The UK's first 'gigafactory' has moved a step closer to reality with the announcement today that start-up Britishvolt has chosen a site in South Wales to develop a 30GWh battery manufacturing plant and accompanying 200MW solar system.

The firm today said it had signed a "landmark" memorandum of understanding with the Welsh Government that will see both parties work together towards developing a commercially-viable facility in the Vale of Glamorgan to feed rapidly growing demand for lithium-ion batteries.

Following six months of analysis to narrow down from 40 potential locations, the former RAF base at Bro Tathan has been chosen for the gigafactory due to its close proximity to industry, skilled workforce and potential customers, according to Britishvolt.

The company envisages investing an initial £1.2bn towards the project, with the hope of beginning construction next year. It estimates the project could eventually lead to the creation of up to 3,500 jobs.

To help fund the proposed South Wales manufacturing plant, the company is seeking to raise support through equity, debt and potentially government grants, including the Automotive Transformation Fund.

Orral Nadjari, CEO and founder of Britishvolt, said Wales offered "vast untapped potential" for developing a battery factory and adjacent solar farm, and that his aim was to create a battery electrification hub in the region that could support thousands of jobs.

"The pandemic is acting as a catalyst, creating new markets for greener technologies, and highlighting the importance of localised supply chains - which Britishvolt has the backing and resources to drive forward," he said. "The construction of the solar farm will not only ensure our gigaplant has a near carbon neutral electricity input - complementing our goal of becoming one of the greenest battery producers worldwide - but also provide cleaner energy to the local area."

It follows a separate agreement announced in May between Britishvolt and fellow battery developer AMTE Power, aimed at developing a domestic manufacturing supply chain for a "diverse portfolio" of lithium ion batteries in support of the UK's 2050 net zero goal, with demand for electric vehicles and battery storage systems expected to surge in the coming years.

At present UK electric car manufacturing is heavily reliant on battery components from abroad, raising significant potential challenges for the sector should trade tariffs emerge in the event of a no-deal Brexit. But while Tesla is planning a gigafactory in Germany and Swedish firm Northvolt has raised $1bn for a similar facility in Sweden, the recent plans from Britishvolt and AMTE Power mark the first serious efforts to deliver large-scale battery manufacturing capacity in the UK.

But Nadjari said the UK remained "globally renowned for its academic excellence in research and development with an abundance of home-grown talent for Britishvolt to take advantage of".

"We believe this will not only be vital for the manufacturing and automotive industries, but for the future growth of the UK economy, as the demand for battery production escalates in years to come," he added. "In the absence of any onshore battery production, 114,000 direct British automotive jobs are predicted to be lost by 2040, and we want to ensure that this doesn't happen."