Battery Strategy (Science and Technology Committee Report) Debate
Full Debate: Read Full DebateViscount Hanworth
Main Page: Viscount Hanworth (Labour - Excepted Hereditary)Department Debates - View all Viscount Hanworth's debates with the Department for Business, Energy and Industrial Strategy
(1 year, 9 months ago)
Grand CommitteeIn 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.