This article has some good elements for you to consider - should government intervene? Is it operating joined-up policy, or is it pulling in different directions to achieve different objectives? Plenty to mull over:
Britain’s new gigafactory is our entry into the global league of the EV revolution
Rishi Sunak must now ensure cheap power to meet the voracious energy needs of lithium battery plants
Bad industrial policy is to waste public money propping up declining companies that can no longer compete on world markets. That is a bottomless pit.
The imputed £500 million subsidy to build Tata’s gigafactory for battery cells is nothing of the kind.
It is laying the infrastructure base for a rising industry, akin to building a road or installing fast broadband. It also heads off the risk of punitive tariffs on EV exports to Europe due to local content rules in the Brexit trade deal.
Britain needs 100 gigawatts (GW) of battery capacity by 2030 and double again by 2040. The 40 GW Tata plant in Somerset, and Nissan’s 7.5 GW expansion in Sunderland, take us only a quarter of the way.
Simon Moores, head of Benchmark Minerals Intelligence, told Parliament’s battery hearings that it would require £5bn of state funding to draw in the necessary £15bn of private investment.
“Traditional economic models do not work in this. This is a brand new industrial revolution,” he said.
Without the Tata plant as a downpayment, and the ecosystem that comes with it, the UK would have lost its footing altogether in the global switch to EVs, with little to replace the existing 200,000 jobs in combustion engines and linked supply chains.
“Embedded manufacturing that we have now would drift away, model by model,” said Jeff Pratt from the UK Battery Industrialisation Centre.
The UK slid down the protectionist slope in the 1970s trying to save Coventry’s car industry. The unhappy saga ended in the nationalisation of British Leyland amid strikes, ‘Friday afternoon’ lemons, and a shipwreck of debts.
The British Motor Corporation, Rootes, Standard-Triumph and Vauxhall had together been the world’s biggest exporters of cars as recently as the 1950s. The industry employed 5pc of the UK’s workforce. One can understand why successive governments could not bear to let it wither away.
The carmakers thought Britain’s accession to the European Community would revive export sales by enabling longer production runs. Instead it was the coup de grace. It took fifteen years of hard slog and Japanese reinvention to come back from near death.
The British Leyland error today would be to scrap the UK’s sales ban on petrol and diesel cars in 2030 and try to hang on to the old order, inevitably at some point with public money and in defiance of market forces.
That would be a certain recipe for national economic ruin, quite apart from the immense damage to the UK’s moral reputation.
“Ten years ago it wasn’t clear whether electrification would win or not. Today it is absolutely as clear as death and taxes that the auto industry is going electric,” said Andy Palmer, former chief executive of Aston Martin.
There is no turning the clock back.
Global sales of EVs have risen 58pc over the last year. China is on track to reach eight million in 2023. Sales in Europe have risen 66pc, increasing the EV share from 10.7 to 15.1pc, despite Volkswagen bungling its pricing policy.
New emissions standards in the US are forcing a step-change and so is the $7,500 EV tax credit under the Inflation Reduction Act. The first million EV sales took 60 months, the second took 17 months, the third took six months.
The trajectory is following the classic S-Curve of disruptive technology. The US think tank RMI thinks EV sales will reach 90pc in China and 70pc worldwide by 2030. “It’s exponential, global, and this decade,” it said.
British chemists were pioneers of lithium-ion batteries. The UK had every chance of leading as EVs took off.
But somewhere between 2017 and early 2023, the British government dropped the ball. It pushed through the most aggressive fossil car ban in the OECD bloc without taking steps to secure strategic minerals as China launched a global land grab, and without nurturing the EV supply chain.
“We laid down the law but we have not followed through with what UK industry needs to do to get there,” said Jeremy Wrathall, founder of Cornish Lithium.
Westminster seemed to think business could do it all alone. The EU and the US made the same mistake, but twigged earlier to the danger.
The Tata deal comes in the nick of time and starts to close the gap. It is also a shot in the arm for a much-maligned UK economy that is not doing as badly as the global nomenklatura proclaims.
In January, EV exports to Europe will require 50-60pc of local or EU content for batteries to avoid tariffs. The terms will tighten further in 2027.
Neither side is ready but Brussels is still playing tough, calculating that it is sufficiently far ahead with 30 gigafactory projects (some will fail) that it could peel away Britain’s EV industry in much the same way as it has tried to peel away chunks of the City.
The Tata deal levels the playing field.
Furthermore, it disproves the defeatist myth that the UK is too small to compete with the alleged hand-outs of the EU’s green deal.
The Commission does not have real money, and whatever it has must be spread across 27 states. The vast headline sums are aspirational, mostly reliant on national governments and on leveraging private investment.
Spain lost the bidding war with Britain for the Tata factory, even with EU funds.
The UK has the advanced chemical and engineering companies, and top-notch universities, needed to sustain a world-class EV industry. The British Geological Survey says it has Europe’s biggest lithium deposit near St Austell.
Cornish Lithium thinks it can extract large amounts of lithium from geothermal brine with a zero carbon footprint and at competitive cost.
Lithium start-ups are sprouting up in the north. They may struggle to match the costs of Chilean lithium from the Atacama – mostly locked up already in long-term contracts with Asian buyers – but they could eliminate the geopolitical supply risk.
The missing link is cheap power. Lithium battery plants have voracious energy needs. “It is our greatest competitive disadvantage,” said Konstanze Scharring from the UK car lobby (SMMT).
It ought to be an urgent national priority to roll out cheap wind power as fast as possible, each watt replacing a watt of imported gas.
Yet the Government’s overshore expansion has hit a wall. Some 5 GW of agreed wind farms are blocked because the Chancellor imposed a 45pc windfall tax on renewable companies just as they were struggling with a 30-40pc surge in turbine costs.
Vattenfall this week cancelled the 1.3 GW Norfolk Boreas array. “It simply doesn’t make sense to continue the project,” said chief executive Anna Borg
Unlike the oil and gas industry, wind companies were denied a tax deduction against fresh investment. Which bright spark in the Treasury thought it a good idea to reduce the future supply of energy in the middle of an energy crisis?
Rishi Sunak has redeemed himself this week with the Tata coup. At least the UK has a fighting chance of saving its car industry. Now he must convince the world that he has a credible plan to slash energy costs. Without cheap power he can kiss goodbye to everything else.
No comments:
Post a Comment