Working in the battery industry is pretty exciting right now. There seems to be almost daily announcements of new investment into the global battery supply chain and it is certainly needed. Batteries provide us with a tangible route to decarbonize transport, through their use in battery electric vehicles (BEV). Batteries can also help us balance the load of the future energy mix as we decarbonize our energy system.
Challenges in investment
The business of batteries is highly capital intensive, necessitating significant and sustained financial investment in technology innovation and company growth.
The UK Research and Innovation Faraday Battery Challenge Battery Gap report analysed the UK investment landscape and found that there is a lack of investment in the later stages of company growth. This was rationalized by the youth of the industry and the difficulty in raising funding following the venture stage.
The Coalition for the Decarbonisation of Road Transport (CDRT), has identified two “valleys-of-death” for batteries as well as a number of barriers to scale-up such as risks to the supply of raw materials, relative competitiveness of the UK and difficulties in matching available capital with investment opportunities.
Demand for batteries
We need to be able to overcome these challenges to create a battery supply chain that can meet our future demand. The global lithium-ion battery market is predicted to grow from $59B in 2021 to $278B in 2030, representing great opportunity for growth in the sector. According to the Faraday Institution, 140GWh of battery power will be required in the UK by 2040, representing approximately seven gigafactories. This is equivalent to 3.5M Nissan Leafs or 2.38M Tesla Model S! However, investment is needed to turn these ambitions into reality.
Unlocking private investment with public funding
The CDRT points to government funding as a key enabler to unlocking private investment. The Battery Gap report also found that 48% of companies receiving investment in battery technologies had also received a government grant from Innovate UK. Governments around the world are helping to unlock the investment needed through publicly funded programmes which in turn is helping to secure localized supply chains. The Faraday Battery Challenge and the Advanced Propulsion Centre (APC), supported by the UK government, are doing just this; putting the UK on the investment map and securing UK supply chains.
But in a fast-paced dynamic industry, what has happened in the UK since the Battery Gap report was published?
Cathode materials
First of all: Brexit. The Rules of Origin, stipulated under the Trade Cooperation Agreement, state that to avoid trade tariffs EVs must contain 55% UK or EU sourced content and must have a UK or EU battery pack by 2027. Also the battery pack must contain either 65% of the value of the materials in the cell, or 70% of the value of the materials in the pack, sourced from the UK or EU. Given that cell materials account for over half of the battery value and the UK exports over half of the vehicles it manufactures to the EU, then this becomes a pretty big deal and provides the UK with a strong incentive to localize the supply chain.
The 2021 BNEF Lithium-ion battery supply chain rankings indicate that the UK is particularly lacking in the production of upstream cell materials and since 2020 we have seen the sale of Johnson Matthey’s lithium-ion cathode material business to Australian EV Metals group for £50M and recent extreme price fluctuations of raw materials, such as nickel.
But it’s not all bad news. There are companies in the UK receiving investment to fill some of these supply chain gaps. British Lithium was the first company to start mining lithium in Cornwall back in 2019 and in 2021 it received £2.9M from Innovate UK to build a pilot plant to scale-up their novel metallurgical lithium extraction technology.
Cornish Lithium, also based in Cornwall, is exploring the extraction of lithium from geothermal waters. In 2021 it secured £18M investment from TechMet Limited to build a pilot plant and undertake further studies to unlock subsequent further funding.
Green Lithium, based in the North East of England, recently received equity investment from Trafigura. The company will build a large-scale lithium refining facility which will be operational by 2024 and provide battery-grade lithium hydroxide to the UK, conveniently located next to the UK’s gigafactories.
The UK is also home to a sodium-ion cathode manufacturing company, Faradion. Compared to lithium-ion, sodium-ion batteries are safer, use abundant materials and are cheaper. However, the supply chain is not yet established and the energy density is typically lower than their lithium-ion counterparts, which currently limits their use in the transport market. In late 2021, Faradion was acquired by Reliance New Energy Solar Ltd for £100M with a further £25M invested by the company to accelerate deployment of their technology. Faradion currently license its technology for use in AMTE Power’s Ultra Safe pouch-format sodium ion cell product.
But the sale of Johnson Matthey’s battery materials business places uncertainty around the future of lithium-ion cathode material manufacturing in the UK.
The UK is leading across Europe in innovations and there is opportunity to localize the European anode supply chain in the UK
Anode materials
The story is different when we look at anode materials. The UK is leading across Europe in innovations at the anode and there is opportunity to localize the European anode supply chain in the UK.
Nexeon recently raised $80M from a consortium of investors to scale-up production of its silicon anode materials. The company’s technology delivers faster charging, higher energy density and better cost per kilowatt hour compared to traditional graphite anodes.
Echion Technologies and Nyobolt respectively announced £10M series A funding and £7.5M in series A funding in 2021. Both companies are exploiting the performance enhancements that niobium oxide can provide; faster, safer charging, and longer cycle life. This reduces the total cost of ownership of BEV’s containing their anodes.
Battery manufacture
Securing gigafactory investments in the UK is the keystone to localizing the rest of the supply chain around them.
Household name on the battery scene, Britishvolt, has secured significant investment to build its gigafactory. £1.7B was committed by Trixtax and abrdn stimulated by (a currently undisclosed amount of) funding from the Automotive Transformation Fund programme. Britishvolt’s gigafactory in the North East will deliver initial capacity of 10GWh/year and triple in scale to 30GWh/year by 2028.
Envision-AESC is currently the only gigafactory in the UK, supplying just under 2GWh/year. In a £1B partnership with Nissan, it has committed to building a new gigafactory in the North East, which would more than quadruple current capacity to 9GWh/year by 2024. The company estimates that a further £1.8B will be required to scale this to 35GWh/year by 2030.
AMTE Power (AIM: AMTE) raised £13.7M in 2021 to support scale-up activities and has yet to announce its UK gigafactory site but plans are progressing and this is expected by the end of 2022.
Solid state batteries
Solid-state batteries are frequently referred to as the holy grail of battery technologies. They are expected to deliver much higher energy densities and enhanced safety, but innovation and investment are needed to drive costs down.
Ilika (AIM: IKA) develops lithium-ion based solid-state batteries on the south coast of the UK and in summer 2021 the company successfully raised £21M to increase the performance and scale-up the production of its “Goliath” technology.
LiNa Energy, based in the North West region of England, is focused on a novel sodium-ion system and its £3.5M late seed funding, raised in autumn 2021, is helping to expand laboratory facilities and accelerate commercialization
Waste and recycling
Although the UK has promising companies on the rise in materials production, we must not forget that localization of the supply chain must also mean localized waste. This presents the opportunity not only to recycle the battery at the end of its life but also the waste produced throughout manufacturing. Waste company Veolia has recently announced an electric vehicle battery recycling facility, in the West Midlands, which has an estimated recycling capacity of up to 20% of the UK’s end-of-life batteries.
Britishvolt has also announced a joint venture with Glencore (LSE: GLEN) to set-up a new battery recycling plant at the Britannia Refine Metals site in Northfleet. The site is expected to process 10,000 tonnes of lithium-ion batteries a year as well as the valuable manufacturing scrap produced by Britishvolt’s gigafactory.
What next?
It is fair to say that there is a clear market for batteries in the UK and specific examples demonstrate the scale of the challenge and potential rewards. However, further investment is needed if the UK is to fulfil its projected demand and produce the 140GWh of battery power needed by 2040. Whilst government funding can help catalyze investment significant, sustained private investment is needed in new localized, national UK capability with the potential to boost economic growth and position the UK as a world leader in battery innovation.
The UK landscape also continues to change rapidly, and with UK government legislation coming into play in by 2030 it’s hard to see this slowing. Looking back at investment data from the Battery Gap Report alone, it’s going to be exciting to see what happens over the next decade of innovation and investment.
