Faraday Challenge promises much but more detail is needed

Last month it was announced that the Conservatives will make an investment of £246 million in flexible electricity if they return to government following the election on 8 June.  The Faraday Challenge will operate over four years, and is part of a £1 billion investment package from the Industrial Strategy Challenge Fund (ISCF) announced by Philip Hammond at the 2016 Autumn Statement.

Whilst the Faraday Challenge is ostensibly about delivering clean and flexible energy, it appears that the ministerial priority is to drive down the costs of the batteries that power electric vehicles. The rationale here is sensible. In order to meet the 2020 climate targets, up to nine percent of new cars will need to be ultra-low emission. However official Whitehall estimates suggest that less than five percent of new car demand will be met by ULEV in that timeframe. Alongside carbon reduction, the worsening air quality crisis has provided added incentive for ministers to act.

The timing of the announcement, just the day before the civil service enters the pre-election ‘purdah’ period, enables the Conservatives to highlight that they will deliver on their stated ambition of making the UK a “world leader in battery storage technology”.

Greg Clark’s announcement is also timely to the rest of the battery sector, considering the recent growth predictions for the UK’s storage market. According to a new report by the independent energy firm Smartest Energy, the UK’s commercial battery storage capacity is expected to grow 100-fold by 202,0with the growth partly due to investors shifting money in large-scale battery units as they explore new markets following changes to support schemes for renewables.

Another reason for the recent boom in investor interest can be allocated to the fact that the price for previously costly battery storage systems decreased about 50% between 2010 and 2015. Battery storage will never be able to fully manage inter-seasonal variation on the UK grid, but its potential to manage the short and medium term fluctuations in supply and demand is enormous.

However, despite the promise of investment, the government press release offers little detail for how the challenge will work. It reveals that £10 million has been awarded to a first wave of 35 projects – but there is no information for businesses who want to explore the options around government funding for the design, development and manufacture of batteries. This perhaps explains the muted industry reaction – with the announcement barely featuring in the trade press.

If the Conservatives are to maximise the value from this programme, they must not keep industry in the dark. The UK clean energy sector has experienced the consequences of limited dialogue with Whitehall before – culminating in the drastic policy changes that followed the 2015 general election, and inflicted a lasting impact on investor confidence.  By choosing the name this challenge after Michael Faraday, the forefather of electricity, the Conservatives want to demonstrate that they are serious about delivering a battery storage revolution. The new administration after 8 June will have to bring industry into the conversation to ensure the potential of battery storage for delivering clean growth is realised.