Can the UK create a globally competitive battery supply chain that supports economic prosperity and the net zero transition?
Following a public consultation, the UK government has recently published its first Battery Strategy. The purpose of the Strategy is to lay the foundations for future development of the UK’s battery industry.
The Strategy acknowledges the difficulties currently facing the Battery Energy Storage System (BESS) sector, including volatile supply chains, a scarcity of raw minerals, and potential over-reliance on imports, specifically from China from which the UK imported nearly £1.8 billion worth of battery packs in 2022.
By 2030 the Strategy seeks to position the UK as a world leader in sustainable design, manufacture, and use, underpinned by a thriving battery ecosystem.
This is to be achieved by playing to the UK’s existing strengths, specifically battery innovation. The UK ranks third in the world in terms of research quality, and fourth in the world in terms of the enterprise value of battery start-ups.
The battery sector in the UK is as such well-established, however, the hope of the Strategy is to cement the UK’s position as a world leader in the battery sector and take advantage of the projected growth of the battery market in the coming decade.
Despite the significant strengths of the UK sector, the Strategy does not address how recent failures in the domestic market, such as the insolvency of Britishvolt and AMTE Power recently being placed into administration, will be mitigated.
The UK Battery Strategy explained
There are three main strands to the Strategy, which build upon the UK’s existing research and advanced manufacturing base. These strands are Design, Build, and Sustain.
In terms of Design, the Strategy envisages smaller, lighter batteries with greater capacity being designed in the UK by companies and research bodies.
The Strategy will assist by supporting innovation, assisting with funding and maintaining stringent safety standards. This element of the strategy could be categorised as the low hanging fruit, as this is the element of the battery sector where the UK is already a market leader.
The next strand, Build, focusses on working with the domestic Battery industry and international partners to ensure the UK supply chain can continue to support growth in the industry, which includes the domestic and export markets.
This will be achieved by ensuring a robust supply chain and international collaboration. Whether the strategy will be successful in this aim remains to be seen. The UK has historically struggled to develop a domestic supply chain for other renewable activities such as onshore and offshore wind, both of which are entirely dependent on imports, primarily from China.
It will be interesting to see whether the battery sector manages to successfully develop a domestic supply chain in a way that has so far eluded the onshore and offshore wind industries in the UK.
The final element of the policy is Sustain. This will seek to enable the development of a sustainable battery sector which will be supported by regulations across the supply chain, including raw materials and recycling. This element includes ensuring a pool of employees with relevant skills and regulatory reform are involved to encourage investment in the circular economy.
This will certainly play to the UK’s traditional strengths, however, with the potential for a divergence of regulation between the UK and the EU post-Brexit on aspects affecting the sector, such as recycling, it will be interesting to see how this element of the strategy will play out.
In addition to the “Design, Build, Sustain” approach, the policy also outlines some additional commitments the government will make in relation to the battery sector.
These include providing over £2 billion of support to research and development (R&D) until 2030, an additional £38 million of support to the UK Battery Industrialisation Centre, and exploring opportunities to establish R&D centres.
What this means for the BESS Sector
The energy storage capacity in the UK in 2023 was 1.38GWh. This is expected to rise exponentially to nearly 10GWh by 2030 and nearly 20GWh by 2035.
The huge opportunity for UK BESS is clear but the Strategy, crucially, signals government acknowledgment of this potential.
To facilitate this growth in storage demand, the Strategy seeks to speed up grid connection waiting times and reform the planning and consenting process to allow quicker approvals. As grid connections are currently one of the biggest challenges facing BESS projects, this will undoubtedly be welcome news to the sector.
In addition to providing improvements to infrastructure, the Strategy also highlights the previous support government has provided to the BESS sector - including £69 million of capital funding available to start-ups developing longer duration batteries, as well as the new UKIB mezzanine loan product available to BESS developers.
The Strategy seeks to continue with the provision of targeted support to assist with the growth in the BESS sector. That said, the Strategy does not address existing long lead times on major equipment.
While the focus on grid connection and planning is undoubtedly positive news, the Strategy is by no means a silver bullet for the BESS sector.
What next for BESS in the UK?
While the Strategy acknowledges that there are higher subsidies in other countries, this is not the approach the Strategy has taken.
That said, targeted generous financial support is to be made available, with a particular focus on the BESS sector.
The key takeaway for those operating in the energy storage sector is that while the UK may not provide the highest levels of subsidies for battery development, targeted funding is to be made available to increase investment in the sector and to support the existing high-level R&D facilities.
Additionally, investment in the planning process and infrastructure required to develop projects will reduce the time taken to get projects live, thus making them more profitable.
However, the impact of Brexit on regulatory divergence with the EU and whether the battery sector can develop a domestic supply chain remains to be seen.