Redflow was the great hope of Australian manufacturing. Its collapse left customers with broken batteries

Shortly before its abrupt collapse in August,Queensland battery manufacturer Redflow Energy appeared to be riding high.

The 19-year-old company was capitalising on global demand for large-scale battery systems, with multi-million-dollar contracts in California and a growing list of prominent customers at home, including the Bureau of Metereology, Optus and Queensland government-owned energy provider Stanwell.

The innovative "flow battery" maker met regularly with federal government ministers and was tipped as a potential recipient of "Future Made in Australia" funding to support clean energy manufacturing.

But, largely out of public view, the company was in trouble.

On August 23, Redflow announced it was in financial distress and was placed in voluntary administration, meaning control was handed over to insolvency administrators to investigate its affairs.

At the time, Redflow blamed its fate on tight capital markets and its failure to raise money to build a larger factory and expand production for the new US contracts.

But the company also had a fundamental problem: revenues were being eaten up by the growing cost of dealing with failing products.

Batteries sold with 10-year warranties were sometimes failing within months of installation. According to financials in a recent administrators' report, the company was spending more on repairing and replacing batteries than it earned selling them.

The same report shows the company recorded increasing losses for the past three financial years.

ABC interviews with customers, installers and former employees, including Redflow's largest investor, Simon Hackett, tell of a clean-energy company with a clever idea and soaring ambitions but manufacturing difficulties.

It could never make reliable batteries at scale.

Redflow's assets are now being liquidated after the administrator was unable to find a buyer for the business.

The company's departure leaves a wake of jaded customers, broken batteries and a cautionary tale for the future of Australian manufacturing.

'It's a lot of money people are going to lose'

Not even Redflow staff saw the end coming.

John, a former Redflow employee whose name has been changed to protect his identity, says the news came as a shock on August 23.

"At no point was there any hint that we were in financial strife," he says.

"It's a lot of money people are going to lose."

Some of Redflow's customers say they are now stuck with broken batteries covered by warranties that are probably worth little.

The administrators' report lists 124 unsecured creditors, including customers, who are owed money from the company.

The administrators say unsecured creditors may receive 19 cents for every dollar they're owed once Redflow's assets have been sold.

On August 22, Calvin Melen paid Redflow (through his installer) $25,000 for three ZBM3 batteries to be delivered to his Brisbane home on August 26.

"After they took my money, it wasn't even a business day before they went into administration," Calvin's installer, who asked to remain anonymous, says.

Calvin's paid-for batteries are now sitting in a Redflow warehouse, part of the company's assets to be liquidated.

To make matters worse, Calvin's other three Redflow batteries died in September, six months after installation.

"We've lost $60,000 on three dead batteries and three we never saw," Calvin says.

"If you didn't laugh about it you'd cry."

Other Redflow batteries may fail soon, meaning more customers may lodge warranty claims but may be unable to reclaim lost costs.

A remote access maintenance system that helps keep the batteries operational has been switched off. The batteries also require an annual electrolyte servicing, which the company can no longer provide.

There are also questions around the effect of Redflow battery failures on critical infrastructure. The technology powers off-grid mobile phone towers in Australia, New Zealand and South Africa and weather radar stations around Australia.

Why did Redflow fail?

The administrators' report puts the reason for the company's collapse simply:

In our opinion, the failure of Redflow came from its inability to raise the necessary funding from external sources.

Redflow was a nearly-two-decades-old start-up that never turned a profit and survived on regular injections of capital. It ran out of money and investor confidence.

Outgoing CEO Tim Harris told the ABC: "We were unable to secure the growth capital required to execute our plans."

But why couldn't Redflow — with its backlog of fresh new orders — find willing investors?

Simon Hackett served as Redflow's CEO until 2018 and was employed by Redflow as a technical consultant at the time of the collapse.

"It was always a high-risk investment," Mr Hackett, an investor in the company who stands to lose $11 million, says.

He says the company's failure was due to "investor fatigue" and "manufacturing complexity".

Some of Redflow's batteries failed due to "manufacturing problems", he says.

From 2008 to 2022, Redflow launched four successive battery designs: ZBM, ZBM2, ZBM 2.5 and ZBM3.

These were primarily for residential use, such as storing power from off-grid solar panels, but could be combined to power larger facilities such as mobile phone towers or weather radar sites.

By 2022, Redflow boasted installations at a council building in Melbourne, mobile phone towers in New Zealand and a wastewater and fertiliser plant in California, alongside a long list of Australian residential customers.

When US President Joe Biden signed the Inflation Reduction Act into law in August 2022, billions of dollars flowed into clean energy investment in the US.

Redflow's time had come. It was globally one of the few proven manufacturers of a technology ideally suited to large-scale energy storage.

But within Redflow, problems were brewing.

Some of the batteries they had sold were breaking.

'I don't think they should have been selling the product'

Installers the ABC spoke with say Redflow batteries were notoriously unreliable.

Everest Energy in Victoria installed more than 150 Redflow batteries for about 50 clients from 2019.

"We had just continuous issues with the batteries," its director, Adam Smith, says.

In 2019, Everest installed 36 ZBM2 batteries for a Melbourne council that reported a 90 per cent failure rate and a long wait for replacements under warranty.

"Eighteen of the batteries have been broken for a year and a half," Adam says.

The council did not respond to a request for comment.

Off-grid customers were particularly affected by battery failures, as they had no backup power.

Ben Baker paid $40,000 for four ZBM2 batteries for his gin distillery. They failed "spectacularly" within three years and were replaced under warranty.

Matt paid $50,000 for five ZBM2 batteries for his rural bed-and-breakfast. They also failed within a year and were replaced under warranty.

"I had an emotional breakdown every time guests were staying, worrying about their power," Matt says.

"I was really interested in supporting Australian [business]. Now I don't think they should have even been selling the product."

John, the former Redflow employee, said the ZBM2 and 2.5 models would often only last "a few years", but were sold with a 10-year warranty.

"Someone in their infinite wisdom decided a 10-year warranty was a good idea. There was no way battery would even get close to lasting like that."

John says the final design, the ZBM3, was even worse.

Adam from Everest Energy says the ZMB3 was the "least-reliable" battery Redflow ever made.

Nathan Skelly in regional New South Wales paid $30,000 for three ZBM3s that failed within three months of installation. These were replaced under warranty in May 2024, but the replacement batteries have since developed problems.

"I suspect they're going to fail within the next few weeks," Nathan says.

A resort in South Australia had 56 ZBM3s replaced within a year.

Redflow was honouring its warranties, but repairing and replacing batteries cost the company millions.

In the company's last full financial year, the cost of honouring warranties soared by $2.7 million, while annual sales revenue plunged to $629,000.

Why did the batteries keep breaking?

Simon Hackett describes a "conga line" of "manufacturing problems".

"As one would be resolved, another one would come up because some other manufacturing problem would occur.

Redflow was making a unique product: the world's smallest commercially available zinc-bromine flow batteries.

Their batteries had many advantages over lead-acid replaceable batteries or the rechargeable lithium batteries used in mobile phones and electric vehicles, but had one great drawback: no-one else was building them.

There was no how-to-manufacture guide.

Redflow's design was unique, so it had to solve any manufacturing problems on its own.

And because Redflow was small, it was forced to rely on repurposed third-party components. This put it at the mercy of other manufacturers, who would regularly decide Redflow's small orders weren't worth the trouble.

For example, one component was made by Japanese beverage company Asahi.

"A year's worth of Redflow production involved Asahi having to shut a production line down for a week, reconfigure it to our specifications, and then spend one day making the stuff," Mr Hackett says.

"And that challenge happened over and over in different parts of the battery because we just needed to be ordering 10 or 100 times as much of [the component]."

Redflow was at an impasse. To iron out the manufacturing issues, it needed standard-quality components. To get these, it needed regular suppliers. To get regular suppliers, it needed to make and sell more batteries. To sell more batteries, it needed to iron out the manufacturing issues.

And so its problems recurred.

"For the last several years, it felt like unless we could figure out a way to to raise a bigger chunk of money … eventually the wheels might fall off," Mr Hackett says.

Meanwhile, the repeated battery issues scared investors.

"These [manufacturing problems] were all things that could be dealt with with enough capital, but they were clearly a part of making it difficult to raise capital."

What now?

With its assets being liquidated, Redflow shows some of the challenges faced in rebuilding Australian manufacturing and competing in the global clean energy market.

After almost two decades of operation and the long slog of developing a prototype, setting up a factory in Thailand, manufacturing a commercial product and then ramping up sales, Redflow had finally cracked the US market.

Its order book was overflowing with demand from decarbonising grid-energy providers in California.

The global grid-scale storage market is valued at over $US10 billion and may be worth five times that within a decade.

But Redflow still couldn't succeed.

Outgoing CEO Tim Harris said developing a globally competitive battery manufacturing industry in Australia was "a major challenge" that required "significant and patient capital".

The Redflow saga also shows the risks associated with relatively new and untested clean energy technologies.

Redflow supplied 18 ZBM2 batteries to power three weather radar stations in regional NSW for the Bureau of Meterology (BOM) and 56 ZBM2 batteries for remote and regional Optus mobile base stations.

The BOM declined to comment about the batteries' failure rate.

An Optus spokesperson said: "Optus is actively working through plans to ensure that our services and infrastructure are not impacted."

Redflow customers' only way of getting some money back is to lodge a claim as an unsecured creditor, Consumer Action Law Centre CEO Stephanie Tonkin says.

"The proliferation of new energy businesses selling or installing a range of products, together with certain settings — like government finance programs and the push toward electrification — potentially leaves more consumers exposed to the risk of engaging a business that winds up or becomes insolvent."