RedT Energy powers up

RedT, which has emerged from the ashes of carbon-trading company Camco Clean Energy, intends to plug into the growth of the renewable energy market, specifically the "mismatch between availability and demand". By definition, solar- and wind-powered electricity generation can only take place intermittently, either when the sun is shining, or when the vagaries of weather systems allow. That represents a structural problem for generators, but RedT's systems allow operators to store energy when available and release it to the grid when needed.

The company's 'energy storage machines' can also be utilised to provide local grid services in remote or isolated areas without access to power infrastructure.

Commercial roll-out is starting to gain some traction. Last month, the company announced that it has sold a second generation energy storage system to South African energy company Jabil Inala to be installed in an African telecommunications company. A month earlier, the company announced that it had delivered four of its 15 kilowatt-240 kilowatt-hour energy storage machines to the ironically named Scottish Isle of Gigha.

Recent analysis from Cenkos highlights that while RedT isn't the first battery maker of its kind to enter the market, "it has engineered a substantially cheaper product" than rivals including Germany's Gildemeister Energy Solutions GmbH - the market leader.

The advantages of RedT's technology are linked to the underlying chemistry. The Vanadium Redox Flow Battery system is ideal for renewable generation sources, because unlike most conventional industrial batteries, it does not degrade when fully discharged and is suited to long duration storage. This means it can safely and efficiently cope with the inherently cyclical and volatile flow rates associated with green energy. The systems offer versatility in terms of capacity and energy flow rates. The Vanadium systems are fully recyclable and retain residual value after the nominal 25 year lifespan.

Admittedly, the company is still in early-stage commercial development, but its manufacturing agreement with $3.9bn US-listed contract manufacturer Jabil Circuit should help support working capital needs, plug it into a global supply chain and give the operation scalability. RedT only had €5.5m (£4.65m) in the bank at its June half year, while the cash burn for the period amounted to €3.6m, so even with Jabil on board, unless we see a sudden surge in revenue, the company may be forced to tap shareholders. †

But we see that as a manageable risk for investors given the potential growth opportunities. An element of early-stage financial risk is probably unavoidable, particularly as management is intent on ramping up the company's production of liquid vanadium storage units over the next two years. This is where economies of scale kick in, as the unit cost of production is expected to decrease considerably over the period.

† After we had gone to press RedT announced that it had conditionally raised gross proceeds of £12m from institutional and other investors through a proposed issue of 150m shares at 8p share – a 29.7 per cent discount to the closing share price on Dec 7th.