New Chairman As RedFlow Targets Residential Market

By Victor Bivell | More Articles by Victor Bivell

Battery maker RedFlow has appointed major shareholder Simon Hackett as chairman and will target the residential battery market as significant sales from the commercial market are yet to appear. The delay in commercial orders also means the company no longer expects to achieve its target of operating cash-flow breakeven by December this year.

Former chairman Howard Stack will stay on as deputy chairman to support Mr Hackett, and new directors with additional expertise may be brought in. The company said Mr Hackett is best placed to lead the transition to a broader customer base as the new strategy needs a technically advanced and customer-centric delivery strategy.

Although it is very early days for the sale of the batteries, in the last financial year the revenue from the sale of goods was only $130,170. The year before it was $177,182.

RedFlow did not say why the takeup for its ZBM batteries from the telco and grid scale sector has been slow. Only that it has received small orders from Europe and Australia with more orders expected. Field trials are underway in Africa, South America, Europe, Asia and Australia, and it remains positively engaged with major telco sector system integrators.

But these activities and a "continued delay in achieving substantial recurrent volume sales" don’t sound like it expects a flood of orders soon.

As well as the board changes, the company also announced initiatives to lower its manufacturing costs, technical improvements and reduced prices for its new ZBM2 and ZBM3 batteries, and the development of a plug and play battery management system (BMS) so it can enter the residential and small and medium business energy storage markets.

The battery management system is a compact unit and will plug into a string of 1 to 8 RedFlow ZBMs. It will have web based, automated battery string management and performance monitoring, features that should make its functionality competitive with other suppliers.

Development work for the commercial BMS product will be done in Adelaide under a commercial contract with Base64 Pty Ltd, a company founded by Mr Hackett. Mr Hackett will oversee the development and delivery, while RedFlow will own all the intellectual property developed by Base64 Pty Ltd under the contract.

RedFlow said this is the shortest time-to-market approach, and that Mr Hackett and his team have the motivation and immediate access to the appropriate technical resources and world-class expertise. The first version of the product is expected to be released in the first calendar quarter of 2016.

RedFlow is also developing new products so the ZBM battery can be easily integrated into a variety of existing AC battery inverter and DC battery control products. The first product will support the inverter/ charger products from the European manufacturer, Victron Energy, whose equipment is said to be widely deployed by system integrators around the world.

A quick move into the residential and small business sector makes sense given the huge and growing interest in energy storage from these markets. RedFlow said it has received substantial interest from potential customers asking it to enter these markets.

Its entry will be helped by lower and quite competitive costs for its systems.

Part of these reductions will come from outsourcing the manufacture of the electrode components of the ZBM to Flextronics, which already manufactures most of the rest of the battery. Another saving will come from a new electrode coating surface, ACN13, developed over the last 12 months and which should substantially improve operating characteristics and projected battery lifetime. Production of the fully outsourced ACN13 batteries will commence in December. The production of ZBM products will be substantially reduced until the electrode outsourcing process is complete, but with orders slow perhaps it is a good time to make the change.

RedFlow is also offering enhancements to the ZBM2’s and ZBM3’s electrode lifetime expectations, manufacturing warranty and base pricing.

The new pricing sees the recommended retail prices for both batteries reduced significantly – the ZBM2 by 16 per cent from US$9,500 to US$8,000 and the ZBM3 by 10 per cent from US$9,750 to US$8,800. The improvements mean the Levelised Cost Of Energy (LCOE) for the delivery of energy from ZBM2 and ZBM3 batteries has reduced to US 20 cents per kWh based on the US$8,000 list price and the expected 40,000 kWh electrode stack lifetime.

The ZBM2 and ZBM3 have many features that should make them attractive to householders and business people – the prices, the energy storage capacities at 10 and 11 kWh respectively with 100 per cent depth of discharge, and the long operating lives.

On the money side, RedFlow estimates it will have sufficient operating cash reserves for the next 12 months, even with minimal sales over that period. This is handy as RedFlow made a loss of $12.3 million in 2014-15, down from a loss of $3.6 million the year before.

It is disappointing that commercial sales have been slow to get going. But RedFlow is right to give the residential and SME markets a good go. Investors seemed to agree with the company’s new strategy as the shares momentarily dipped on the news and quickly rebounded to their previous level. (ASX: RFX)

Victor Bivell

About Victor Bivell

Victor Bivell is editor of Eco Investor Database. See www.ecoinvestor.com.au.

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