Electrification: the downside

The electrification of vehicular transport is progressing apace as part of the decarbonisation agenda. But could it be doing more harm than good? And what are the alternatives? Victor Hill is asking.

Doubts about the road ahead

Scepticism about the government’s electrification strategy is on the rise – and it’s not confined to petrol heads. A section of the Tory Party is becoming increasingly uncomfortable about Mr Johnson’s eco-extreme agenda (the columnist Alister Heath’s phrase). Last week, a former leader of the Conservative Party, Sir Iain Duncan Smith, wrote a piece for the Daily Telegraph in which he questioned whether the target of going net carbon neutral by 2050 had been fully costed. As regular readers will know, my answer to that would be: No, it hasn’t!

Regarding electric cars, Sir Iain first observed that the charging infrastructure will cost £16.7 billion. The government has allocated just £1.3 billion for that purpose, and it is unclear whether the private sector will be able to bridge the financial gap.

Second, Sir Iain pointed out that electricity production will have to be ramped up massively, and it is unclear how that might be achieved. Separately, the Climate Change Committee warned last week that Britain might face severe power cuts. It is likely that as demand increases electricity will become more expensive for all users.

Third: how is the government going to recoup the £40 billion or so in lost road taxes and fuel duty? Nobody seems to know.

But Sir Iain’s main fear is that electrification is going to make Britain and others excessively reliant on China. China currently produces over 70 percent of all electric vehicle (EV) batteries, and although the prospect of gigafactories in the UK now looks brighter (see below), China is opening new battery gigafactories on a monthly basis. There are 38 gigafactories planned across Europe, of which about 20 are already under construction. China’s Envision outlined proposals on Monday (28 June) to build a gigafactory in northern France to supply Renault (EPA:RNO). But as of yesterday, only two have been confirmed in the UK. There is the £2.6 billion Britishvolt factory in Blyth, Northumberland. (Incidentally, in April Britishvolt revealed that the Texan oil heir William Harrison had taken a 20 percent stake in the British start-up.) And now the Nissan gigafactory in Sunderland.

I might add that using heat exchangers for domestic heating and hot water (which I discussed here a few weeks ago) will also make us more dependent on China. At present, not a single air-source or ground-source heat exchanger is manufactured in Britain. And yet the government has decreed that gas boilers will not be allowed to be installed in any new homes from 2025 – just four years from now.

The question of disposal

The prospect of millions of electric batteries with relatively short economic lives (15 years maximum) being manufactured begs the question of what happens to them when they no longer function. Electric cars in volume are a recent phenomenon; but when (almost) everyone drives one there will be a colossal tonnage of e-waste every year. There are just 11 million EVs on the world’s roads today; but by 2030 there will be about 145 million.

The raw materials required to build batteries for electric cars are scarce and getting more expensive by the month. Therefore, there will be an economic incentive to recycle them as much as possible. Happily, there are already companies which are developing expertise in this domain, such as Canada’s Li-Cycle. The more EVs reach maturity so, with economies of scale, the more viable EV battery recycling will become. 

The scale of the problem is huge. The University of Birmingham has calculated that there will be eight million tonnes of battery waste per year by 2040. This could be manageable. Lithium-ion batteries contain several hundred lithium-ion cells which can be individually recovered. However, dismantling an EV battery can result in explosions. But it’s the value of the metals recovered which makes recycling viable.

Currently, EV batteries are shredded into a substance called black mass which is then refined. The process is highly energy intensive. But it will hopefully become more efficient over time. Apple has developed a robot called Daisywhich disassembles iPhones in order to extract the valuable minerals within. Ultimately, the big automotive manufacturers will be obliged by regulation to design EVs to be (relatively) easy to recycle. The EU is already in the process of updating its Battery Directive, which will require a minimum of recyclable materials to be used in new batteries.

But as yet there are no lithium-ion battery recycling facilities in the UK. The more acute the shortage of these scarce resources, the more urgent the need to recycle them from spent batteries.

Batteries galore

Coventry Airport could soon be home to a battery gigafactory, promoted by the West Midlands mayor, Andy Street. Britishvolt considered the site but eventually turned it down. Reportedly, Slovakia’s Inobat, Samsung, and LG Chem are all interested in the site. Ford is also looking for a site to manufacture batteries for its soon to be available electric Transit Custom van.

Another British firm, AIM-listed AMTE Power (LON:AMTE), is looking for a site to build a gigafactory in the UK. It has already assessed sites in Scotland, Northern England and Wales. The former Ford engine plant in Bridgend, South Wales, is being marketed as a potential site. But AMTE CEO Kevin Brundish warned two weeks ago that the industry needs significantly higher levels of support than the £500 million currently on offer from the UK government. Benchmark Mineral Intelligence reckons that the government will have to come up with more like £3.75 billion.

Yesterday (01 July) Nissan unveiled plans for a gigafactory located next to its car plant in Sunderland. Nissan also announced a new EV model to be manufactured there. The gigafactory could open as soon as 2024 with 1,650 new jobs, producing batteries for 200,000 EVs every year. This was the company which in 2016 was going to abandon Britain altogether if there were no acceptable Brexit deal. In May, Nissan COO Ashwani Gupta said that Brexit gave the company “a competitive advantage in the UK and outside”.

This week Wrightbus, famous for its hydrogen-powered buses, unveiled its first electric city bus with a 200-mile range – the StreetDeck Electroliner. Significantly, this vehicle will use batteries supplied by the French company, Forsee Power. The bus can be fully charged in just three hours. The CEO of Wrightbus, Jo Bamford, warned last year that battery powered EVs would increase the UK’s dependence on China. He pointed out that the UK has no competitive advantage in batteries, but that it could achieve one in hydrogen.

In a report out this week, Full Throttle: Driving UK Automotive Competitiveness, the Society of Manufacturers and Traders (SMMT) called upon the government to invest in hydrogen fuel cell manufacture as well as batteries. Jaguar Land Rover recently announced plans to develop a hydrogen-powered version of its Defender 4X4. But the only volume manufacturer which seems to favour hydrogen over battery power to date is Toyota, producer of the hydrogen-only Mirai. Toyota is reportedly working on an engine which burns hydrogen rather than converting it into electricity. Watch this space.

The SMMT wants the government to decree a binding target of 60 gigawatt hours of battery capacity to be in place by 2030. Such capacity would enable manufacturers to build one million EVs in the UK each year. That would ensure that the UK automotive industry could retain the 180,000 jobs that it sustains at present. If battery capacity could be further increased to 80 gigawatt hours, then that could generate an additional 40,000 jobs, the SMMT calculates. Many of these would be located in the politically critical Red Wall seats in Northern England. Conversely, if battery capacity only reaches 30 gigawatt hours by 2030, then 90,000 jobs could be lost in the UK automotive sector.

A further challenge is that under the Brexit free trade agreement, cars built in Britain will have to source their batteries either domestically or from the EU by 2027. As far as the SMMT is concerned, Britain has the management and engineering expertise and a skilled workforce. What we need now is full support from the government beyond the green rhetoric.

Tesla’s travails

Meanwhile, Tesla’s first gigafactory in Europe (and only its fourth after Nevada, New York and Shanghai) has run into delays. Progress at the plant in Grünheide, Germany (southeast of Berlin) has been painfully slow. If the original timeline had been maintained the plant should have opened yesterday (01 July); but at this rate it will not be productive until Q1 2022 at the earliest. This is partly due to the bureaucratic quagmire that is the German planning system. Thus far, Tesla has been proceeding with preliminary construction permits, and is still waiting for final approvals.

Mr Musk announced his choice for the German plant in November 2019, having spurned the UK on the ground that Brexit made it too risky. But the voices raised from the local municipality, which embraces a nature park, have been stentorian. The word is that Tesla’s plant will pollute the water table in an area which has protected its drinking water. Thousands of hectares of virgin pine forest, home to rare flora and fauna, will have to be cleared. (I thought this technology was supposed to induce a greener world.) Tesla has been accused by local groups of crimes against the environment – not a good look for a save-the-planet icon.

It was all so much more straightforward in Shanghai. But a cynic might suspect that the Germans, who are justly proud of their domination of the European automotive sector, are not best pleased by the arrival of this brash American upstart.

The original planning application envisaged that all power required would be provided from local renewable energy plants. But by adding a battery gigafactory to the car plant, planned to manufacture 500 million battery cells a year, Tesla was obliged to amend the application. Even if Tesla gets its way, Mr Musk will have to confront another of his bugbears – labour unions. The plant is likely to employ about 12,000 workers, virtually all of whom will be union members.

Recently the Tory mayor of Tees Valley, Ben Houchen (who was re-elected this May), wrote to Mr Musk to urge him to reconsider the northeast of England. It is not known how Mr Musk responded, if at all. Tesla’s gigafactory 5 is earmarked for Texas. Mr Musk mooted the possibility of building one in Russia during a trip to Moscow in May. Russia has only 10,000 EVs on its roads. As it happens, I suspect that that trip was much more SpaceX related than concerned with Tesla.

Input shortages

Without EV batteries, there will be no mass take-up of EVs. And without adequate supplies of lithium, cobalt, nickel, graphite and other rare Earth elements, there will be a shortage of EV batteries.

According to Rystad Energy, the energy research firm, miners can cope with current demand for electric vehicles, but there will be a serious lithium supply deficit by 2027. Rystad thinks that the price of lithium could triple by the end of the decade unless new mines come on stream soon. That means that the cost of EVs will also rise. About 300,000 tonnes of lithium carbonate will be consumed by EV battery manufacturers this year. That will rise to 2.8 million tonnes by 2028. We therefore risk being held to ransom by a hostile state which controls the lithium supply. (Who could that possibly be?)

One bright spot is that there are high hopes for Cornish Lithium, which announced a successful funding round last month. However, the company has warned that commercial production remains far off.

Alternative technologies

Lithium-ion batteries are not the only technology, though they are preferred by most EV manufacturers. Lithium iron phosphate batteries are cheaper than lithium-ion batteries because they use iron instead of rare Earth metals. These are already being used in Tesla’s Model 3. These batteries will be easier to recycle but will add less value for the recyclers. Hyundai (KRX: 005380) is a leader in lithium-sulphur batteries; Honda and Toyota are developing lithium-oxide alternatives.

Liquefied petroleum gas (LPG) engines, while generating CO₂, emit almost no pollutants. Yet there is currently a scarcity of LPG in the UK. Shell has permanently closed all its LPG stations. And there are only about 20 petrol stations in the UK selling hydrogen – even though, unlike EV batteries, hydrogen tanks can be recharged in minutes.

By banning the manufacture of internal combustion engines (ICEs) in 2030, Britain is closing down an industry in which it has developed keen technological advantages over the years. Other countries will continue to manufacture ICEs and will continue to export to countries that currently buy ICEs from us. It does not follow that there will be a strong export market for EVs manufactured in the UK.

A few weeks ago, I considered the outlook for hydrogen as an alternative to fossil fuels. Sometimes in the history of technology one technology drives out another, even if its superiority is not demonstrable. VHS versus Betamax, anybody? When the carbon emissions from manufacturing EV batteries and then recycling them is considered, I doubt that EVs will prove dramatically more climate-friendly than ICE-powered vehicles.

That is the main reason why I refuse to buy a battery powered EV. Come 2030, I’ll just keep going with my gas guzzler until such time as it pegs out or petrol stations fold, whichever is the earlier. And then I shall avail myself of flying taxis which will be ubiquitous by 2035. (Seriously – Rolls Royce (LON:RR) is already working on battery packs for these.) I shall be accompanied in that transition by the young, who are no longer learning to drive, partly due to the cost of motoring and partly because of the rise of ride-hailing (Uber, Lyft et al). I suspect there are many others like me.

***

If John McAfee’s life had been screened his story would have been dismissed as fantasy.

McAfee was born on a US army base in Gloucestershire, just after the end of WWII, to an American father and an English mother. The family returned to the USA when McAfee was a boy. His alcoholic father shot himself when he was 15. He graduated in mathematics from Roanoke, supporting himself while there by hawking magazines.

He made his fortune of more than $100 million from his eponymous anti-virus software which he pioneered in California. This was one of those products that the world did not realise it desperately needed until it became available. He used his fame to become a well-known media pundit, often predicting impending global disaster. McAfee sold out of the business he founded evidently much too early. The business was finally bought in 2011 for $7.68 billion by Intel (NASDAQ:INTC) who later reinstated the name of its founder. He invested much of the proceeds of the sale in high-end real estate, the value of which bombed in the financial crisis of 2008-09.

McAfee then decamped to Belize where he built a community in a swamp in the shadow of a Mayan temple. His stated reason for residing there was to research natural antibiotics. (Psychedelic drugs were a recurring theme of his life.) He got involved in scrapes with the local honchos. He fled Belize, where he was wanted for murder, disguised as a street hawker. In Guatemala he was arrested but managed to escape by faking a heart attack.

Back in the USA, he was one of the first to warn that social media was spying on us. In 2016 he sought the nomination for the presidency from the US Libertarian Party. His programme included – naturally – the legalisation of marijuana, as well as the fenestration of Google. He was an early enthusiast for cryptocurrency. He lived on an ocean-going boat far from the reach of government (and the tax man) for a year.

Last October, McAfee was arrested in Barcelona pending extradition to the USA on charges of tax evasion. He accused the IRS of corruption. He died last week in a Spanish jail, apparently by his own hand, aged 75.

Imagine a film that was Social Network, The Beach and Waterworld all rolled into one. In 2017, plans were announced to make a film of McAfee’s life, starring (inevitably) Johnny Depp. But real people can be more surprising than characters in films: genius, obsession, and criminality, all intertwined. Truth is stranger than fiction.

***

A personal footnote to last week’s piece on inflation. My carpenter tells me that the price of timber has gone up by 40 percent in the last month or two. He says the Americans are buying up all the European timber they can lay their hands on. (Don’t they have forests of their own?). The price of plasterboard has risen by about 60 percent since he last worked for me in December. A neighbour, who plans to build an extension, was told by Travis Perkins this week that all non-trade customers are limited to just 20 bags of cement.

That’s communism! I told him. He laughed but was not really amused.