialist, engineered chemicals and materials and not commodities.

UK needs half of the world’s 2020 lithium supply to meet future battery capacity challenge 

The UK’s demand for raw materials from four Gigafactories at a capacity of 175GWh would equate to:

Half of the world’s lithium chemicals (LCE) produced in 2020

More than the entire world’s supply of anode in 2020

30% of the world’s total cobalt supply that was destined for battery end markets in 2020

  • Benchmark forecasts total global supply this year to be 121,000 tonnes
  • Yet, its crucial to understand just under half of this supply base does not serve the lithium ion battery industry
  • Source: Benchmark’s Cobalt Forecast Q3 2020

61% of total nickel sulphate supply in 2020

  • Nickel sulphate is the key nickel chemical derivative needed for lithium ion batteries
  • Despite the total nickel market being huge, over 2.3m tonnes, only a fraction is geared to making nickel sulphate chemical for lithium ion battery usage; the UK will need 140,000 tonnes of this chemical
  • Source: Benchmark’s Nickel Forecast Q3 2020

Geologically speaking, the UK does have these raw materials domestically and should be encouraging new supply bases, and most critically, new extraction techniques.

However, for the sheer volume needed, the UK will also need to strike partnerships with countries such as Canada, Australia, Chile, Argentina, Indonesia, and the Democratic Republic of Congo – strategic suppliers which will be crucial for at least 75% of the UK’s demand.

The lithium ion battery is the platform technology on which the UK is to build a lithium ion economy, the bedrock to Prime Minister Boris Johnson’s Ten Point Plan.

Yet, while the European Union, USA and China plan these lithium ion mega-projects, the UK is yet to attract a Tier One lithium ion battery producer – the likes of LG Chem, CATL, Panasonic, Tesla, Samsung SDI, SK Innovation and Envision AESC to build new domestically or begin construction on even one battery megafactory.

Global Battery Arms Race enters new gear post pandemic

Since 2015, we have witnessed a global battery arms race that has seen the number of super-sized battery plants increase from 3 to 175 according to Benchmark data.

Of this 175, 58 battery gigafactories have been added this year – a clear acceleration in the wake of coronavirus pandemic.

In 2020 alone, China has announced 38 battery plants, Europe 2 and, 3 in the US but zero in the UK.

global battery arms race EV

china gigafactory

This is a leadership position that the UK has failed to build upon despite hosting EV battery manufacturing in Sunderland for the Nissan LEAF since 2014 – the first automaker outside of China to understand the importance of in-house production.

The UK has also not yet attracted a tier one lithium ion battery producer that has the track record of producing battery cells in quality and quantity to EV makers.

Benchmark’s Tiers of Automotive Grade Battery Producers ranks global producers of lithium ion battery cells into three levels. The UK will need a wide variety of producers for its EV and energy storage ambitions but can not do without the quality supply base from Tier One battery makers: LG Chem, Panasonic-Tesla, Samsung SDI, CATL, SK Innovation and Envision AESC.

Interestingly, Envision AESC own the UK’s only battery megafactory in Sunderland, a plant that is geared for manufacturing cells for the Nissan LEAF.

However, a new or revamped plant design will be needed to scale into the tens of gigawatt hours on a single site. At present, Envision AESC’s capacity is 1.9GWh.

Building a Lithium ion Economy in the UK: What does it need to do?

1. Lithium ion battery manufacturing at high volume, high quality and speed

Speed, Scale and Quality.

Benchmark has always advised the global battery supply chain, investors and governments that lithium ion battery production needs to have these three attributes at the centre of any plan.

Firstly, Tier One lithium ion battery production by the industry’s experts that know how to make and evolve high quality cells for electric vehicles is crucial. Battery making is where physical and chemical engineering crosses over.

The UK is a leader on the chemistry side, yet it needs large scale industrialists to turn this knowledge into commercial reality.

2. Building an ecosystem to support this lithium ion economy

A lithium ion economy – a term created by Benchmark – is not just about battery production but the ecosystem to support it.

It is critical that the UK builds the upstream and downstream of the battery cells to ensure that the industry scales and has the infrastructure to support continued growth.

The UK can take lessons from the combustion engine success: the making of actual cars has migrated elsewhere over the decades, yet a high quality knowledge pool offering services and manufacturing of high specification components has remained.

This blueprint has to be recreated but instead of for engines, it has to be centred on:

  • The upstream – battery precursor: the chemical / battery ready materials of lithium, cobalt, nickel, graphite, manganese and copper
  • The midstream – cathodes / anodes: the battery materials that are the core components to every battery cell
  • The downstream: battery recycling to close the loop and build a sustainable industry

It is a challenge that every major economy in the world needs to tackle and one that Benchmark has testified to the US Senate on three times in two years.

3. Establishing a UK ‘Lithium ion Economic Task Force’  

The UK government needs to ensure its policy, legislation and funding all align to meet the same goals: to build a domestic lithium ion economy. 

All too often, these three components sit in silos and do not talk to each other: usually a symptom of political interest over the national interest. 

The EU has taken a leadership role here with the creation of the Battery Alliance that brings together government, industry and money to ensure everyone is talking from the same playbook. 

Much like the UK has SAGE (Scientific Advisory Group for Emergencies) and COBR (Cabinet Office Briefing Rooms), the UK will need to establish its own Lithium ion Economic Task Force to ensure the path forward is as straight as possible. 

Is it too late for the UK?  

Is it too late for the UK? Certainly not.

However, the government and industry needs to understand that the first act has now been played out on a global scale – this global battery arms race is no longer a secret and it is scaling faster than the present pace of domestic development.

The second act has begun and it is about speed, scale and quality.

The UK is not only playing catch up on Act One but also needs to get up to speed or ahead of the game in Act Two: building a rock solid base for a 21st century lithium ion economy in the UK, the enabling technology of any Green Industrial Revolution. 

And the UK Government and industry have to work in unison to have any chance of competing in the industry’s top echelons. 

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Simon Moores is managing director of Benchmark Mineral Intelligence, the world’s leading price reporting agency, data and advisory firm for the lithium ion battery to EV supply chain.