That the Grand Committee takes note of the Report from the Science and Technology Committee Battery strategy goes flat: Net-zero target at risk (1st Report, Session 2021-22, HL Paper 53).
My Lords, it is a pleasure to open this important debate on the Science and Technology Committee’s report, entitled Battery Strategy Goes Flat. Before I do so, I thank all those who gave evidence to the committee: our committee staff; the committee clerk, Dr Simon Cran-McGreehin; our analyst, Dr Amy Creese; Ellie Hassan, a POST fellow and the committee constant, without whom chaos would prevail; and Cerise Burnett-Stuart, the committee operations officer. I most sincerely thank them all.
My particular thanks go to our specialist adviser, Professor Clare Grey FRS—who has recently become Dame Clare Grey DBE FRS, and who I am pleased to say is listening to us—and Geoffrey Moorhouse Gibson, professor of chemistry at the University of Cambridge. Their advice, knowledge and expertise guided the committee. Last but not least, I thank all the committee members for their help and hard work; they were never controversial, and they never challenged me, at least.
I regret that, due to previous commitments, our current chair, my noble friend Lady Brown, is unable to take part today. I am grateful to the Minister for taking time to reply to the debate today; I have no doubt that he will do so in his much-appreciated customary manner of answering the questions raised by those speaking and not just sticking to the brief provided. I most sincerely thank all noble Lords, not just the members of the committee, for making time to take part in today’s debate.
The title of our report is Battery Strategy Goes Flat: Net-Zero Target at Risk, and it was published on 27 July 2021. At the time, it seemed a provocative title, but subsequent events and the recent news seem to have confirmed our scepticism. The report—which has four key chapters covering the applications of batteries and fuel cells, technological developments and, importantly, strategic issues facing the UK for decarbonising the transport system—makes several conclusions and suggests government action to make the UK a leader in batteries and fuel cells. The Government’s response, while not disagreeing with the conclusions or details in the report, was not convincing as a clear delivery plan. Most of the responses to our ask for government action used the phrase, “The Government are committed to”, but provided few details as to implementation. I hope that the Minister, in responding, can put that right today.
At the time of the report’s publication, the committee felt that the UK policy of battery manufacture was insufficient to meet the future needs of the automotive industry as it transits to the government policy of full electrification of cars and smaller commercial vehicles by 2030. The requirement of seven to eight gigafactories by 2030, as suggested by our witnesses, is not likely to be met; in turn, our net-zero commitments will not be met either. The committee felt that the pace and scale of the building of gigafactories in the UK will not meet the demands for batteries by the automotive industry, and the UK would risk losing much of its automotive industry to overseas. In our evidence sessions, many witnesses felt that the UK faced serious challenges from our competitors, and that we were behind them not only in the manufacture of batteries but in innovations, supply chains and skills.
My Lords, I congratulate the noble Lord, Lord Patel, and his committee on producing a powerful report, which I hope will send an electric shock through the Government and the industry about the need for urgency if we are to move in the direction that they wish and have a sustainable automotive industry in this country with the necessary battery production.
I want to focus on a precondition of that, which is that we have access to sufficient reserves and resources of minerals to produce the batteries if we have the capacity to do so. I draw attention to two documents which highlight this very powerfully. The first is The Role of Critical Minerals in Clean Energy Transitions, produced by the International Energy Authority about a year ago, which paints a fairly disturbing picture of potential shortages of these minerals. It states:
“EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end user of nickel by 2040.”
It predicts that lithium demand will grow 40-fold by 2040, even in the IEA’s more moderate sustainable development scenario. That is followed by graphite, where demand will go up 25-fold, cobalt which will go up 21-fold, nickel which will go up 19-fold and rare earths which will go up sevenfold. In less than two years since January 2021, the price of lithium carbonate has risen more than 13-fold, so the shortage is already demonstrating itself.
The IEA states that the expected supply from existing mines and projects under construction is estimated to meet only half of projected world demand for lithium and cobalt by 2030, and its analysis suggests that on average it takes 16 years from the start of a mining project through to first production, so the scope for ramping up production is much less than one might hope—or so it would appear.
In one sense, there is very little that needs to be said about the conclusions of the report of the Science and Technology Committee regarding the future of the industries in the UK that are pursuing the technologies of batteries and fuel cells. The report declares in its title that the strategy to support these industries has gone flat. The effort to support the emerging technologies has barely got off the ground, and the forewarning contained in the report has since been realised.
During the writing of the report, it was learned that Johnson Matthey has abandoned its project to supply materials to the emerging UK industry aimed at providing the lithium-ion batteries to power the next generation of UK manufactured vehicles. The firm was well established by middle of the 19th century as a dealer in bullion and rare metals. More recently, it has wished to be in the forefront as a provider of the special metals, including lithium, nickel and cobalt, that are essential to the industry. The chief executive of Johnson Matthey stated that the decision to exit the battery materials business was due to
“insufficient returns, increased commoditisation of battery materials”
and
“the need for very high capital investments to remain competitive.”
In fact, the company was short of the funds that needed to be invested in what is liable to become a highly profitable enterprise.
The sale of the assets of Johnson Matthey was mainly to EVM, which is a large European consortium. The sale included the battery technology centre in Oxford and the battery technology centre and pilot plant in Billingham. The assets relinquished also included a research centre in Moosburg, Germany, and a partly constructed site in Konin, Poland. The company’s lithium-ion phosphate battery facility in Canada was acquired by Nano One, which is a large North American consortium and technology innovator in battery materials.
My Lords, I start by commending the noble Lord, Lord Patel, for his skill in chairing the committee that put together this report. I am proud to say that I am a member of that committee. I also congratulate him on the way in which he introduced the debate, which leaves me with very little to say except that I agree with the remarks that he has already made.
It is a shame that it has taken over a year since the report was published for it to come before your Lordships’ House for debate. Batteries powered by zero-emission energy sources are on the front line of our battle against climate catastrophe, and this report concludes that the Government need to do much more to secure Britain’s place in the forefront of the battery revolution.
The bans on the sale of new petrol and diesel cars and vans by 2030, hybrids by 2035 and heavy goods vehicles by 2040 were welcome announcements, given that emissions from the transport sector make up about one-fifth of all greenhouse gas emissions in the UK, and had shown themselves to be resistant to efforts to bring them down. However, ambition without action is pure hubris and doomed to failure. The committee’s conclusion that it could not identify a government plan for the rapid action needed to achieve the Government’s stated aims has not been disproven with the passage of time.
Since the report was published, there has been a revolution in the car industry. Changes have been hastened by the unpredictable events of Russia’s invasion of Ukraine and the ensuing chaos in the production and cost of fuel. The sales of new EVs in the UK have increased enormously. In the half-year to June 2022, pure-battery electric vehicles enjoyed the biggest growth in any fuel type, with 56% more registrations—and that was in the context of an overall market that shrank by nearly 12%. Furthermore, despite the worldwide semi- conductor shortage and Covid lockdowns in China, global sales of EVs rose 61% in quarter 2 of this year.
My Lords, I wholeheartedly welcome this report from the noble Lord, Lord Patel, and his committee. It is absolutely timely. While it focuses primarily on vehicles, I would like to look at the broader scene a little bit. However, before doing so, I declare an interest in that I have a modest equity holding in a couple of stocks that are quoted on the London Stock Exchange. They are hydrogen companies.
I start with the report from Goldman Sachs, which appeared in the Financial Times either last Saturday or the one before, in which it highlighted the fact that the US and Europe can cut their dependence on China for electric vehicle batteries through more than $160 billion in new capital expenditure by 2030. It pointed out that China today produces three-quarters of the world’s batteries and dominates production of their materials and components, citing the fact that in the USA
“South Korean conglomerates LG and SK, who have been attracted by massive subsidies from US taxpayers”,
are forecast to achieve from 11% to 55% of that market in a three-year period. The question arises, if the US can do it, why on earth are we not parallel with the US? Clearly, we are not—we are clearly behind the curve.
Rather than repeating what the committee has said, I thought that it would be more helpful to look at a case history with which I was involved, to some degree, when I was on the Select Committee on energy in the other place: the change from coal gas to North Sea gas. That was a massive change, with 40 million households converting to North Sea gas, involving at least 30,000 men and women to do all the work over a period of time. That was a huge achievement, and it was done well—partially because there was a workforce there to do it. It seems that one of the key elements that is not quoted in this report is the involvement of our unions today. Two unions stood out at that time: the GMB and UNISON. If you talk to them today, as I did a few days ago, you will find that they worried stiff about the necessary labour force. Only 12% of the relevant labour force is under 30, yet we should look at the situation with BT, which is laying off its older workforce. So one of the challenges that His Majesty’s Government need to look at is the workforce. That means looking at every level in that area, including our universities, technical colleges and apprenticeships. It may be happening—I do not know—but I would welcome hearing from my noble friend the Minister that the Government are aware of that challenge.
My Lords, I am no technical or scientific expert in this field, but I did read the report of this committee as soon as it came out, and I found it a very good exposition of the failure of government to work effectively with the research sector and business to develop in Britain the native industries of the future. That is one of my main political concerns.
The second paragraph of the report points out the problem we have here; it says that
“we were astonished by the stark disconnect between the optimism of Ministers and officials that the UK could retain its position in the automotive sector, and the concerns of our other witnesses that the UK is far behind its competitors and faces significant challenges”.
I wonder whether the Minister agrees with that conclusion and, if not, whether he will explain to us why he does not agree with it. This was said 17 months ago, when the report was published, but the situation has become even more desperate in that time. I did a bit of newspaper research with the help of the Library on how things are going. I note, for instance, that this year the
“UK production of cars has tumbled from 1.7 million per year to just 866,000”.
This is in what used to be one of our most successful industries.
I think that the noble Lord, Lord Patel, referred to the same newspaper article that I read in the Times about a week ago. I want to emphasise it again because I would like an answer from the Minister as to whether he agrees that this represents the situation:
“Recent months have been a slow-motion car crash for the nation’s pretensions to become what successive prime ministers have promised would become a ‘global hub’ of the electrified automotive industry.”
We have the examples of BMW and Johnson Matthey, and the fact that Britishvolt is near bankruptcy. Where is there any positive news, other than, incidentally, news of the Chinese-owned battery company that is getting ready to manufacture alongside Nissan in Sunderland, which I welcome and do not see any particular problem with?
My Lords, I first declare my interest as a director of and shareholder in Aldustria Ltd, a battery storage company, and a trustee of Regen, a renewable energy trade association—I think that that is the best way to describe it. Like many other noble Lords here, I very much welcome the report and congratulate the committee and its chair on it.
One thing that always seems to be forgotten outside this area is the timebomb in the trade and co-operation agreement that is around the 2007 rules of origin and when the percentages come into force. There are different ones for cars, cells and assembled batteries and they are a real challenge to that industry.
Soon after the EU referendum, one substantial vehicle manufacturer in the west of England, Honda, at Swindon, was straight on to me, and I am sure to other Members who were interested in the west of England economy, and said, “If something isn’t sorted out on rules of origin, the automotive industry in this country is going to be dead”. And, of course, Honda has gone; it is no longer there, which is a huge blow to the economy of Swindon. It decided to get out while the going was good.
I am not going to go on hugely about vehicles, because that is what other Members have already done, but the point has come over strongly, in the report and in the Faraday Institution’s work, that at the end of the day it is not just around tariffs—we export around 80% of our car manufacturing and 50% of that goes to the EU—but location. In electric vehicles, batteries are the most substantial accessory or part of the vehicle—quite obviously. There is a huge benefit in terms of colocation between the rest of the manufacture and assembly of automobiles and the gigafactory being close by. If we do not have those gigafactories, almost whatever the tariffs are, those manufacturing centres will disappear out of our area.
I want to move on to something that my noble friend Lady Sheehan has mentioned. It comes also from what the noble Lord, Lord Lilley, referred to. It is around resources and the circular economy. If there is one challenge in this area that is being overlooked, although the committee did look at this area, it is the reuse of scarce resources and rare earths that are used in a lot of electronic goods, in automobiles and in batteries. The stranglehold is largely in China and some other economies as well. We need to make sure that we have a circular economy ability to recycle batteries. On the whole they can be refurbished fairly easily. Often when they are at the end of their life, only one or two cells have gone, which can be replaced. Also, they can then be used for other purposes and have a second life. That industry, I believe, is one area where we could get well ahead. Europe is already on its way, but I believe that it is important for both our resource security and for having a viable industry in this area that we are good on the circular economy as well.
My Lords, despite the ravages of Covid and the requirement for much of this report to be compiled remotely, the noble Lord, Lord Patel, has done a masterly job in leading us to produce this crucial study. We must thank him for it. We must also thank the team who helped us in crafting this high-quality document, again under the difficult conditions of lock- down. Together we present to your Lordships’ House a report of great depth, which contains strong recommendations. Such a pity, therefore, that the Government have given us such short shrift.
This report was presented to your Lordships’ House in July 2021. In September of that year, we received the Government’s response—a document I can best describe as “thin”. If noble Lords can believe it, the narrative of our report talks about our hopes for COP 26 in Glasgow. Since then, COP 26 has been and gone—and so too has COP 27 in Egypt. Can somebody please explain to me why, as we approach 2023, we are only now debating this report for the very first time? Procrastination does not make for good policy.
Certain themes come from the report that are screaming for government focus. The first is the plea for long-term commitment. Scientists and industry need strong direction. Industry, contemplating massive long-term investments, needs to know the ground rules, and to know that the rules will not change. Individuals looking to their careers, whether as academics or scientists, need to know that the rug is not going to be pulled from under their feet. Sadly, this is not the case. It all feels uncertain and unpredictable.
Another feature that we saw when we were taking evidence, and which has been mentioned today, was the contrast in attitude between Ministers and officials compared with those at the coal face. Ministers were gung-ho about our country’s advances in battery technology; scientists and industrialists were much more cautious. My money is with the experts. Even now, I kick myself for not asking every witness just one question. I should have asked: “Do you believe that net zero by 2050 is going to happen?” Sadly, I asked it only twice. Ministers agreed, of course; those who knew lowered their eyes.
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I recognise that the UK now has a critical minerals strategy to fill the gap in supply chains—a positive step—but no clear implementation plan, without which the UK will again miss out to competition for securing much sought-after minerals.
We were astonished by the stark disconnect between the optimism of Ministers and officials and the evidence from our many witnesses that the UK will be unable to maintain its automotive industry. The two immediate deadlines, of 2027, when the rules of origin agreement will require batteries and 55% of components to be manufactured in the UK or the EU, and 2030, when production of all petrol and diesel cars and vans will cease, are unlikely to be met. Without scaling up the domestic manufacture of batteries and urgently focusing on improving the supply chain of materials, the UK will end up importing batteries and vehicles.
A recent report in the media summarised well the current state of battery manufacturing in the UK and the future of the automotive industry. Recent events have put an end to the UK’s ambition to be a global hub of the electrified automotive industry. BMW has announced the end of production of its electric Mini in Cowley, which it is moving to China. Johnson Matthey, a leader in the development of battery technology in Britain, has quit the sector, citing competition from China and South Korea as a reason. Arrival, once a promising enterprise for the manufacture of electric vans and buses in the UK, is rumoured to be moving to the USA.
When it comes to battery manufacture, Britishvolt, once highly trumpeted as the UK’s big gigafactory, is now reported to be in serious difficulty and is possibly facing insolvency. Another such enterprise at Coventry airport has hardly got off the ground. This leaves the UK with one gigafactory, so it seems we have lost out on the international race to manufacture lithium-ion batteries.
The UK still needs the capacity to supply its domestic market, so I ask the Minister: what plans do the Government have to attract investment in building gigafactories for the production of batteries in the UK? How many will there be, and what is the timescale for when such facilities will be up and running? Does he think the UK can still meet its commitment to phase out petrol and diesel cars by 2030?
Although we may have lost the race to be the global hub of lithium-ion batteries, the UK could be a leader in the development of the next generation of batteries, such as solid-state, lithium-sulphur and sodium-ion technologies. To exploit the competitive advantage that we currently hold, the Government need to show strong support for both research and manufacturing. As yet, there is no sign of the Government doing so. I ask the Minister: do the Government intend to provide a UK strategy for the manufacture of the next generation of electric batteries in the UK, and to increase support for the research and development of such technologies?
We need to grow our innovators, yet this is also threatened. For example, the Faraday Institution, which received flat funding until 2025, will not be able to recruit PhD students in 2023, as funding cannot be guaranteed beyond 2025. How are we to grow the next generation of innovators if we cannot recruit them because of lack of funding?
The Government can still meet their ambition to be a global hub of battery production by demonstrating a strong commitment to the research and manufacture of the next generation of batteries, and not risk losing our automotive industry.
I shall now move on. Our report also reported on the production of hydrogen. Soon after the publication of our report, which asked for a clear policy on hydrogen and fuel cells, the Government published their hydrogen strategy in August 2021. It stated the Government’s ambition to deliver blue hydrogen generation capacity of 5 gigawatts by 2030 and the first 1 gigawatt by 2024. More recently, the Government have increased this by committing to increase the capacity of hydrogen generation to 10 gigawatts by 2030. Will the Minister say how and where this is to be achieved, and in what timescale?
The UK’s current capacity for hydrogen production is way short of the Government’s ambition. None of the strategy refers to the development and production of fuel cells, a technology where UK excels, with several UK companies operating overseas but not in the UK.
There is a lack of clarity about the Government’s plans for the use of hydrogen for light and heavy goods vehicles, the development of infrastructure for the supply of hydrogen, and the use of hydrogen and fuel cells for domestic heating, and in the not too distant future there will be a need for a joined-up strategy on the use of hydrogen, ammonia and aviation fuels. When will the Government make these decisions and will there be a paper describing them?
The Government also need to address public concerns about the safety of batteries and hydrogen fuel cells and the regulatory changes needed to address this. What plans do the Government have to address these issues?
I have no doubt that other noble Lords will speak to many other issues that our report identified, including the need to expand vehicle charging points, address the skills gap and increase research funding for batteries and fuel cells.
If the Government are to deliver on their net-zero commitments, these issues need urgent attention. I will be surprised if someone does not ask about the implications of net-zero policies, given the current energy crisis and rising costs. The view of the committee was clear about the role that batteries and hydrogen fuel cells can play in delivering net-zero policies. The evidence presented to us was also clear that the Government need to do much more. All the evidence suggests that the Government have big ambitions and are doing something, but not enough. We need more action and commitment from government to give confidence to industry, investors and our research community. The Government’s ambition needs to be matched by their action. I beg to move.
The other source I refer to is a report produced for the Finnish geology institute by Professor Michaux. Those of your Lordships who got up at 6.30 am on Friday to listen to his presentation—750 people did, I am told, although I was too late and had to see it on playback—would have been struck by the analysis that he has produced: to make one battery for each vehicle in the global transport fleet, once we transition to electric vehicles, will require 48% of total global nickel reserves and 44% of total global lithium reserves. He concludes, to cut a long story short, that the whole EV battery solution may need to be rethought and a new solution developed that is not so mineral-intensive.
I hope that he is too pessimistic; I am an optimist where resources are concerned. I recall that famous wager between Julian Simon and Paul Ehrlich, in the wake of the Club of Rome and Paul Ehrlich’s book The Population Bomb, in which he forecast that there would be shortages of everything. Julian Simon took him on and said, “Choose a portfolio of minerals or other resources and a period of your own choosing, and I bet you that the price will come down and not go up”. Ehrlich chose five minerals and a period of 10 years. Ten years later, the average of those prices had fallen: three had fallen in absolute terms and all had fallen in real terms.
So the market is quite good at responding to shortages and can develop things, but doing so will be a huge problem if the world is going to move as fast as it is planning—and hoping—to move in the development of electric vehicles in particular and other uses of batteries that are associated with the move to net zero by 2050. I hope that the committee’s recommendations will be followed with greater urgency than the Government and industry seem to have shown so far. I hope too that we will pay attention to the need to develop the sources of minerals and raw materials that will be necessary to make it a reality.
Recently, we have learned that BMW, which owns the production facilities of the UK Mini, has decided to relocate the production of the electric Mini to China. We have also heard that one of the much-vaunted UK gigafactories intended to produce the car batteries—Britishvolt—has gone into receivership. The combination of these announcements is devastating. As regards the decision of BMW to relocate to China, we can assume that the firm has made its decision in view of a clear-sighted negative appraisal of the prospect of there being an adequate supply of automotive lithium-ion batteries sufficiently close at hand to justify its continued presence in the UK as a manufacturer of electric vehicles.
It has become evident that car manufacturers require their supply chain for batteries to be close at hand. One obvious reason for this is the cost of moving such heavy items from a remote manufacturer to the assembly lines of the cars. A more cogent reason is the likelihood that a heightened demand for batteries in future will be met with a dearth of supply. In such circumstances, a car manufacturer needs to be in a position to pre-empt the necessary supply. To do so, it must be located close to the source.
What would have convinced the departing car manufacturer that it should remain in the UK? Surely it is none other than confidence that support for the developing manufacturing infrastructure will be forth- coming from the Government. This is where the attitude of the UK Government has been most discouraging. The Conservative Government are wedded to the idea that free enterprise flourishes best when there is minimal intervention from the Government. Under Margaret Thatcher in the 1980s, the Government divested the state of its nationalised industries. These had been a legacy of the Second World War and the immediate post-war years, when the Labour Government had begun to take control of the commanding heights of the economy.
An assurance that private industry could be relied on to invest sufficiently in the basic infrastructure of the economy seems to have been provided by the experience of the privatisation of the electricity supply industry. Cheap combined-cycle gas turbine plants, powered by plentiful North Sea gas, began rapidly to replace the ageing coal-fired power stations of the erstwhile nationalised industry. The illusion was created that it is sufficient for the Government to undertake to supplement marginally the capital funds that private industry can raise from the financial markets. This is how the Government have proposed to support the building of factories to manufacture automotive batteries.
The support that the Government have offered Britishvolt is paltry. In January, they pledged a mere £100 million in support as a means of attracting investors. This is a small sum in comparison with the £1.7 billion that is reported to have been raised from private investors. The future of the enterprise was thrown into doubt over fears that it could run out of money, when the Government rejected a request for £30 million in advance funding. The matter is still unresolved, and the episode will serve as a future deterrent to investors in projects that require the support of the Government.
The Department for Business, Energy and Industrial Strategy continues to say that the Government are
“determined to ensure the UK remains one of the best locations in the world for automotive manufacturing as we transition to electric vehicles, while ensuring taxpayer money is used responsibly and provides best-value”.
This kind of boosterism is seen to be pure fantasy when one looks at the commitments of other countries to the future of battery technology. China has 20 battery gigafactories that are either operating or under construction, which have been sponsored by the state. Britain currently has only one sizeable factory that manufactures automotive batteries, which is a plant in Sunderland that is tied to the Nissan car factory. Nissan had planned to leave the UK in consequence of Brexit but, presumably, the tie to its battery producer was too strong to allow this to happen. Pathologies such as those affecting the automotive industry are pervading the British economy, and the fault lies largely with the incumbent Government.
Modern battery technology is closely allied to fuel cell technology. Fuel cells are proposed as a means of propulsion for the freight vehicles that are to replace the large diesel-powered juggernauts that pound our roads. They are also proposed for powering trains and ships. Fuel cells have received even less support from the Government than batteries.
Fuel cells are powered by hydrogen fuel, which is created, nowadays, mainly via the steam reformation of methane. This is an energy-intensive process that releases carbon dioxide. It needs to be replaced by a process of high-temperature electrolysis that splits the hydrogen molecules from the oxygen atoms with which they are combined in water.
The appropriate means of supplying the electricity and the heat for the process of high-temperature electrolysis is a small nuclear plant, dedicated to the task. However, Britain’s project to build small modular reactors, which has been undertaken by Rolls-Royce, has been subject to endless hesitation and delay as a consequence of the failure of the Government to provide adequate funding for the period of development, and the project remains in peril.
Our economic prospects are already dire, at least for the short and the medium term. Unless we can effect an industrial recovery, which would need to be sponsored by the Government, our long-term prospect is of an impoverished country that will be largely dependent on imported foreign technology. The majority of our capital assets, whether industrial or otherwise, will have fallen into the hands of foreign owners, through a process mediated by the financial sector, which will be the only remaining profitable enterprise.
Our car manufacturers are first class, but the sharp increase in sales of EVs is steeper than predicted. Can they meet the numerous challenges? For example, we will need a secure supply of critical resource materials— the noble Lord, Lord Lilley, spoke at length about those—chief among them lithium and cobalt. So the Government’s publication, finally, of the 2022 critical minerals strategy is welcome. Some might say it is too little, too late, but it is here now. However, it lacks any statement of where we might find some resilience in the supply of these critical minerals. These supply chains are always risky and fragile and are currently disrupted due to the war in Ukraine, Brexit, Covid-19, and other conflicts in producer regions. So the Government miss a trick when they fail, yet again, to address demand reduction to increase resilience.
According to research by Greener UK—and I thank it for its briefing—reducing demand for electricity in our homes by heat pumps, and on our roads by improving public transport infrastructure, are two examples that could halve the UK’s total future use of critical resources by 2030, compared with the current trajectory. This is a no-brainer, so why are the Government still resistant to action on reducing demand for electricity?
Secondly, I urge the Government, through the Minister, to address recommendation 30 in the report that the Government should set out clear plans for developing industrial-scale recycling of batteries in the UK, including ecodesign rules to make them easier to disassemble. It is another oversight of the critical materials strategy in that it fails to expedite a circular economy and create a market for safer, cheaper and more secure supply chains of recycled materials for battery manufacture. The EU has already introduced rules, and it is time that we tried at least to match them.
We have an excellent car manufacturing industry, but the report concludes that we risk losing it to our European competitors if we cannot meet the deadline of 2027, by when the rules of origin conditions for sale of vehicles to the EU will kick in. This will require the battery in EVs to be wholly made in the UK or EU, and 55% of the rest of the car to be made in the UK or EU, for tariff-free access to the EU. At our current trajectory of battery manufacturing capacity, we will lose production to the EU or other competitors abroad. In October, BMW announced that its hatchback and small SUV electric Minis will start being built in China. Its electric Countryman model will be built in Leipzig, Germany. The noble Lord, Lord Patel, has cited several other examples. This, I fear, is a sign of things to come.
Can the Minister say what urgent steps the Government are taking to meet the 2027 deadline agreed in the TCA? It might be too late for some of our car manufacturers, but it might protect others. In his response, can he reference the situation at Britishvolt and bring us up to date with the Government’s views on its future viability?
In 2017, the then Business Secretary, Greg Clark, announced the launch of the £246 million Faraday Challenge to establish the UK as world leader in battery technology. It was a start, but since then there has been little follow-through. Investor and industry confidence has been further damaged by the abolition of the Industrial Strategy Council.
In conclusion, I refer to recommendation 31 of the report, that the
“Government should explain to industry what will replace the industrial strategy”—
something that is sorely needed if we are to stay at the forefront of next-generation batteries and realise a successful future for our fuel cell manufacturers.
Of course, that particular challenge is not just domestic because, in terms of hydrogen being inserted into existing natural gas, probably at a 20% level, gas is firing our factories up and down the country—so that, again, is another massive challenge. So I ask my noble friend on the Front Bench for reassurance that he recognises that, while the vehicle market is absolutely vital, there are industries alongside that which will produce the goods and facilitate the conversion of our boilers up and down the country from the existing pure natural gas to some combination of natural gas and hydrogen.
When you look at what is happening in Britain by comparison with overseas, it is a worrying situation. The Faraday Institution, which noble Lords have referred to, counts 41 projects in western Europe that are under way. Only three of them are in the UK and the only one that is going well is the one that I referred to: the Chinese company operating beside Nissan. We are in a weak position. Germany has 12 gigafactories opened or planned, while Hungary, France and Italy are making strong preparations. We are losing the Mini from Oxford.
Something has to be done and I would like to know what the Government are planning to do about this crisis. Do they recognise that there is a crisis, because there is? When Greg Clark was Secretary of State, we had a certain consistency and coherence in our approach to industry for the years of Mrs May’s premiership. In the last three years, we have had five different Secretaries of State for Business: Andrea Leadsom, Alok Sharma, Kwasi Kwarteng, Jacob Rees-Mogg and Grant Shapps.
What sort of chaos have these changes produced? What grip do Ministers have on what is going on in the department? What leadership are they offering in this field to try to rescue us from impending disaster? That is the question that I want the noble Lord, Lord Callanan, to answer at the end of the debate. I do not think that they have done very much, because they do not have an ideological approach that is about working closely with businesses to develop new growth opportunities and new businesses of the future.
This was not the approach that Mrs Thatcher adopted in the 1980s when she led the renaissance of the British car industry. She saw the opportunities of the single market and the opportunity to bring overseas companies into Britain to re-establish this great industry. We are in danger of losing all that now. It is not that the Government have not had some successes—I would give them high marks for the Vaccine Taskforce and how it worked—but what is the barrier to Ministers rolling up their sleeves, getting on the telephone and trying to sort out the mess that this report has detailed? If the Minister can answer that question, I will be very happy.
In my last comments, I will come to a completely different sector, which is stationary batteries and those that are to be used in grid balancing. It is chaotic at the moment. One of the big things that it is almost impossible to do if you are a developer is to get access to the grid. It is not just around battery storage but around housing developments—even in west London—and around renewables, solar and offshore wind coming into the UK grid system. To quote a current example, a connection in the south-west given by the local transmission network, Western Power Distribution, is for 2038: that is where the queue has got to. There is no way under Ofgem rules at the moment of undoing that queueing mechanism and getting the right priorities for the right place.
If we want to get to a net-zero electricity and energy system, we need batteries to be a part of that. In fact, if energy storage is seen as a solution to the grid and not a problem—not an extra load—we can in fact move a lot quicker towards net zero and a resilient grid system. This is a serious problem at the moment. The figures I looked up say that 25 gigawatts of battery storage is needed to get to net zero—if they are four-hour batteries, that is roughly about 100 gigawatt hours, obviously. As I say, the connection wait times are now out to something like 2038.
Now this is a sector that does not require any public money at all; it is completely mercantile. But it is unable to bring forward that balancing, and through balancing bring down the cost of energy into the future. So I would be very interested to hear from the Minister what the likelihood is of us solving that. There are various studies going on at the moment, but they are slow and there is not really much light at the end of the tunnel. Frankly, what we need in terms of the national grid is anticipatory investment, not the reactive investment that we have at the moment.
I have a last question for the Minister. In terms of battery storage, there were amendments to change battery storage from being defined as an energy generator in the Energy Bill. I know that he will not say when the Energy Bill will come back to this House, but can he say when there might be a decision as to when the Bill might come back to this House?
Electric vehicles are not pie in the sky; we see them all around us. Tesla’s market cap exceeds that of every other automobile producer. The Government have set a directive that no petrol or diesel cars will be sold beyond 2029. I think that that is a very positive goal, but the Government need to do their part to ensure that it happens.
All of us know of the panic that we get into when our mobile phones are just about to run out of battery. Electric vehicles evoke an enhanced panic of being stranded. Charging points are key to dispelling vehicle panic. It is forecast that we will need 325,000 charging points by 2032. Can the Minister say whether we are on track to hit that target? I would also like to know what the Government’s plans are for encouraging hydrogen charging points. Few charging points lead to reduced take-up—it is as simple as that.
I turn to the geostrategic challenges posed by battery and fuel cell technology and development. This year we have seen all too clearly our vulnerability to energy blackmail. We simply cannot allow any hostile country to hold us to ransom again. China produces 75% of the world’s batteries. It plans to have 149 gigafactories by 2030. The EU has 19, the US 11 and we have two. It makes us very exposed, and it is a clear demonstration of how China plans to dominate automotive production and electricity storage. As the noble Lord, Lord Naseby, mentioned, according to an upbeat report by Goldman Sachs featured in the FT this week, the US and Europe have the opportunity to become independent of China by 2030. It will require a capital expenditure of $160 billion. That may sound a lot but, it is less than the cost of HS2.
The recent US Inflation Reduction Act is showering vast amounts of money in the US by way of subsidies and tax credits on renewable energy and electric vehicles. As has been mentioned, a South Korean firm has invested $3 billion in a cathode factory in Tennessee. I agree that we need our own equivalent of the IRA in terms of long-term financial commitment, otherwise we will just shuffle along.
As has been mentioned, Britishvolt is a prime example of a tepid government response. Launched with such fanfare only three years ago, it is now on life support in the battery ICU ward. Can the Minister say whether the Government are committed to support Britishvolt at this crucial moment? If they are not, they should be.
Success in modern technologies comes not from slogans and bluster but from hard-nosed, long-term commitment. The successful quest for the Covid-19 vaccine showed that in sharp relief. The title of our report begs two questions. Has our battery strategy gone flat? Is the net-zero target at risk? I think the answers are yes and no. Will the Minister please tell me that I am wrong?
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