In early September ISG, a UK construction company, broke ground on Britishvolt’s Gigafactory in Cambois, Northumberland. ISG’s scope is estimated at £300m, with the overall cost of the Gigafactory expected to be around £2.6Bn by 2027 if the facility is expanded to its 30GWh target. The contract was awarded in December 2020, with planning permission for the site granted in July 2021.
Apart from Nissan’s 1.9GWh plant currently operational in Sunderland, Britishvolt is the first company to progress their plans to site preparation.
This article aims to provide a snapshot of current UK Gigafactory activity and the underlying drivers and business opportunities. In essence, the UK motor manufacturing industry will face punishing export tariffs under the rules of origin contained in the UK-EU Trade and Co-operation Agreement unless battery production capacity is increased significantly by 1st Jan 2027 – a very challenging target given that only two new plants are currently firmed up and progressing.
So, what is a Gigafactory?
The word Gigafactory was first used by Tesla to describe their first large EV battery manufacturing plant outside Sparks, Nevada, which reached an annualised battery production rate of 20GWh (Giga-Watt hours) by mid-2018. Using a median Tesla car battery capacity of 75kWh, this provides sufficient battery manufacturing capacity for approximately 270,000 cars annually.
The term stuck and is now used to describe any large scale EV battery manufacturing facility. Gigafactories in Europe and the USA are trending towards average capacity of 25-30GWh per year, built up in stages as the factory develops – normally over five years from initial production. A factory will typically start with 10GWh of annual production and increase capacity in steps as they mature until they reach between 25-30GWh of annual capacity.
The diagram below shows the key manufacturing steps (in green) which take place in a typical Gigafactory. Input material and products are shown in blue. Some Gigafactories are also including recycling of end-of-life batteries as a separate process, however integrated production and recycling is not yet standard.
It is important to recognise that not all of these activities will necessarily take place in a Gigafactory. They do not always take battery grade lithium carbonate and other raw materials in at one end and churn out car-ready battery packs at the other end. There is a significant associated supply chain in cell manufacture, battery pack assembly and intermediate manufacturing processes which may take place elsewhere, or may take place in the Gigafactory. The implication for the UK supply chain is that Gigafactories are all different, and different opportunities for providing goods and services exist depending on the manufacturing processes in each Gigafactory.
Cost-competitive and at-scale cell manufacture is an essential part of Gigafactory operations, an industry which the UK must become competitive at versus incumbents in Japan and South Korea, and emerging competitors in Europe.
Despite China being responsible for 82% of global cell production, their use in EVs sold in the USA is minimal, due to the demands of the Chinese domestic market, import tariffs and the desire of US automakers to localise production. US domestic cell production has seen an 11-fold increase in cell manufacturing from 2017-2020 as new Gigafactories came online. The market share of Japanese and South Korean cell manufacturers has remained static in the same period. A similar situation is likely to arise in the UK/EU as demand for EV cells increases and tariffs strongly dictate UK or EU production. Whilst imported cells may initially be used to bridge supply-demand gaps as UK Gigafactories ramp up, market demand for local production and tariffs will require at-scale UK cell manufacture.
Why do we need them?
The ‘rules of origin’ requirements for electric vehicles that were set out in the UK’s Brexit deal means that by 2027, EVs must have 55% UK/EU content and must have an originating battery pack (an originating battery pack must have either 65% UK/EU content for the cell or 70% for the battery pack) in order for the vehicle to remain exempt from tariffs. For a typical EV the battery accounts for around 1/3 of the total vehicle cost.
Unless the UK can capture a significant part of the EV battery value chain, from battery-grade lithium production (from geolithium or mining), other battery metal recycling, cell manufacture and battery module assembly then the UK EV manufacturing industry will be significantly disadvantaged versus EU competitors.
The UK’s car manufacturing industry is worth £82bn and is the second biggest industry by employment, accounting for around 168,000 direct jobs, and as such is a cornerstone of the UK manufacturing economy. From 2030 the sale of new petrol and diesel vehicles will be banned, with hydrogen cell vehicles unlikely to have significant market share by then. The planned Gigafactory sites in Northumberland, Sunderland and Coventry are therefore fundamental to securing the strategically important vehicle manufacturing industry in the UK, however we will need more.
How many do we need?
UK EV sales in 2020 reached 107,000 vehicles, of which theoretically only 30,000 could be supplied by the UK’s current 1.9GWh of capacity if 60kWh battery modules are used. It is clear that there is a need to expand UK EV battery manufacturing capacity, but by how much is less obvious.
How many Gigafactories the UK needs is subject to uncertainty and estimates vary. The UK car industry estimates the UK will need 60GWh of battery manufacturing capacity by 2030 (3 medium-sized Gigafactories), the Faraday institute estimates eight Gigafactories by 2040 (an increase of one from previous estimates), the UK Parliament Environmental Audit Committee estimates 100GWh (5 medium-sized plants) and the Prime Minister, in typical style, said that Gigafactories will have to be built “across the UK”. Any estimates are unlikely to be static and will likely only increase as the pace of adaption of EV’s increases and as certainty returns to the automotive sector following two years of disruption due to Coronavirus. Gigafactories are built with significant potential to increase production, typically from 10GWh in initial production to 30GWh as demand increases from associated vehicle manufacturing plants, so there is considerable flexibility in how UK-wide GWh targets will be achieved. Until data in post-coronavirus new EV registrations are released and EV lifecycle trends are established it is difficult to forecast how many will be needed with any certainty.
What is the progress of current UK Gigafactory projects?
Envision AESC, Sunderland: 1.9GWh, in operation
The UK’s first at-scale battery manufacturing plant was originally operated by Nissan’s battery subsidiary AESC, however ownership of AESC transferred to the Chinese Envision group in 2018, with Nissan retaining a minority stake. The plant manufactures 40kWh battery packs for the Nissan Leaf. In early 2021 Nissan announced it was moving manufacture of the Leaf 62kWh power packs from the USA to the UK to ensure that all UK manufactured vehicles complied with the UK-EU requirement for at least 55% of the car’s value to be derived from either the UK or the EU to qualify for zero tariffs when exported to the EU.
The plant remains the only operational Gigafactory in the UK and is significantly smaller, at 1.9GWh, than the more modern plants either in operation or under development.
Nissan and Envision AESC, Sunderland: 9-25GWh, in planning
Nissan’s second site is adjacent to the existing plant, and is currently going through the planning process. The plant will have an initial capacity of 9GWh by 2024 with a capacity of 25GWh by 2030. Plant CAPEX is estimated at £1Bn and the project is expected to create 1,650 direct jobs with an aspiration for an additional 6,200 in the supply chain.
Britishvolt, Northumberland: 10-30GWh, planning granted, site preparation underway
Britishvolt’s Gigafactory, on the site of a former power station in Northumberland, has an aggressive timeline with an initial 10GWh of capacity planned to come online by mid-2023. Subsequent phases will increase capacity to 30GWh by 2027 if demand is sufficient. The project is expected to cost £2.6Bn and will be the UK’s first Gigafactory not owned or associated with a vehicle manufacturer. 2/3rds of the initial 10GWh of production has already been allocated to three unnamed customers, and Glencore, the commodities company, has taken a stake in Britishvolt as part of a long-term agreement to supply cobalt. The company remains privately held, however a listing or a SPAC merger is under consideration to finance the plant. Britishvolt are estimating that the plant will create 1,000 jobs initially, raising to 3,000 when the plant is at full capacity. The project has been marketed very successfully, however the aggressive timescale and relative silence on automotive customers suggests that expectations may need to be tempered.
Coventry City Council, Coventry Airport: not yet defined, in planning
Coventry City Council and Coventry Airport submitted a planning application for a Gigafactory site at Coventry airport in July 2021. There are no defined plans for battery manufacturing, and the move could be viewed as an attempt to lure Gigafactory operators to Coventry through short-cutting the site selection and planning processes. The planning application is for 5.7 million square feet of battery manufacturing and recycling space, with InoBat suggested as a potential site partner. The project is aiming to include cell and battery manufacture as well as battery recycling, with links to the UK Battery Industrialisation Centre. Coventry is the home to Jaguar Land Rover, the UK’s largest car manufacturer, as well as many other smaller vehicle manufacturers. Although costs for the plant will vary depending on the ultimate scope, Coventry City Council are estimating an investment of £2Bn with 4,500 direct jobs created.
Emerging trends in UK Gigafactories
Sites are co-located with existing vehicle manufacturing hubs
All UK sites either in operation or under development are co-located with vehicle manufacturing hubs. This is logical, given that vehicle manufacturing hubs often have brownfield sites available, local governments are strongly supportive and there is local worker pride in vehicle manufacturing. It also provides opportunities for co-development of battery modules and reduces supply chain risk. Skills alignment with existent local workforces may be challenging, as battery manufacture requires somewhat different skills profiles to vehicle assembly. All UK vehicle manufacturing hubs now have Gigafactory projects earmarked for them, so future Gigafactories developers must decide whether to compete for human resources and government funding as 2nd entrants in vehicle hubs, or seek sites elsewhere. Regardless of where they decide to go, there will be enduring central and local government support for Gigafactories. Finding 250-acre sites on flat and level ground, with good transport links, an acceptable distance from EV manufacturing customers and a suitably skilled local workforce may prove challenging.
Integration with renewables
All new Gigafactories are expected to be powered by renewable energy, a not insignificant undertaking given that Gigafactories use around 50–65 kWh of electricity per kWh of battery capacity. Britishvolt has the option to use hydropower through the North Sea Link interconnector from Norway, for example. The integration between Gigafactories and renewables presents an opportunity for renewable energy developers as future sites are announced. The staged nature of Gigafactories fits well with staged renewable energy developments in solar or wind, and joint planning applications for factories plus renewable developments are likely to be viewed favourably by planning authorities.
Planned projects do not address battery recycling
With the exception of the Coventry Airport scheme, which is essentially still an “empty box”, projects do not address the need for EV battery recycling. This is unsurprising, as existing EVs have not yet reached end-of-life, and there is currently limited demand for recycling and rules-of-origin requirements are not yet in place. However, given that UK production of lithium is still at pilot stage, and the UK has no other battery metal resources, this will need to be addressed if the UK is to have an easy transition to EU rules of origin requirements.
Co-locating battery recycling adjacent to Gigafactories is not necessary, but could help create regional battery hubs where better integration between manufacturing and recycling drives efficiencies. These efficiencies could come through EV manufacturers designing battery modules better for recycling or for re-use of battery module components. Closer integration between battery manufacturers and battery recyclers depends on having both industries in place, but neither are yet well developed in the UK.
Nissan currently re-uses battery modules from Leaf cars in the electric vehicles used to transport workers and components around the Sunderland plant, where the capacity and performance of second-life modules is acceptable. In the EU Volkswagen has opened its first recycling plant in Salzgitter, Germany, close to the Northvolt Gigafactory currently under development, with plans to recycle up to 3,600 battery modules annually during the pilot phase. Renault now recycles all electric car batteries, however this amounts to only 200 battery modules annually, through a consortium with the international waste management company Veolia and Solvay, the Belgian chemical company. EV battery recycling is a complex and labour-intensive process, and is an emerging industry with opportunity for a large number of both blue and white collar jobs.
Looking to the future
The current announced pipeline of Gigafactory projects is necessary, but not sufficient, for the UK motor manufacturing industry. In addition to the announced projects there are other Gigafactory developers at the very early stages of site short-listing and government engagement – but none have yet gone public with their plans. Given that from project announcement to initial operation takes approximately five years (from trends elsewhere in Europe) there is likely to be a rush of new Gigafactory projects seeking to get initial manufacturing capacity in place by January 2027 when the UK-EU rules of origin become law.
Planning cycles for Gigafactories have been short to date, however this can be attributed to local government and local communities being very welcome of the investment in areas which have struggled with the decline of traditional industries. Should Gigafactory developers seek 250-acre developments in prosperous or environmentally sensitive areas then planning cycles are likely to be extended, with an associated opportunity cost in achieving the 1st January 2027 deadline for rules of origin.
Growing the skills base and supply chain for Gigafactories is likely to lag demand. Battery manufacturing engineering requires expertise and a skilled workforce. Although assembling the shell for a Gigafactory is easy, filling it with manufacturing equipment and the skilled personnel needed to operate the plant is more challenging. If the established staged approach to Gigafactory development is delayed then there will be knock-on effects in capacity and ultimately the competitiveness of the UK motoring industry if tariffs are incurred through overseas cell manufacture.
Finally, the UK/EU supply of battery metals, chemicals and other input material will become an increasing challenge as more Gigafactories are developed. Although media focus has largely been on lithium, for an NMC532 battery, commonly used in EVs, for each kilogram of lithium a further 4.4kg of Nickel, 2.5kg of manganese and 1.75kg of cobalt are required.
Although the UK has prospective lithium resource, with developers such as Cornish Lithium well positioned to supply battery-grade lithium, UK/EU supplies of battery metals, solvents and intermediate products are less certain. UK at-scale battery recycling is virtually non-existent, with the EU only recently starting large-scale battery recycling. Breaking the dependence on non-UK/EU product suppliers and miners will be crucial to ensure that UK Gigafactories are safely protected from tariffs.
The rapid development of Gigafactories will be key for the UK to successfully transition from hydrocarbon powered vehicles to electric vehicles. Through our research and consulting we are helping to make this change happen. The supply chain for Gigafactories will be a huge opportunity for UK businesses and regions but is an area which is largely unexplored.
If you are developing battery chemicals, battery recycling, battery resource or other Gigafactory supply chain projects we’d love to learn more to develop our research. If you need data, analysis or insights to accelerate UK Gigafactory development then please get in touch.