Battery Strategy (Science and Technology Committee Report)

Lord Callanan Excerpts

Wednesday 23rd November 2022 Grand Committee

[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.