Battery Strategy (Science and Technology Committee Report)
(2 years ago)
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Lord Patel
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).
Lord Patel (CB)
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.
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.
Lord Lilley (Con)
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.
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.
Viscount Hanworth (Lab)
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.
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.
Baroness Sheehan (LD)
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.
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.
Lord Naseby (Con)
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.
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.
Lord Liddle (Lab)
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?
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.
Lord Teverson (LD)
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.
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?
Lord Mitchell (Lab)
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.
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?
Baroness Randerson (LD)
My Lords, I start by congratulating the committee on its report, which is brutally clear in its conclusions. I have been fascinated by this debate. I have sat in many Grand Committee debates here but I have never come across one that has aroused such strong views across the Room.
The first sentence of this report says it all:
“The UK’s current trajectory of battery manufacture is insufficient to support the automotive industry’s transition to electric vehicles or to meet our net-zero commitment.”
The committee goes on to say—the noble Lord, Lord Liddle, has already quoted this—that it was astonished at the stark contrast between the optimism of Ministers and the concerns of the experts who came to give evidence.
These conclusions stand even more clearly a year on from the writing of the report. This Government—we are of course three Prime Ministers on from when it was produced, but they are still the same Government—never cease to disappoint. Their ambitions sound good, if rather vague, their rhetoric is florid and fanciful and their practical support for business and industry fails at every step. Only last week, the Chancellor’s answer to perceived misuse of some R&D tax credits was to cut them in half, rather than deal with the problem of fraud and tighten up procedures.
For seven years, I have been arguing for a more proactive approach from the Government to battery technology and the availability of EV charging to ensure what this report calls “charging for all”. I have been very frustrated by the lack of progress. We do not even yet have the simplicity of a proper, straightforward payment system. The Government’s response to this report is disturbingly vague and avoids many of the precise questions the report posed. They continue to fall into the trap of being unrealistically upbeat.
The SMMT—the Society of Motor Manufacturers and Traders—is clear that the UK must expand its domestic battery production to retain domestic auto manufacturing in the long term. It estimates that the UK needs at least eight gigafactories by 2040, with approximately 120-gigawatt capacity. Currently there is a capacity of only 2 to 2.5 gigawatts, and only two companies: Envision and the proposed Britishvolt factory. Together, if they fulfil their ambitions, those two might produce 40 gigawatts by 2030—but 120 are needed.
If that were to be achieved, the prizes would be great. EV transition alone will be worth £12 billion to the economy in terms of batteries for the UK supply chain. The EV market is developing rapidly; there were 53,000 UK-manufactured vehicles this year, almost 80% of which were exported. One-quarter of all our vehicle exports are EVs. However, we face huge challenges. Rules of origin under the TCA will apply from 2027, but some related issues apply from 2024 and will make life very difficult for the industry.
We also need a major reskilling of the workforce and training of new workers. The recent Budget produced nothing for further education. We need a national skills strategy; for example, we need about 10,000 qualified workers to manufacture battery cells, but we have almost no such qualified workers at the moment. The report points out that government support, for example via the Faraday battery challenge, has been lower and of shorter duration than that of our competitors. The Faraday Institution receives £30 million per annum, compared with the European Commission’s €3.2 billion aimed at seven member states up to 2031. That is £270 million per annum for 10 years. In France, there is an investment of €960 million and in Germany an investment of €1.25 billion. They dwarf the UK in their ambition and commitment.
The truth is that, by leaving the EU, we have cut ourselves off from the benefits of scale in research and development. The Government now face a stark choice. They need either to massively up the scale of their commitment to R&D to greatly outspend our competitors or to tone down their rhetoric and modify their ambitions. They might even consider a Swiss-style trade agreement.
Lord Krebs (CB)
My Lords, one advantage of coming near the end of the list is that many of the things one was going to say have already been said by others, and I can summarise by saying “I agree”. However, I start by thanking our chairman, the noble Lord, Lord Patel, for his excellent chairmanship of the committee and reiterate the thanks to our specialist adviser Professor Clare Grey for her advice and guidance.
We were told in our inquiry that the availability of raw materials is one of the main limiting factors for battery manufacture, and the noble Lord, Lord Lilley, has given such an articulate and comprehensive summary of the situation that I do not need to say anything more about it, other than to take just one example from the FT on Monday, an article about graphite, a crystalline form of carbon. Every EV contains 25 kilos of graphite —so quite a lot of it. Demand is predicted to rise threefold in the next four years. The price of graphite has gone up by one-third in the past year, 65% of the world’s graphite is currently mined in China and 85% of the graphite is processed in China, which speaks to the point mentioned by the noble Lord, Lord Mitchell, about dependence on certain countries for supplies.
I want to focus on another aspect of the supply chain, which is the fact that the raw materials often come from countries with poor human rights records and poor environmental standards, so when you step into your EV and drive off, do you think about the fact that the cobalt in the battery may have been mined using child labour in the DRC? Do you think that most of the raw materials in your battery might have contributed to serious pollution of the environment as well as damage to human health? For instance, we were told that in South America the extraction of lithium from brine uses large volumes of water and can lead to contamination of both the aquatic and terrestrial environments.
As has already been mentioned, against this background, we made two recommendations. We asked the Government to produce a critical raw materials strategy in order to plan for future supply issues, and we also asked the Government to set out plans for industrial-scale recycling and to require manufacturers to conduct a full life cycle analysis of the environmental and social impacts of batteries.
As the noble Lord, Lord Patel, and other noble Lords have mentioned, we now have a critical raw materials strategy, but I am told that it is a high-level document without a detailed road map for implementation. Equally, the critical minerals intelligence centre established under the strategy at the British Geological Survey has, I am told by scientists from the BGS, no clear remit, so will the Minister tell us when the road map will be published and when the purpose of the intelligence centre will be defined?
I now turn to recycling, which has already been mentioned by the noble Baroness, Lady Sheehan, and the noble Lord, Lord Teverson. Northvolt, the Swedish battery maker, has said that by 2030 it will have developed three gigafactories with a combined annual output to power more than 2 million electric vehicles and that these factories will obtain half their raw materials from recycling. Will the Minister update us on the UK’s level of ambition for recycling? Does it match that of Northvolt? The Government’s response on this was extremely vague, with reference to an inter- disciplinary circular economy centre funded by UKRI, but no specific targets or dates for recycling.
We also asked the Government to introduce incentives and regulations to speed the transition to more sustainable manufacturing. The European Union proposes to introduce legislation on recycled material in batteries by 2030 and for all batteries sold in EVs in the EU to declare their carbon footprint by 2024. Therefore, I ask the Minister whether the UK intends to use its Brexit freedom to go further and faster than the EU, or use it to lag behind—or are we intending to follow the EU’s requirements?
As many other speakers have said, EVs are undoubtedly crucial for our trajectory towards net zero, but they come with costs as well as benefits—and I have referred to the social and environmental impacts of sourcing the raw materials. I now want to refer briefly to another kind of cost. EVs are typically about 30% heavier than their petrol or diesel equivalents. Furthermore, the most popular models of EV in the UK are nearly all SUVs. The result of this is that our city streets are becoming increasingly populated by large, heavy vehicles. Can the Minister tell us what assessments the Government have made of the consequences of this for, first, damage to road surfaces, especially in urban areas and, secondly, the safety of other drivers, pedestrians and cyclists? Furthermore, as a result of these assessments, are the Government considering following jurisdictions in the US such as Iowa and New York, and countries such as France, all of which have introduced, or are planning to introduce, an extra tariff for vehicles above a certain weight?
In asking these questions, I declare an interest as a daily cyclist in Oxford, where the combination of potholes and tank-like SUVs on the narrow streets presents a serious hazard to those of us who chose a transport method with an even lower environmental footprint than electric vehicles. I look forward to the Minister’s response.
Baroness Walmsley (LD)
My Lords, as a member of the committee, I thank the noble Lord, Lord Patel, for his excellent chairing of our inquiry and his introduction today. I also thank all the committee staff and advisers, who have done such a good job. We heard from a very wide range of experts, to whom I am also grateful.
The subject that we chose could hardly be more apt for this week, as COP 27 comes to an end, since batteries and fuel cells should play such a crucial role in our ability to mitigate climate change and reach net zero. I am pleased to note that, since the report was published, the Government have met a number of our recommendations, committing to phase out non-zero emitting HGVs by 2040 and publishing the hydrogen and critical minerals strategies, about which more later. However, our witnesses suggested that the Government have a long way to go if they are to realise the potential of the UK’s role in the production and use of batteries and fuel cells.
As the noble Lord, Lord Liddle, pointed out, even the media have noticed that, unfortunately, we have already lost the race to become a global leader in the production of lithium-ion batteries. As the noble Lord, Lord Patel, warned, this provides a serious danger to our UK automotive industry. If we are even to reach our not very ambitious targets for EV cars and vans on our roads, it will have to be done by importing batteries and complete vehicles, and we can be held to ransom by China. The rules of origin laws coming in in 2027 will also mean higher costs and loss of markets, unless we can increase our own production. My noble friend Lord Teverson called it a timebomb, and he was right.
The Government have stated an ambition to build eight gigafactories to manufacture batteries by 2030, but we have only one, and Britishvolt is struggling to obtain its investment in its proposed factory in the north-east. Is that because investors are unsure of the Government’s support and commitment in the long term? I suspect so. Can the Minister reassure us?
As our witnesses told us, there is an opportunity to take a lead on next generation alternative battery technologies, such as solid-state, lithium-sulphur, sodium-ion, et cetera. Focus and funding of research and development of those new technologies is crucial. However, as the noble Lord, Lord Patel, mentioned, the funding of the Faraday Institution is guaranteed for only two years and has no allowance for inflation for that time, meaning a real-terms cut. That means that there will be no PhD cohort starting in October 2023 or 2024. Will the Minister please look at this?
In addition, there is no significant funding in the Faraday Institution project for redox flow batteries needed for static batteries for power storage. As my noble friend Lord Teverson said, this will be essential as the demand for power, for recharging and other things, increases. Will the Minister talk to UKRI about this issue? The Faraday Institution has also brought together a consortium of seven partners to develop a world-leading prototype solid-state battery, but at least two of the partners have either taken themselves abroad, as is the case with Johnson Matthey, or are struggling to fund their battery factory—the case with Britishvolt. So how will this affect the objectives of that consortium? Badly, I suspect.
To encourage uptake of EVs in the domestic market, we need to look at the factors that deter purchasers and fleet owners: cost, range and the charging network. On cost, the Government have just removed the grant that was available to reduce the price premium, and last week they announced that EVs will have to pay vehicle excise duty from 2025. Indeed, some will have to pay a very high rate of VED, because they are expensive. What is the sense of this, if we are going to reach or exceed our targets? The range is gradually increasing as the work progresses on making lithium-ion batteries more efficient. But this will take time, which makes the motorway and major road charging network even more important. Having queued up many times to use the only working charger of two at a service station, I am painfully and personally aware of this, as is my noble friend Lady Randerson. Our committee recommended a vastly increased number of public charging facilities, since many people cannot charge at home. What are the Government doing to speed this up?
Something could be done right away, however, to encourage people without a home charger to get an EV: reducing the VAT on power downloaded from public chargers. This is at 20%, whereas people like me who are charging at home pay only 5%. Can the Minister do this right away? The cost of upgrading the power supply to serve workplace chargers is high, which will deter blocks of flats, workplaces, petrol stations, supermarkets, et cetera; will the Government increase the support for this?
Skilled workers have been mentioned by several speakers. To reach our targets, we need many thousands of skilled workers for the manufacture and maintenance of batteries, fuel cells, vehicles and the chargers and grid needed to service them. The Government have set out a number of industry training schemes, as my noble friend Lady Randerson noted, but there was no new funding announced in the Autumn Statement for the further education colleges that will be key to delivering them. Was that an oversight by the Chancellor?
As the noble Lord, Lord Lilley, pointed out, many of the essential materials needed for current batteries are not found in this country, and the new critical minerals strategy is important here. However, we hear from researchers that there is no pathway and that funding for delivering the strategy is minimal. Can the Minister assure us that there will be more funding coming down the track?
One way to ensure the pipeline of minerals and deliver a sustainable circular economy is through recycling, as my noble friend Lady Sheehan pointed out. The early batteries were difficult to recycle, but this can be made easier through recycling by design. Can this be made mandatory through regulation, at least for those made here? I think that there is one recycling facility for these materials in the UK; batteries are having to be shipped to France for the recovery of vital materials. I understand that the University of Exeter is working on the reuse of cobalt, lithium and rare-earth elements, but we need development and manufacturing facilities too. What are the Government doing about that? My noble friend Lord Teverson also talked about reuse for static batteries for grid balancing.
I make two final points. First, given that some renewal energies are intermittent, there will be a need—in addition to a smart grid, smart meters and so on—for the Government to ensure that energy providers offer variable tariffs to customers to incentivise behaviour change and spread demand across the day. What are Government doing about this?
As my noble friend Lord Teverson said, there is also the need for large-scale battery storage to even out our supply. They also have a role in ensuring that no precious captured energy from wind or solar is wasted. I have always thought it was a terrible waste to have to pay wind turbine operators to stop the blades turning when the wind is blowing, when grid demand does not match supply. Will the Government widen the remit of UKRI, the Faraday Institution and the UK Battery Industrialisation Centre to include static batteries?
I have not yet mentioned fuel cells and hydrogen but, to be very brief, they have an important role in heavy transport, marine and rail as well as space heating, such as in Japan. What are the Government doing to encourage more research on this? As regards reaching net zero, however, only green hydrogen produced by electrolysers has a serious role to play. What is really needed is a large-scale demonstration plant onshore, near to a major wind farm, to use the excess energy to produce green hydrogen. Can the Minister say whether there are any plans for this? We will also need hydrogen storage. Let us not make the same mistake as we did with gas, when the Government allowed the removal of the gas storage capacity, which has caused such a serious problem since Russia invaded Ukraine.
Our report calls on the Government to make many changes and to speed up our progress, particularly since transport is such a major contributor to our emissions. I look forward to the Minister’s positive reply.
Lord Bassam of Brighton (Lab)
My Lords, this has been an absolutely fascinating debate, I must confess. I have enjoyed listening to it. It has been fizzing with ideas and important points, and coming away from it I feel I have learned something. I do not think I have ever participated before in a deliberation on a Science and Technology Committee report, but clearly, I should do so more often.
I congratulate the noble Lord, Lord Patel, on his brilliance in steering the committee in the way he did, ensuring that the report was as thorough and insightful as it was. As other noble Lords pointed out, the only shame is that the report has taken so long to come before us for debate this afternoon. As somebody pointed out, COP 26 and COP 27 have been and gone, and that time has passed and been lost.
As the noble Baroness, Lady Randerson, pointed out, the opening lines of the summary perfectly pinpoint the problem: if we do not alter the current course of UK manufacture to support the car industry’s transition to electric vehicles, we will not hit our net-zero targets. That is a pretty stark observation. As the report says:
“Despite recent announcements … the pace and scale of building these facilities will not meet demand”,
and, as a number of noble Lords explained, industry will simply uproot itself and move overseas.
The report was clear that the Government needed to establish a strategy for transport, hydrogen and wider decarbonisation. The committee argued that the Government should produce their promised hydrogen strategy as soon as possible. In fairness, they have now done that, but does it match the risks that the committee identified? I do not think so. It is the “stark disconnect” that my noble friend Lord Liddle drew attention to.
The committee also argued that the Government should support the development of UK battery industry supply chains and establish a strategy for securing access to the raw materials needed to make the batteries. The noble Lord, Lord Lilley, pointed very carefully and clearly to some of the problems we are encountering in the critical minerals strategy, which is another warning to the Government.
The committee also recommended that the Government should ensure that the automotive industry has access to a sufficiently skilled workforce to support the transition from mechanical to electrical technology. A number of Peers drew attention to that, in particular the noble Baroness, Lady Randerson, and the noble Lord, Lord Naseby. The problem here is that we are already far behind our European rivals. As has been said, we have one gigafactory in operation while Germany has five and a further four in construction. France and Italy are set to have twice the number of jobs in battery manufacturing that we are set to have. This simply is not good enough, and it means that our car industry will rapidly become unsustainable.
The committee recommended new research and innovation institutions for fuel cells. It described fuel cells as the Cinderella of UK energy policy, receiving less attention than they deserve, and surely that is right. In response, the Government mentioned the launch of the hydrogen for transport programme to support the development of fuel cell technology and said that they were providing backing through the fuel cell electric fleet scheme. However, these initiatives date back to 2017 and 2016 respectively, so will the Minister say what real progress has been made since?
The committee also called for work with Ofgem to ensure appropriate regulation and incentives are in place to facilitate the expansion of the electricity network. Specifically, the argument was made for the importance of developing smart systems for managing supply and demand. It also said that the Government and Ofgem need to supply the expansion of other more sophisticated services, such as smart tariffs and battery storage. Most importantly, the committee called for the expansion of the public charging network. The fact is that the vast majority of charging points are still located in London and the south-east. The committee wisely argued for the commitment to delivering 325,000 charge points by 2032, as recommended by the Government’s own independent advisory body, the Committee on Climate Change. In response, the Government said that they would deliver £1.3 billion in funding to support the rollout of charge points for homes and businesses and on-street charge points. In March 2022, Taking Charge, the policy document produced by the Government, stated that we would have 300,000 charge points by 2030, but that was rapidly undermined when in June this year the Government ended the support scheme then in place for supporting the electric vehicle grant that focused on charging. Surely this should be the moment where the Government are pulling out all the stops to transition to electric vehicles to reduce our dependence on fossil fuels. This is a short-sighted decision that will simply put electric cars out of reach for many. Perhaps the Minister will enlighten us today about the number of charging points now in place and what sort of plan there is for each year to hit the latest target.
I compare this with the attitude of places such as Norway, where I went on holiday this summer. I hired an electric car and experienced no problems with recharge facilities. I was actually stuck for choice when recharging. That was on the Lofoten Islands, their equivalent of the Outer Hebrides. We need the Government to embrace the means and the technology.
The committee also urged the Government to decide whether to phase out the sale of new diesel heavy goods vehicles and recommended that the infrastructure is put in place to support this objective. In a far-sighted proposal, it said that the Government should
“provide a clear timeline for research and development of technologies”
necessary to support this transition, including batteries and fuel cells. Thus far, it seems that the Government have got no further than analysing the responses to their 2020 consultation on banning new petrol, diesel and hybrid HGVs. The sector needs clarity, so when will the Government’s response be published? Will the Government also be spelling out the technologies required to ensure this transition is possible? I know the Government confirmed that they are committed to phasing out the sale of non-zero-emission HGVs by 2024, a welcome move, but surely the announcement in May this year of just £200 million to support this transition is barely adequate as a demonstrator programme.
Finally, the report calls for the acceleration of the rail electrification programme to accelerate the transition away from diesel trains. Will the Minister explain where we have got to on this issue? The Government did not respond to that point when replying to the report. Perhaps they can this afternoon.
Thus far the Government’s response to the report has fallen short of where it needs to be. We need the Government to be speedier in their response to the issues the report raises. We also need them to work in partnership with business better to understand the business perspective in tackling the challenges that getting to net zero imply.
It was drawn to our attention earlier in the debate that we have had a change in leadership, with five Secretaries of State in four years, so we have had plenty of leaders, but not much leadership. Surely, there is a big opportunity for the UK in meeting the challenges. By expanding the manufacturing capacity of battery production nationally we create new jobs and opportunities wherever—the West Midlands, the north-east, the north-west and the south-west. We need an industrial strategy that delivers that promise and opportunity as we move to a greener economy.
For our part on the Labour Benches, we think that the Government lack ambition. It is not just Labour that thinks that—senior industrial leaders do too. In the meantime, this report helps to provide the UK with a useful steer in the right direction and should act as a wake-up call to government. For that, we should all be very grateful to the committee and its members for their wisdom and foresight.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, I am grateful to the noble Lord, Lord Patel, for securing what I agree with other noble Lords has been a fascinating debate and for the excellent way in which he introduced the subject and the brilliant leadership that he provides to his committee, which the number of responses to reports from that committee suggest. I know that he is well respected across the House for the work that he does, so I am grateful to him for that. I also pay tribute to the other members of the committee and to all those who provided the written and verbal contributions that have enabled the preparation of such a thorough and well-thought-out report.
Given the clear priority of the topic, I hope noble Lords will be pleased, as the noble Baroness, Lady Walmsley, reminded us, that since the report was issued, the Government have made significant progress on many areas recommended by the committee. We have continued to be clear about our ambitions and expectations —for example, in setting out not only that we will phase out all new diesel HGVs from our roads by 2040 but the intervening milestones that will see us on a trajectory to make that a reality, building on the formal consultation and close engagement that we already have on this topic with industry.
The Government recognise the challenges that such ambitions bring. To address a question posed by the noble Lord, Lord Mitchell, and the noble Baroness, Lady Randerson, we do not apologise for setting this bold ambition; rather, we need to continue to focus our efforts, and the considerable efforts of British business, industry and society, on solutions to many of the challenges that we face along the way.
Naturally, many noble Lords focused their contributions today on these challenges. I shall do my best to address as many of these comments and questions as possible. However, it is worth framing the issue briefly on what the Government are already doing. We have published our net-zero, hydrogen, innovation and critical minerals strategies. Just last month, we announced a further £211 million of funding to support battery R&D through yet further investment in the world-leading Faraday battery challenge programme, which was mentioned by many noble Lords in this debate, bringing the overall budget of the challenge to £541 million. I am sure that the noble Baroness, Lady Randerson, will want to welcome that as being on a par with her favourite European Commission investment.
Our flagship support programmes have continued to drive real-world successes. Just last month, the Secretary of State attended Green Lithium, supported through our pioneering automotive transformation fund, as it announced Teesport as the site of the UK’s first large-scale merchant lithium refinery, providing battery-grade materials for use in the electric vehicle, renewable energy and consumer technology supply chains. I am sure that my noble friend Lord Lilley will welcome that development.
I move on to some of the other points raised during the debate. A number of noble Lords, including the noble Lord, Lord Patel, in his introduction, the noble Viscount, Lord Hanworth, the noble Baroness, Lady Sheehan, and the noble Lord, Lord Mitchell, asked about companies in this space, including Britishvolt, and about the Government’s plans to attract investment in gigafactories for the production of batteries in the UK.
Noble Lords will understand that I cannot comment on the commercial discussions that the Government may or may not have with private companies or their prospects. What I can say in public is limited in that regard, but the Government have ongoing discussions with a number of companies in this field. It is not our approach to comment on speculation or the commercial affairs of private companies, but we will continue to progress an ambitious pipeline of potential investments which will help to grow our electric vehicle supply chain. This is a priority for the Government.
As we do that, a key plank of our approach is to continue to work with the many investors with which we are in contact through the automotive transformation fund. In 2021, the net-zero strategy announced £350 million of funding in the automotive transformation fund, in addition to the £500 million announced in 2020 as part of the 10-point plan. The ATF supported the £1 billion electric vehicle hub in Sunderland—in my own area, the north-east—in partnership with Envision AESC, which the noble Lord, Lord Patel, and others mentioned. It safeguards 6,200 jobs at Nissan, including more than 900 new jobs, and 750 new jobs at the new Envision AESC gigafactory. The fund has already enabled the announcement of Pensana’s £145 million investment in east Yorkshire to process the critical minerals used in magnets and a £60 million investment by Johnson Matthey in Hertfordshire to develop hydrogen technologies. Through it, as I mentioned earlier, we also backed Green Lithium to build a refinery in the north-east. We have also received a number of other expressions of interest in the scheme and will continue to engage closely with investors. As I said, I cannot go into details in public at the moment, but I and other ministerial colleagues will update noble Lords on this important topic as soon as possible. We will continue to progress these investments.
The noble Lord, Lord Patel, asked whether the UK can still meet its commitment to phase out petrol and diesel cars by 2030. I am delighted to repeat my confirmation to him that we will end the sale of petrol and diesel cars and vans by 2030 as planned. To support this, the Government have committed to introduce a zero-emission vehicle mandate to require a minimum percentage of manufacturers’ new car and van sales to be zero emission at the exhaust from 2024. We have been working with the whole UK automotive sector to ensure that it can do that and meet the needs of UK business.
I thank the noble Lord, Lord Patel, for welcoming the publication of the critical minerals strategy. He also raised the important question of how we will achieve its commitments. As my ministerial colleague in the other place, Nus Ghani, confirmed earlier this month, I am pleased to reassure the noble Lord and others that we will publish a refresh of that strategy by the end of the year. This will include a delivery plan for the commitments set out in that strategy.
The noble Lord also asked whether the UK intends to produce a strategy for the next generation of electric vehicle battery manufacturers. Through the strategies we have set out and the concrete mechanisms already at our disposal, such as the ATF, which many noble Lords mentioned, I hope the Committee will recognise that our strategy in this regard is very much one of activity. The strategy is important, but so is activity on the back of it. I also recognise the importance, brought home in this debate, of joined-up work across government. I reassure the Committee that we are looking very seriously at the best way of continuing to work across departments—BEIS, Defra, the Department for Transport, et cetera—and between government, industry and consumers, all of whom will have to be on board to deliver the important changes we will need.
The noble Lord, Lord Patel, and other Members asked about our commitment to hydrogen. As he noted, we have doubled our ambition to up to 10 gigawatts of low-carbon hydrogen production capacity by 2030, subject as always to affordability and value for money—I think the Treasury inserts that phrase into every ministerial contribution. At least half of this will come from electrolytic green hydrogen, drawing on the scale-up of UK offshore wind, other renewables and new nuclear. I very much agree with the noble Baroness, Lady Walmsley, that it is criminal that we pay constraint payments to wind farms not to produce electricity because the grid cannot handle it.
We aim to have up to 1 gigawatt of electrolytic hydrogen in construction or operational by 2025, with up to 2 gigawatts of production capacity overall, including CCUS-enabled hydrogen, in operation or under construction by 2025. The UK Hydrogen Strategy, published last August, outlines a comprehensive road map for the development of the wider hydrogen economy over the 2020s to deliver what is a very ambitious commitment for 2030. The British Energy Security Strategy in April 2022 built on that, with further commitments on electrolytic allocation, hydrogen transport and storage, and an attached certification scheme, which is also important. We also set out detail on our hydrogen production strategy in the July 2022 update to the market.
The noble Lord, Lord Patel, and other noble Lords asked the important question of when the Government will make a choice on the mix of different technologies; I think this point was also raised by the noble Baroness, Lady Sheehan. Let me use transport as an example to respond to that question. Here, the Government still remain technology neutral. As set out in the UK Hydrogen Strategy and transport decarbonisation plan, we see hydrogen as likely to be important where energy density requirements come into play and where infra- structure constraints or refuelling times make it the most viable option for heavy goods vehicles, locomotives and so on, where battery technology is not necessarily appropriate.
As outlined in that strategy, we expect that the role of hydrogen in transport will continue to evolve over the course of the 2020s and beyond. To date, road transport has been an early market for hydrogen in the UK. Going forward, we expect hydrogen vehicles, particularly depot-based transport, including buses, to constitute the bulk of 2020s hydrogen demand from the mobility sector. Fuel cell hydrogen buses have a range similar to their diesel counterparts.
The noble Lord, Lord Patel, and others also raised the important issue of battery safety and rightly asked me about plans to address this. The safety of electric vehicles and of their charging is of course of paramount importance to the Government and we keep this under regular review. Multiple safety systems are designed into EVs to protect passengers, emergency services personnel and other users from harm. However, we have to recognise that the risks are different and need to be understood and controlled. To consider EV fires, the Office for Zero Emission Vehicles has formed a steering group of experts from across government, industry and academia. The steering group identified research questions to further develop BEV fire understanding. The National Fire Chiefs Council has also developed national operational guidance for fire and rescue services across the UK. I finish my remarks on safety on a positive note: current evidence does not suggest that electric vehicle fires are any more likely to occur than in petrol or diesel vehicles.
I move on to the excellent contribution from my noble friend Lord Lilley, who raised a number of important issues about having access to sufficient resources and reserves of minerals to produce batteries. My noble friend is absolutely right to raise these issues; it is a challenge that we recognise. We are very familiar with the International Energy Agency analysis that he cited and indeed, as we set out in the UK’s first critical minerals strategy earlier this year, the UK is working with the IEA to explore ways to improve the security and supply of energy-specific critical minerals.
My noble friend raised a question on lithium and nickel reserves and the need for battery solutions to be found that may be mineral-intensive. I can tell him that the UKRI is already funding a considerable amount of research in next-generation batteries. The Faraday Institution has a £35 million portfolio in battery technologies beyond lithium-ion—as well as developing the next generation of lithium-ion batteries—namely in sodium-ion, solid state and lithium sulphur, with applications in stationary storage, electric vehicles and aerospace as well as other high-value niche markets.
The noble Viscount, Lord Hanworth, correctly noted the importance of supply chains being in close proximity to battery manufacturers. The Government are committed to supporting the automotive sector through the transition to zero-emission vehicles and the development of the associated supply chains, including through the ATF to support the automotive sector to meet the very important rules of origin provisions that a number of noble Lords quoted. This will of course recognise the significance of the UK and the EU markets for those manufacturing vehicles in the UK.
The noble Baroness, Lady Sheehan, mentioned that the Government need to do more to secure Britain’s place at the forefront of the battery revolution, and I agree with her, particularly on the importance of this issue. The Government are committed to growing the electric vehicle supply chain and, as I said earlier, we continue to work with investors through the automotive transformation fund to progress their plans to build a globally competitive electric vehicle supply chain in the UK. Indeed, the recent investment of over £200 million in the Faraday battery challenge, which I mentioned earlier, is further evidence of this commitment.
The noble Baroness also raised a question on the resilience of supply and the importance of recognising demand reduction—she and I agree on that. We also agree that the circular economy, design and innovation are all topics of significant attention in our critical minerals strategy, which will be part of the delivery plan that we will publish later this year. She also raised an important point about the market for recycled materials for battery manufacture. I am pleased to report that my colleagues in Defra are working with other government departments and the devolved Administrations and are currently reviewing the existing UK batteries legislation; they are working at pace to publish a consultation in the second half of next year. The intention is to create a regulatory space that supports the appropriate treatment of EV batteries, protects our domestic supply of critical raw materials and contributes to our net-zero ambition.
On the noble Baroness’s question about recommendation 31 in the report on “industrial strategy”, in October last year we published the net zero strategy, setting out our policies and proposals for decarbonising all sectors of the UK economy to help to meet the net-zero target. This is supplemented by a range of strategies relevant to today’s important debate: the hydrogen strategy, the innovation strategy and the critical minerals strategy. In addition, and of particular relevance to some of the specific points raised today, in July 2021 we published Decarbonising Transport: A Better, Greener Britain, containing 78 commitments setting transport on an ambitious path to net zero by 2050. The Government have an activist and outcome-focused approach to the delivery of the industrial outcomes through which I think those who have spoken today would wish to see the UK succeed, prosper and grow.
The noble Lord, Lord Teverson, raised the subject—which he has raised with me many times—of the energy security Bill. I am tempted, but, yet again, I cannot give him a precise commitment on timing. However, I can certainly say that I have heard what he and other noble Lords have had to say, and I am keen to move on this issue as quickly as possible, because I know that it is an important subject to individuals and many businesses across the UK. I hope to have a reply for him in the very near future, if that is appropriate.
In answer to my noble friend Lord Naseby’s points about the roles of other countries in this area, I note that two of the three pillars of our critical minerals strategy are on collaboration and enhancing international markets. Our engagement in the Minerals Security Partnership is just one example of where we are working right alongside allies on this important topic.
The noble Lord, Lord Naseby, the noble Baronesses, Lady Randerson and Lady Walmsley, and other Members raised the important issue of skills and supply chains. That is probably one of the key areas of focus for me in government at the moment. The Government are committed to safeguarding and growing the 155,000 jobs in the automotive sector across the UK. Ensuring that the sector has sufficient skilled workers to enable its transition towards net zero is one of our key priorities, and we are engaging closely with industry to consider further action that may be needed, including through the Automotive Council skills working group.
The noble Lord, Lord Liddle, accused the Government of failing to work effectively with research centres and businesses to develop the native industries of the future. The noble Lord is wrong, and my colleague Minister Freeman set out in the other place last week exactly what we are doing in this space. In response to his questions regarding resources, the circular economy is a challenge but one that we are embracing. Funding via the Faraday battery challenge through the Faraday Institution’s ReLiB stream has enabled research into the safe and efficient segregation and repurposing of cell components. The Government are also investing in two new interdisciplinary circular economy centres in this area as part of a wider £30 million investment, as mentioned by the noble Baroness, Lady Walmsley.
I apologise; I see that I am running out of time. I had a few other responses to noble Lords but I will put those in writing. I thank the Science and Technology Committee once again for its significant efforts in raising awareness and progressing our understanding on this important topic. Your Lordships have my commitment that the Government will continue to pay close attention to the many excellent points that have been raised in this debate, and I thank noble Lords for their attention.
Lord Patel (CB)
My Lords, I thank the Minister most sincerely for answering many of the questions raised, or at least for making an attempt to answer them. As he said, many remain unanswered, and I am glad that he has committed to writing to noble Lords.
When I listened to his answers, I came to the conclusion that everything the Government are doing is fantastic, and we should be world leaders in battery technology, battery science and so on. However, in reality it turns out that we are not. The question that I raised in the first place remains. The Government are doing something, but is it enough? I am glad that the Minister said he took note of the points raised and that the Government will think about it and see what action needs to be taken.
Having heard that response from the Minister, I hope the committee might in due course look at this again in a quick report to ask questions about how much is being done. For today, I thank all noble Lords who have taken part. It has been a very interesting and committed debate on the part of all noble Lords. I thank the Minister again in particular.