The property sector is in a race to strategically plan and construct the necessary infrastructure for a decarbonised world. This encompasses a wide range of essential elements, including renewable power generation, zero-emission transportation and net zero buildings. The magnitude of this endeavour cannot be overstated.
Take gigafactories: the mega facilities where batteries for electric vehicles (EVs) are made. The market for electric cars is experiencing exponential growth, driven by incentives and legislation on emissions reductions. Increasing the supply of batteries will be critical to the green transition, and the facilities themselves have been identified as important catalysts for national economies, key to the formation of new industrial clusters and the investment and jobs they could bring.
Today, most EV batteries are made in China, but as the global market grows, there is a major opportunity for other regions to build in security of supply regionally as well as take a larger share of the market globally. The recent announcement by Tata Group that plans for its UK gigafactory will go ahead is testament to this opportunity.
The European Battery Alliance estimated that in 2022, the total level of investment in Europe’s battery ecosystem, which currently includes more than 160 industrial projects developed along the entire value chain, reached more than €180bn (£155bn). The Faraday Institute estimates that 10 gigafactories will be needed in the UK by 2040, and that they could support 170,000 jobs in the automotive industry and 100,000 more across the wider supply chain.
The gigafactory market is relatively immature and the supply chains much less established
The UK and EU will face stiff global competition, as the US and Asia have introduced policies to boost domestic battery production, and to lure gigafactory developments to their shores.
Developing these essential facilities presents a range of challenges, associated with their size and new technology still emerging. There are few suitable sites that can accommodate developments of this scale. A site must have a high-capacity, reliable, renewable energy source, connections to utilities and transport infrastructure to be considered well connected.
Few gigafactories have been completed to date outside China, meaning the market is relatively immature and the procurement models and supply chains much less established. There is yet to be a critical mass of project examples from which to distil best practice, cost information or cautionary tales.
There are, however, many useful parallels with other high-tech sectors, in which there is a much greater body of knowledge about successful delivery, such as manufacturing plants for the pharma and semiconductor industries. Like gigafactories, these are large capital building projects, housing specialised production line equipment, that require controlled environmental conditions. Flexibility is key, as many of these technologies are constantly evolving. In these sectors, facilities must be designed and built to very demanding schedules, to improve speed to market and get new innovations into competitive markets – whether that is a drug that has just received regulatory approval, a chip that is smaller and faster or a battery that charges faster or offers a higher range.
Informed early decision-making, rigorous project and cost controls, early supply chain engagement and change management are essential on pharma and high-tech projects, and it will be no different for gigafactories.
These projects can incur a capex value of more than €5bn (£4.3bn), and the sector is still evolving. Anyone entering this space will need to be agile not only in the flexibility of the facility being developed but also the battery production methodologies being implemented.
Manufacturing techniques continue to evolve, as the automotive industry focuses on bringing down the cost of battery production as a priority. This means it will be even more important to scrutinise business plans early in the process – for example, to interrogate what degree of futureproofing is necessary to accommodate different technologies, and whether the financial premium is worth it.
Bringing in gigafactories on time and on budget is too important to leave to chance. As an industry, we already know what it takes to deliver complex projects successfully – we just need to apply that experience and knowledge to this developing sector.
Niall Greene is senior European director at Linesight