Written evidence from Balance Batteries (BEV0041)

 

15th February 2023

 

Submission – Call for evidence, batteries for electric vehicle manufacturing

 

  1. This document has been produced to give the views of Balance Batteries in relation to the questions posed in the Government’s call for evidence. Each section heading is one of the questions on the call for evidence, followed by our submission.

 

  1. Terminology

a)      The term ‘battery’ is widely used, but refers to three product types. Firstly, battery cells, which are the lowest level of energy store, have a voltage between 2.6V and 4.3V and take the forms pouch cell, cylindrical cell and prismatic cell. Secondly, cells are typically combined together to create battery modules, or blocks of cells, with voltages of less than 60V. Thirdly, battery packs are made of battery modules, which are situated inside an enclosure, along with some safety electronics and typically have voltages in the range 350V-800V.

 

  1. Background information

b)      Product differentiation by automotive OEM’s has previously been around the engine. Each manufacturer defining its breed by the engine, which was then manufactured in-house. E.g. BMW are famous for in-line 6 cylinder engines, Ferrari for V12’s, Audi for V10’s.

c)      As the transition to electric vehicles takes place, batteries are becoming the differentiator between OEM’s. Nissan use very low cost, low power battery modules with no cooling, for their low power low duty vehicles. Tesla use battery modules with liquid cooling touching each cell, for their high-power vehicles.

d)      A great deal of development is taking place in this area, to reduce weight, increase range, increase power and provide product differentiating features. Research and development in battery cells, battery modules and battery packs will depend upon understanding the manufacture and use of the end product. If we are not manufacturing the end products, we will lose our relevance in R&D also.

e)      It is our firm belief that the UK needs an end-to-end battery eco-system, from cell chemistry research, to pack production.

 

  1. UK car-maker sales

JLR – In 2021, JLR sold;

28,181 cars in China,

22,529 in the UK,

20,578 in Europe and

18,186 in the USA. The rest of the world accounted for another 8,195 cars.

Source: https://www.statista.com/statistics/763140/jaguar-sales-volume-cars/#:~:text=In%20the%202019%2F20%20fiscal,35%2C335%20units%20sold%20that%20year.

 

  1. UK Carbon intensity of electricity production

f)       At 270 gCO2/kWh, the UK has one of the lower carbon intensities of electricity production, making it a good place to base production and expect low embedded CO2.

g)      For reference;

Worse than us (gCO2/kWh): Poland 739, China 544, USA 380, Germany 354.

Better than us (gCO2/kWh): Italy 226, Portugal 183, Spain 169, Austria 91, France 58.

Source: https://ourworldindata.org/grapher/carbon-intensity-electricity?country=~ETH

 

  1. Inflation reduction act

h)      The USA has passed legislation on an inflation reduction act, the impact of which is that tax reductions are offered to consumers, based on local production of batteries for electric vehicles. For example, to unlock the full EV consumer credit, a scaling percentage of critical minerals in the battery must have been recycled in North America or been extracted or processed in a country that has a free-trade agreement with the United States. The battery must have also been manufactured or assembled in North America.

i)        From this, it is clear that a free trade agreement with North America, including tariff free supply of EV’s made in the UK, is of paramount importance to UK car manufacturers.

Source: https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it

 

Questions and answers

 

  1. Q. Is UK-based battery production necessary to support the manufacture of electric vehicles in the UK?

j)        Yes, without local battery manufacture, we will be not be able to be cost competitive. Transportation of battery packs is more highly regulated (UN ECE 38.3) than transport of vehicles. Special fire-retardant stillages are required for freight transport of battery packs and modules, whereas transport of completed electric vehicles is not regulated in this way and the vehicles can be freely transported. In addition, the empty stillages must be transported back to the battery plant, to be re-used. Which means that it is more economical to produce vehicles in countries where the batteries are made than shipping battery packs around the world. The consequence of this is that our automotive industry will move vehicle production to the countries where Gigafactories are present.

k)      An alternative, is to purchase battery cells and manufacture modules and packs, but high embedded CO2 in products imported from China (544 gCO2/kWh) will make our vehicles uncompetitive in terms of carbon taxation, so restricting sales to Europe.

 

  1. Q. What are the risks to the UK automotive industry of not establishing sufficient battery manufacturing capacity in the UK?

l)        The UK will lose its automotive manufacturing industry if we do not establish domestic battery manufacturing capacity. The additional cost of pack transportation and high embedded carbon when purchasing from China, will mean it is far cheaper to produce EV’s locally for European markets.

 

  1. Q. What can the UK learn from investment in other countries in the establishment of gigafactories?

m)   It is evident that countries across the world are offering incentives to create gigafactories within their borders. The key learning from this is that Government subsidy is required to match the offers made by rival countries if we are to manufacture batteries in the UK and in so doing, retain our automotive industry.

 

  1. Q. Do we have the skills in the workforce required for the production of batteries? If not what needs to be done?

n)      Battery cells, modules and packs are relatively simple to manufacture and close tolerances, such as those required for engine production are not needed. Other than specialist cell manufacturing equipment, the processes required are sheet metal stamping, extrusions, bending, bonding and welding. These skills are very similar to those required for body panels and should be abundant in the west midlands. Automation skills are required to create cell and module production lines.

 

  1. Q. Will the cost of UK batteries be competitive compared with batteries produced elsewhere?

o)      The relatively lower embedded CO2 content of batteries made in the UK (Compared to Germany, Poland, China and the USA) should mean low carbon taxation at the European border. Battery cells and modules tend to have low labour cost as the production is highly automated, so the high UK labour rates should not dramatically affect production cost. Battery packs are assembled by hand to some extent and skilled workers are required for this. There will be a trade off of embedded CO2 costs (via carbon taxation) Vs slightly higher labour costs.

 

  1. Q. What impact will the European Union’s proposed Carbon Border Adjustment Mechanism have on UK production?

p)      If we are able to manufacture complete battery packs in the UK, including cells and modules, our low carbon intensity grid supply should enable us to be competitive with Europe. However, if we import battery cells from e.g. China, or Germany, then the embedded CO2 will be significantly higher than if we had made them ourselves, meaning a higher taxation regime for importing EV’s into Europe.

Source: https://www.carbonchain.com/blog/what-you-need-to-know-about-the-eu-cbam?gclid=Cj0KCQiAorKfBhC0ARIsAHDzslvQ0mDg6jDudbzgrJu97bBnZRlOMuOfUkOvjfYDPciP1lcd962J2lsaApRbEALw_wcB