Labour's landslide victory: Implications for UK's energy storage industry

The UK general election has ushered in a new era with Keir Starmer’s Labour Party securing a decisive victory. This electoral shift brings substantial implications for the UK's energy storage industry, underpinned by Labour’s comprehensive manifesto aimed at “[making] Britain a clean energy superpower”.
 

The Great British Energy

Referring to the Conservatives’ energy transition moves as “chaotic ‘sticking plaster’ policies,” the Labour party outlines a robust strategy for achieving a zero-carbon electricity system by 2030 in its manifesto this year. Central to this vision is the establishment of Great British Energy (GB Energy), a publicly-owned energy company dedicated to investing in clean, home-grown energy production.

This new entity is posited to become a pivotal role in the expansion of energy storage infrastructure. It will collborate with the private sector to develop and fund clean energy projects nationwide. The new government aims to triple solar power capacity, double onshore wind, and quadrable offshore wind by 2030.
 

Electricity reforms

As the UK accelerates its journey towards a sustainable future, a national grid overhaul has never been more critical, or as per the manifesto, “the single biggest obstacle to the deployment of cheap, clean power generation and the electrification of industry.”

Although the manifesto touches briefly on energy storage, the plans Labour pitched all point to the urgent need for efficient energy storage solutions and a substantial increase in demand for battery energy storage systems (BESS).

1. Local Power Plan

GB Energy will offer up to GBP 600 million funding and up to GBP 400 million low-interest loans each year for local communities as Labour said it will “back the builders and not the blockers” of homegrown renewables. The company aims to develop 8 GW of cheaper, cleaner power by 2030.

2. Warm Homes Plan

As a key component of Labour manifesto, this initiative pledges an investment of GBP 6.6 billion over the next parliamentary term to retrofit homes with improved insulation, energy-efficient heating systems, and renewable energy solutions, such as solar panels and home batteries. The plan also includes a mandate for the private rental sector to upgrade properties to meet minimum energy efficiency standards by 2030.

3. Changes in the regulatory system

Labour outlined several significant changes to the regulatory system governing renewable energy and grid connections. Specifically, the party will:

• Reduce bureaucratic red tape and accelerate approval timelines
• Recognize energy storage as a distinct asset class within the regulatory framework to allow for more targeted incentives and support mechanisms
• Allow energy storage to compete on a level playing field with other forms of capacity (For instance, providing energy storage systems access to energy markets, enabling them to participate in energy trading, capacity markets, and ancillary services on equal terms.)
• Invest substantially in grid modernization and smart grid development

By promoting a more distributed and resilient energy system, these reforms are intrinsically linked to the energy storage industry. The increased focus on installing home batteries and other energy storage solutions will drive up demand for battery energy storage systems (BESS), batteries, cells, and raw materials such as lithium carbonate.
 

Dependency on Chinese Supply Chain

Sourcing 60% of energy storage cells from China in 2023, the UK is heavily reliant on the Chinese supply chain, a concern Labour is well aware of and pledged to address, saying it will “rebuild supply chains at home” and “export the technologies of the future” in its manifesto.

In the first quarter of 2024, Chinese suppliers CATL, EVE Energy, REPT BATTERO each accounted 35.0%, 14.9%, and 8.5% of global market share respectively. Such an established dominance means that UK manufacturers will need to compete on price, production cost, and technology innovation.

As of the second quarter this year, China-made 280Ah cells were sold at nearly USD 48/kWh domestically and USD 55/kWh (FOB) in non-China markets. The price gap will narrow amid overseas expansions of Tier-2 Chinese companies.

The future of the UK's energy storage industry hinges on strategic insights and informed decision-making. In addition to its financial mire, the reliance on Chinese manufacturers is a formidable barrier, which no regional market has effectively navigated.

Labour's vision of reviving the domestic supply chain and creating job opportunities is not a pie in the sky but requires UK manufacturers to gain a deep understanding of Chinese suppliers’ production capabilities, price trends, and technological advancements. This knowledge helps UK manufacturers identify potential partners, integrate into the global supply chain, and stay competitive while pursuing energy autonomy and security.