Application for UK EV and Battery Manufacturing Economics Case project supported by grant funding from the Faraday Institution, April 2018

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1 Application for UK EV and Battery Manufacturing Economics Case project supported by grant funding from the Faraday Institution, April 2018 Background to the Faraday Institution The Faraday Institution is a company limited by guarantee and a Registered Charity. Based at Harwell, it has been awarded 78 million of government grant funding over the next 3 years, from the Engineering and Physical Sciences Research Council, to commission and manage research in energy capture, conversion and storage. Information about this call for grant applications Project title An estimate of the economic benefit the UK can derive from the manufacture of electric vehicles, and battery cells and packs to 2040, and the provision of economic models to support ongoing analysis in this area. Background In the context of the move to electric vehicles, the Faraday Institution wants to gain a robust perspective on how the UK can maximise jobs creation and investment in the electric vehicle (EV) and battery manufacturing markets. In particular: o The UK has 800,000 jobs in auto manufacturing, exports 25bn of cars a year (around 80% of UK cars are exported) and makes one-quarter of Europe s ULEVs. There is no significant cell manufacturing within the UK and no major cell manufacturing in the EU. o The UK government has given the target of 100% of new vehicles sold to be EVs by Other countries with demand for UK auto (France, Norway, China) are publishing similar targets. o There are a number of existing forecasts for growth of electric vehicles (Bernstein, Bloomberg, McKinsey, Ricardo etc.) o Whilst bottom up calculations for demand for cell and pack manufacturing to 2025 have been made by the Auto Council, this is likely the beginning of an s-curve, and any battery manufacturers will likely be considering a longer horizon. o The UK government and industry have launched the Faraday Battery Challenge to safeguard existing automotive jobs, create more jobs and stimulate investment. The Faraday Battery Challenge needs to have robust numbers as means of tracking success. The proposed project is focused explicitly on the UK s production of EVs and batteries, not the UK s consumption of electric vehicles, except insofar as the latter contributes to the former (only 20% of cars made in the UK are sold in the UK, 40% go to the rest of Europe and 40% elsewhere). We require the project to cover these research questions specifically: Note: We expect that the research project will include both modelling and extensive interviews with

2 industry (the UK Auto Council and the most significant individual auto manufacturers on the one hand; and potential Asian cell and pack manufacturers on the other). Demand Note: that we do not want another forecast for electric vehicle demand when many exist already (including one created by the Faraday Institution itself see attached). In fact, the research project can utilitise some of the existing forecasts as different demand scenarios to test. What we want to understand is the specific implications for UK manufacturing. Q1. Given a set of demand scenarios, what is the implied demand for UK manufactured EVs from the UK, Europe and other market destinations for UK cars by 2025, 2030 and 2040, assuming the UK maintains current automotive market share? What factors/ constraints make one scenario rather than another more or less likely? What demand shocks could occur that we should consider in our scenarios? Q2. Could the UK capture more than its current automotive market share in the UK, Europe, and other UK markets? What share could UK manufacturers realistically capture (again different scenarios could be required)? Q3. Given the demand scenarios and the UK government s targets for the sales of EVs, when is UK production likely to be solely EVs and what is a realistic ramp up (s-curve) to that date? Q4. What actions could the UK government take to bring forward UK demand versus other UK markets (especially in Europe) in order to underpin EV manufacturing in the UK? Q5. What is the demand for battery cells and packs to serve UK-manufactured EVs given different scenarios for the type of battery used (capacity, technology, etc.)? Supply Q6. What battery cell and pack manufacturing could the UK attract to support the demand for UK manufactured EVs outlined above? Could the UK also supply battery cells/ packs to nearby European markets? How would this manufacturing ramp up by 2025, 2030 and 2040 under different scenarios? What then, is the range of demand that a battery manufacturer(s) should anticipate if it constructed a plant(s) in the UK? Q7. Are there likely to be different segments of UK-manufactured EVs that would require different plants with different technologies? Q8. Which type of companies would be likely to manufacture the cells (cell manufacturers) and which the packs (cell manufacturers or auto companies)? What, therefore, are the analogues (e.g., Tesla gigafactory, plants in Asia, etc.) that we can use to forecast the implications of this shift in terms of jobs, capital required, opex, etc.)? Q9. Which cell manufacturing partner(s) would be the right ones for the UK (balancing tried-and-tested experience/ scale with the importance of the UK for the partner)? What scale would each factory need to have? How many would therefore be needed? And what are the implications for auto manufacturers (e.g., one gigafactory supplying multiple companies)? Given the forecast ramp up of manufacturing plant(s) in the UK, what are the implications for the adoption of different technologies (especially those being researched by the Faraday Institution)? Which technologies would be applicable to existing plants? Which would require different types of plant? And what would be the implications for when a new technology would be too late to have an impact on UK

3 battery manufacturing? Q10. What type and number of jobs would be created by this shift (in the supply chain, car manufacturers and support e.g., maintenance)? What type and number of jobs would no longer be required? What, then, would be the net impact on UK auto related jobs under different scenarios? NB. The study will need to incorporate (but not deliver original research) the implications of changes to UK engine manufacture. Q11. What quantity of materials would need to be imported to enable this manufacturing? How might this change under potential battery break throughs (especially those being researched by the Faraday Institution)? What are the implications for UK supply and demand? Costs and incentives Q12. What is the likely economics of UK battery manufacturing plants in terms of investment, operating expense and required returns? How does this compare to Asia, the US and Europe? Q13. How do incentives programmes to attract battery plants compare across countries (e.g., EU/ Battery Alliance, US states support, China and rest of Asia) and what form do these incentives take? Q14. In order to compete with these global incentives, what is required to attract a battery cell manufacturer to the UK in terms of: o Certainty of demand from auto manufacturers? o Land? o Energy provision/ grid connections? o Speed of planning permissions? o Pipeline of trained people? o Coordination across government departments? o Managing the impact of Brexit? o Other government support (within state aid rules)? o Input from research (from the Faraday Institution)? Which of these elements does the UK already have? Which could the UK develop easily? What will be more challenging and what will be required? Economic Models Note: as important as the answers to the above is the provision of economic models that can be used on an ongoing basis by the Faraday Institution s economic team. We therefore require models covering: o UK EV and battery demand and its implications o Other EU EV and battery demand and its implications o Rest of the world EV and battery demand and its implications o Implications for UK EV and battery manufacturing, and the jobs and materials required o The economics of UK battery manufacturing plant We want clearly structured, updateable model(s). The model(s) should be clearly structured in terms of: factual inputs; assumptions/ scenarios; calculation engine; outputs. The winning consortium, will have to hand over the model and train up the Faraday Institution s analyst to use it.

4 Other specific requirements we have We anticipate this project will be led by a body eligible to receive Faraday Institution funding but the lead institution will collaborate with others to draw upon their expertise. Collaborative partners could include other universities, research institutes and private-sector consultancies. The winning consortium will be expected to have, or be able to rapidly build, relationships with the largest automotive manufacturers (especially, Jaguar Land Rover and Nissan) and Asian battery manufacturers The project should focus on the automotive sector and what it requires. The work should cover all types of vehicles. Batteries for the grid and other uses are not in scope for this project. The project should focus on UK and the markets that currently and will in the future generate demand (especially EU and China). The project should give scenarios for costs and prices, not predictions, with estimates of the impacts of shocks or breakthrough technologies. Outputs/ signs of success A clear success factor for the project will be that UK industry and government take actions to address gaps identified via this work within the next 1-2 years. The specific outputs are: Also, please note: o A detailed report that informs the future thinking of the Faraday Institution. Note that the Faraday Institution will hold the right to publish this report. o An updateable suite of models to be owned by the Faraday Institution and its Head of Global Analytics in particular. o The delivery of monthly presentations to the project steering committee, and as required to the Faraday Institution Board, Expert Panel, and wider audiences. o The project needs to be fully completed within six months of commencement. o The Faraday Institution requires that organisations we fund and work with follow the highest standards of good practice and legislative compliance in equality and diversity. o All funding provided by the Faraday Institution should be spent in accordance with the principles contained within Managing Public Money and be delivered: in the spirit of, as well as to the letter of the law; in the public interest; to high ethical standards; achieving value for money. o Our maximum budget for this project is 200,000 (i.e. fully economic cost of 250,000), but applicants will be judged on both quality and cost efficiency of their proposal.

5 The application process How to apply Please prepare a proposal using the template format given later. Please send your application to: executive.assistant@faraday.ac.uk. We are deliberately using a single-stage application process for concise projects as we are mindful of the time taken by applicants to prepare proposals. Who is eligible to apply for and receive funding? UK higher education institutions that receive grant funding from one of the UK government higher education funding bodies and some Research Council institutes and independent research organisations are eligible to apply. A list of eligible organisations to apply is provided at: Timetable for applications o This call for proposals is issued on 10 th April o Closing date for receipt of proposals is noon on 22 th May o The funded project commences work early July Our contact details, for queries Before you submit your proposal, you are welcome to contact us about any queries you may have, for example about the objectives of this call for grant applications, and one of our team will be happy to provide an informal steer on a draft application. Please contact Tanis Lawfull-Brookes, at executive.assistant@faraday.ac.uk +44 (0) Our postal address is: Suite 4, 2nd Floor, Quad One, Becquerel Avenue, Harwell Campus, Didcot OX11 0RA. Grant funding Please note that any irrecoverable VAT and all relevant staff costs should be built in to your financials. The Faraday Institution s policy is to fund at 80% of full economic costing. We will assess the value-for-money of proposals we receive as one of the selection criteria. If awarded funding, we require your institution to agree to our standard terms and conditions of funding, which are available from our Head of Programme Management. Assessment criteria The quality, relevance and feasibility of the proposed research, approach, methodology and timeline. Among other things, we expect a clear workplan with milestones on the completion of the work. The extent, relevance and quality of the outputs and beneficial outcomes, including the likely impact they might have. The importance for the UK s energy storage community and UK competitiveness will also be considered. The ability and quality of the applicants and mix of competencies among the proposed delivery

6 team, including any contractors/ partners that are proposed to be used. Value for money, particularly in terms of the outputs and outcomes generated in relation to the investment being made by the Faraday Institution. What happens next? The Faraday Institution will arrange for your proposal to be reviewed by the Expert Panel with the final funding decision(s) being made thereafter by the Faraday Institution s Board of Trustees. We intend to fund only one proposal.

7 The standard application template Please prepare your application using only the section headings and sub-headings listed later below, writing with 11 point or larger Calibri font on A4 page-size. The proposal should be a maximum of SEVEN x A4 pages, plus any optional letters of support. 1. The case for support Limited to SIX A4 pages. Please refer to our requirements, given earlier in the call for applications. Your case should be structured via these sections: 1.1. Key facts (We suggest ½ page.) Project title An estimate of the economic benefit the UK can derive from the manufacture of electric vehicles and battery cells and packs to 2040, and the development of models to support ongoing analysis in this area Name of the lead institution Proposed start and end dates of the project Details of the Principal Investigator: Name; Position; Postal address; address; Telephone A public summary description of your project that could be published on our website if successful (maximum 1/3 page) A gateway question outlining how your application aligns with the competition scope. If your application does not meet the requirements of the competition your application might be rejected (maximum 2/3 page) Your track record relevant to the scope of the proposal. (We suggest 2 / 3 of a page.) 1.5. Introduction to the project. (We suggest 1 / 3 of a page.) 1.6. The research you propose to do and its methodology. Also, what are the key risks that could prevent the project being completed successfully and how will these be managed? (We suggest up to 2 pages.) 1.7. How is this work unique and adding value to what is already known? (We suggest ½ page.) 1.8. What is the likely impact of the study for the UK? (We suggest ½ page.) 1.9. How will the project be resourced? (We suggest ½ page.) Please complete the table below. 1 2 etc. Name Position Organisation Hours per week of input Role within the project

8 Please state if you will be using external commercial organisations to deliver part of the project work and if so please assure that you will follow your organisation s procedures to procure such services in a manner to achieve value for money.

9 2. Financials Limited to ONE page Please complete the following table. 100% of FEC 80% of FEC Directly Incurred Costs Staff Consumables Travel and subsistence SUBTOTAL Directly Allocated Costs Estates Staff Other please list SUBTOTAL Indirect Costs Indirect Costs GRAND TOTAL 2.2. Please provide a justification of the above resources. (We suggest ½ page.) 2.3. Please confirm that your organisation is willing to accept any grant funding at 80% of full economic costing (FEC) and is eligible to receive Faraday Institution funding Please detail any cash or in-kind contributions, over-and-above those listed in the table, being made by project partners. 3. Optional annexes (which do not count toward the page limit for the standard application template) 3.1. Letters of support can be annexed if required.