RedFlow Limited (RFX) Earnings Call Transcript & Summary

Good afternoon, everybody, and welcome to RedFlow's Fourth Quarter 2024 Quarterly Results. With me today to represent is Tim Harris, CEO; and Michael Hipwood, CFO. Before I ahead across to Tim and Michael to do the presentation, just some housekeeping. [Operator Instructions] So with that, Tim, I'll hand it across to you.

Thanks very much, Craig, and good afternoon, everyone, who's joining on the call and thanks for your time. As usual, today, I'm joined by Michael Hipwood, [indiscernible], CFO these days. We'll follow the normal format we released our 4C earlier on this morning. We've got a presentation that we've also posted. We'll go through the presentation and give you our perspective of the business where we are now and in particular, what we think the important highlights are over the quarter and they're looking forward and hopefully leave a lot of opportunity for questions and answers as we go through. So in terms of an overall summary, I think this quarter and some of the subsequent events for RedFlow have been very important and I think, consequential for our future and our future growth strategy. As we can see here, we've made significant enhancements with a number of our customers, both sort of confirmation of projects that we had previously announced. But critically, and we'll talk about a little bit later, I think a very significant breakthrough for RedFlow with the MOU partnership that we announced with Stanwell just a little while ago. That's really exciting for us for a number of reasons. But I think it really does signify how we have broken through as a company and got credibility in that very large multi megawatt hour size of talent with those type of customers and projects that we are aiming for. At the same time, I think the market had interest in first energy storage but also in long duration energy storage has also accelerated significantly even over the last few months. We remember back in March where we saw the launch of the Queensland battery strategy that, again, we thought was very significant for the RedFlow. In May, where you also saw the launch here in Brisbane of a National Battery Strategy, and we'll go into a few details about that later on about why we think it is consequential for RedFlow. And at the same time, we see some very promising shoots of demand starting to come through or specifically focused on long-duration energy storage solutions in our markets here in Australia but also specifically in the U.S. that we think fit right into our sweet spot. And we think we're a very well-placed to capture. And look, we've also made progress against what we call our X10 program. We've talked to you before about how X10, the product that we have been working on and continue to work on and make progress against is very important for our business commercially but also meeting the needs of our customers as we start to look forward and we're delighted to say that we've made some significant progress against that over the last few months, and we've got a lot of work to do, but we're hugely excited about some further progress that we can make over the rest of '24 and into '25. And then lastly, we would like to thank all those investors who supported us through our entitlement offer. That's allowing us to progress some of the growth strategy and some of the projects that we've announced. But it's critically also enabling us to confidently engage with a series of investor sources of nondilutive funding that's going to help and enable and accelerate the product development and deliver on our growth strategy. And what I can say is that some of those discussions have advanced significantly over the past few months, and we expect to make some announcements around that imminently. Next slide, if you can, please, Kurt. And the thing that we just really wanted to highlight. We think, as we said before, is one -- I think one of the most significant advances that we've made in RedFlow in recent years. And that's the partnership that we announced with Stanwell a few months ago. For those who are not aware, Stanwell is a Queensland government-owned Corporation, it's the state's largest energy generator but it's also the Australia's second largest greenhouse gas emitter according to Wikipedia. So a lot of its generation, well, the vast majority of this generation is coming through its coal-based assets. As the company and as Stanwell and Queensland looks forward, they're going through their own transformation. And they're looking to invest in the future and a future of renewables. And that's based on, I think, 4 key pillars. One is building a portfolio of renewal-based assets. And we're investing in lots of solar, wind assets and also hydrogen, which is I think secondly is a key part of their future. Ensuring the reliability of their current assets but also making sure that they have a really strong transition pathway for their people moving from a fossil based fuel environment to a future renewable energy-based environment as well. And I think that very much reflects the Queensland Government strategy and a very clear strategy about that the Queensland Energy and jobs plan, that has a very specific goal of retiring all regular use of QRET asset by 2035. And so we are delighted to make those announcements with the CEO of Stanwell, Michael O'Rourke back in July. And that follows some quite significant activity that we've had with them over the last probably couple of years. But something that's really accelerated, we would say, over the last 6 to 8 months, particularly as we started to crystallize our thinking around our X1 product. And so as you've seen from the announcements, we're working towards a pre-feasibility to look at the X10 and getting that customer feedback in about what their needs are. The next stage of that is building a 5-megawatt hour projects using that X10 that we're targeting to commence that next year. And then the sort of price for us, as we see is looking for at least some demand and commitments around sort of hundreds of megawatt hours as they make the energy transition. And if you look at the ASX announcement we made that contains that information from Stanwell, they publicly said that they need about between 9 and 10 gigawatts of renewable energy for near future but they also need at least 5 gigawatts of energy stores to support that strategy and growth. And we believe a significant and a material amount of that is going to be in that medium to longer term in the energy storage duration, which we believe that we are very well placed. And quite specifically, I think that Stanwell really wants to support a proudly Queensland developed technology and one that has continued to invest in the state over many years. So we're hugely excited about this opportunity. We're really looking forward to working with the Stanwell team and starting to develop that sort of feasibility study and then towards that 5 gigawatt hour project in that data center just outside of Rockhampton and we've already kicked off the sort of program governance around that. So we look forward to continuing to update investors as we progress against this very, very important customer, and I think a very significant announcement that we've made in July. Next slide, please. We think the other key announcement that is very important for investors to recognize is this launch -- a formal launch of a National Battery Strategy back in May that was made by Prime Minister Albanese, Science Minister, Ed Husic and Queensland Premier, Steven Miles here in Brisbane, which we were delighted to be invited to. I think this is important for a number of reasons. The first is it really starts to recognize the importance and the focus by the Australian federal government on energy storage as a key pillar to enable an energy transition world, noting according to AEMO that Australia will need 43 gigawatts of medium -- short, medium and long-term duration to meet those kind of requirements. We'd also like to probably point out a couple of aspects around that strategy that we think are especially relevant to RedFlow. The first one is that the focus of that strategy is not just on lithium. Very clearly, that strategy calls out the role and potential role of flow batteries as being very much orientated and optimized for large stationary energy storage systems. And we were delighted to be sort of cited as a core chemistry alongside vanadium systems and iron flow based systems that the strategy really wants to focus on. So the intent there, I think, is very, very strong. The second part, I suppose, is where some of that budget and allocation is going to be focused towards. So there 's a focus on flow batteries. There's a size in zinc bromine flow batteries and be an brackets RedFlow around that but it sets out a very clear objective to establish sovereign battery manufacturing capability in Australia. And it's allocated over $500 million to the battery breakthrough initiative that specifically orientated towards establishing sovereign manufacturing battery capability here in Australia. There's further support to the Australian made battery precinct that was announced a couple of years ago with $200 million, $100 million from the federal government and $100 million from the Queensland government to establish that precinct here in Queensland. And we look forward to seeing how that's going to crystallize in the coming months. And lastly, over $1.7 billion towards a future made in Australia funds, specifically focusing on energy storage amongst other technologies. So when you start to bring that together, I think it's very strong in terms of the signal that it should be giving to companies like RedFlow to the market; and two, we think consumers of energy storage that they really want to see an Australian energy ecosystem manufacturing and technology thrive. And I think that's created some very significant tailwinds and momentum in the market as people have started to digest this and understand what is thinking moving forward. As always, we'd always like the government to move a little bit faster and making sure that we can sort of tap into those funds that have been allocated, which we think will probably become much more apparent towards the end of this year or and early next year. But certainly, the signals that we have been seeing and the conversations that we've been having at the policy level and with those organizations that are charged with deploying and managing these funds, we're very excited about the opportunities that, that's going to bring RedFlow. Next slide, please. The other aspects we talked about is really those forces around long duration energy storage accelerating. For those that follow this space, we see a very strong report that came out from the Australian Clean Energy Council in June about the future of long-duration storage. And critically, what they have recognized is as the energy transition is starting to see those challenges and bottlenecks around transmission infrastructure and any concerns around reliability. The role of what they call advanced long-duration storage and not that kind of storage technologies that are still on the land, but ones that have been commercially proven like RedFlow have a very key role to play, both in terms of loan system costs, reducing reliance on coal-based assets or gas plant peakers and facilitating that transition to a Net Zero carbon power system. And so we believe that's a very strong validation in terms of the journey and the increasing interest around long-duration storage. At the same time, in California, which investors will know, is a very key and strong market for us. We're starting to see procurement activity and intention to procure significant amount of long-duration storage from kind of 2030, but procuring exercises that we believe are going to start around next year. Critically, what we want to point out to investors is when you start to look at the details of that procurement intent, firstly, it's a size and we understand that the sort of opportunity set for a company like RedFlow and that kind of intraday shifting environment is around AUD 2 billion. So very, very significant but also specifically how the intent of that procurement looks to exclude pumped hydro and also lithium-based systems from that procurement exercise. And I'll just remind investors that we are one of only a selected number of companies that had been supported by the California Energy Commission for large-scale multi-megawatt hour projects that we are delighted to be living. I think we're now on our fourth project with CEC but also the operational track record have shown how we can commercialize our technology and deploy that at scale with over 60-milliwatt hours of orders that we've announced over the past kind of 18 months. So we are hugely excited about that. We think that validates the market and the opportunity that we see before us and we believe that we're very well positioned, having invested in that kind of California capability and those relationships and those projects over the last few years. Next slide, please. So giving you an update around the key projects that we have previously announced and where they are tracking towards. The first one is Energy Queensland and that's 4 megawatt projects that's going to be established as a kind of solar [indiscernible] just down the road from us here in Brisbane, Ipswich. I'm delighted to say that, that final contracting has been completed and almost signed. We look forward to the deployment of those batteries that we think is going to sort of begin around the second quarter of this financial year, so sort of October towards December. And we're also delighted in the CFO perspective to say that we've always already submitted our first invoice. So we're very excited about that project being a really key reference point for potentially a very large customer. For Paskenta, that's continuing to move. I think the critical point from a cash flow perspective is that we've received that significant deposit from Paskenta that we've highlighted previously that we think is greatly received. When we start to look at the timetable, we believe that, that sort of battery production and delivery is expected to commence in around Q3 of this financial year. And the forecast of that because of revenue recognition is around $15 million in FY '26. Horizon Power, we announced this not too long ago, we're proceeding rapidly towards final contracting around that with delivery of batteries sometime early next year. But again, that's a strong reference customer that we think with the opportunity to have lots more on RedFlow energy storge systems across its network. The DoD projects, we are proceeding on those wells. Again, we're planning to produce and start shipping those batteries before the end of this calendar year. Hugely exciting for us. And I think as we've highlighted, that Sigonella Air Force Base is the second project that we've announced with the USD DoD that's come in very rapid succession to the first announcement that we've made. And I think we have said that the opportunity that we think exists within the U.S. Department of Defense is very significant. Based on the duration of discharge that we could have, our unique lack of thermal runway that we believe is very attractive to the U.S. DoD but also importantly is our hibernation mode that we've talked to investors before that has got very, very fine interest within the DoD from a resiliency perspective. And in terms of the last 2, the Barona microgrid 6.6 megawatt hours. We were delighted to see that, that project has formally received funding subject to final CEC approval at the business meeting earlier on last month. Again, that's a project that we think is hugely important for us. We're delighted to be working with the Faraday and also the Barona grid again, and that's going to again be a strong reference point for us in FY '26. And lastly, with that 34-megawatt hour projects, we are continuing to engage with negotiations between the U.S. DOE, the CEC and Faraday and the end customer around that. And we're targeting delivery of that in around 2027 and orientating a delivery using our X10 product. Next slide, please. So let's talk about the X10. I think it's really important just to spend a couple of minutes talking about why we think the X10 is so important. Now as we've been through the journey with RedFlow, we've been pretty consistent in terms of our message to investors that we think our future and our commercial success does not lie in smaller systems but it relies on bigger systems. You have scale, that's where 90-plus percent of the market is going to be, and that's where we think the orientation of some of the application characteristics that we have are well suited to the end customers. And so a natural progression of our product is what we call the X10 that we unleashed and launched to investors into the market a few months ago. What I would stress though is this is not a revolution, it's an evolution. We see the opportunity to use the X10 to create much higher energy density, much higher energy performance in a 20-foot container that really also reflects all the investment we've made, particularly around our stack technology but also enables us to be very, very competitive from a market CapEx perspective and also a levelized cost perspective at the 8-plus-hour duration where we think our real opportunity lies. The thing about this as well is we're evolving to a 20-foot container light solution, which is really the market standard for large-scale commercial, industrial and utility-based customers but that's also modular, so we can rapidly scale it. We can have ease of maintaining and serviceability and the transportation costs that we have around that we think are also competitive. And so this is something that we launched in the market. The key changes that we would make is some adjustments in terms of the cooling system that our 20 foot container is enabling us to do so, reducing some of that ox load that we have with our current batteries, we move to a larger scale but very much driving towards a system and products and components that are designed for volume manufacturing and are going to dramatically reduce the cost, both to our customers, but also allow us to drive good and reasonable margins into our business. So this has made great progress, and it's really resonated with people like Stanwell and a number of other large-scale customers that we have been engaging with the market that have also expressed very strong interest in the X10 as we start to move forward. And so in terms of progress we go to the next slide, Craig, we've been sort of working on this in the background what we want. So the first stage of milestone that we created is what we call kind of calling hydraulic testing. So this is taking a series of our existing ZBM through stacks, putting that through an AC pump and testing for pressure and rate flow equalization. So we know that we can put a liquid, like an electrolyte liquid consistently through our steps to get all the performance that we need across each of those individual stacks when they put in parallel like that. So that was completed, and that gave us some very valuable information. And so the next stage that we see is moving to what we call our initial prototype, which we're targeting to get up and running in August of this year for initial testing. And the focus of that initial prototype is to work on a multi-stack hydraulics. So you'll see in the image there. Again, we're using a number of our existing ZBM through stacks. We're using a number of our existing [indiscernible] electronic boxes, putting that together with AC pumps and also large tanks to make sure that we can manage the chemistry. Particularly the sort of our bromine complexing agent, which is a very important component of our battery and operational performance. But also understanding how we can ensure flow and performance with single tanks and simple pumps across a multi-stack firmware and software type environment. So that's going to be the next stage. We look forward to giving you some better updates in August as we start to kind of launch that. But I think from where we sit today, we're very much on track with that X10 moving towards the pilot that we mentioned with Stanwell but moving towards, I think, when we think about large scale manufacturing, of that X10 moving towards a final investment decision that we want to reach about this time next year. If we go on to the next slide, please. And then just talking a little bit about our plans and ambitions for an advanced manufacturing facility. I think we've been pretty clear with investors that we think there is a huge opportunity for us in Australia to manufacture our stacks in Australia. And we think that's due to a number of factors. One, the anchor demand that we see sort of becoming much more visible for us in Australia for the intraday long-duration energy storage needs. We think the fact that we are very familiar with the Australian market and with some of those customers that we think really want to grow with us. And I think that's evidenced by the MOU that we announced with Stanwell. But also we think the significant advantages that we see in terms of government support for that made in Australia, that sovereign manufacturing capability -- that's sovereign. I think national energy storage capability that we see become very clear and at the forefront of people's minds, both at federal and also state level. So we're continuing to work on that. We've got an engineering team that's working alongside that X10 team that's looking about where that is. And I think as we mentioned before, we are partnering with Queensland government in terms of looking at that feasibility study. So we can look at that business case as we target to get to that point, in -- towards about this time next year. So again, that's a hugely important project for us. But when we start to look at the demand overall for the market, but some of the demand that some of those clients are talking to us about, we think there's a huge opportunity for us, and we need to make sure that we're ready for it and can demonstrate and prove that we have that manufacturing to scale up beyond where we see Thailand being that's going to support those key reference projects over the next couple of years. Next slide, please. I'll hand that over to Michael now for the financial quarter.

Thanks, Tim. The quarter was a very good quarter. As Time said, we received the initial deposit from Paskenta Microgrid, which helped significantly in our cash, along with the capital raise of net of $2.982 million. Overall, the cash flow and the expenditure was in line with budget and well control for the quarter.

Great. Thank you, Michael. If we go on to the next slide. So look, this is a slide that actually hopefully might become boring to investors, right, because it's something that we've been consistent over quite some time in terms of where our focus is and where we think we're going to be successful. So very much, we think the opportunity for us is to be a key player in the energy storage market and play a major role in the energy storage transition as we start to see medium- to long-term energy storage has become much more of a focal point for the industry, for government and for our end customers. So the ability to efficiently and effectively shift excess solar and wind and naval integration with the future grid to avoid transmission investment to mitigate any further investment. That's not necessarily by having a dispatchable and deployable but actually modular-based approach to energy stores, we think is very strong. And we think we have a set of customers that we've been very conscious about nurturing and cultivating over the last couple of years that are very keen to go on that journey with us. We mentioned the U.S. Department of Defense, the U.S. Department of Energy, Energy Queensland, Horizon Power, [indiscernible] that we mentioned and then lately Stanwell that we think is a very important flag not only for us but we think for the rest of the industry about where and how we can grow with a customer that has potential demand in the gigawatt hours, which we're very excited about. In terms of our core markets, we think that, again, the U.S. and Australia are really core markets. We see huge opportunities in those. And I think we're starting to see the rewards of investing in places like Australia and engaging and showing that we have a battery that's operational commercial and delivered over 3 gigawatt hours of energy is hugely valuable when we're talking to these customers. And they appreciate the journey that we've been on, but also they appreciate the opportunity that we have at that multi gig -- multi megawatt available and that background and a pathway that gives us credibility to kind of lean into that space. That's not to say that we don't see opportunities in other markets, and we quite regularly get engaged with a number of parties, such as utilities in Europe, and we pursue those where we think the opportunity is compelling. We've got lots of opportunity here. But when you start to see some of those large utilities start to really want to actively engage with us, particularly after the standout announcement, we really want to be ready for that. So I think we've worked very hard over the last 2 or 3 years to position ourselves a bit. We think the market is coming towards us. We think we have the right set of customers. We have the right product, technology and operational history to really be a meaningful player as this long duration energy storage market accelerates. If you go to the next slide, please. And so if you start to look at it as a perspective for our business, we now have a series of projects that we're going to think is filling our production capacity in Thailand, the rest of this year, 2025 and 2026, and that's the date where we really want to get that new facility, make an investment decision and start to commission that. And so we don't want to invest too heavily in Thailand. We want to get that kind of goldilocks scenario where that Thailand facility is able to meet our customer delivery needs and goals without overinvesting because we know that opportunity for us to increase our automation and extend is hugely compelling for our customers but also for our shareholders. And so we have detailed plans around that Thailand facility and matching that with the demand that we're starting to see going forward while also driving good efficiencies and further cost down. We've progressed significantly. I think we've said in terms of that preliminary design of the X10 products, the testing that is going to take place, and we look forward to providing investors with better updates as we make progress against that. And at the same time, I think we've made some very good progress against engagement around both the X10 products but some other projects that we think are right for delivery with key reference customers in '25 and '26. We're very pointed about some of those engagements because really what we want to do is have a very strong thread between projects that we see over the next 18 months and our ability to go and sell significant amounts of the X10 product when we're starting to launch that from kind of '26 onwards. And so hugely exciting about the X10, I think we're very placed and we have continued to advance our thinking around that Queensland factory in design, both in terms of how we're going to automate our stack the different mechanisms that we can do and apply where we're starting to think about that battery and volume, and the business case and where that's going to be that puts us in a very strong competitive position even versus lithium at sort of 8-hour plus duration. And as I mentioned at the start, I suppose, we see huge opportunities to be supported by governments as we start to go through that journey and scale up from where we are today. Some of those, as we said, we have been in active discussions with that have sort of advanced significantly over the last kind of 2 or 3 months. And as we said before, we believe there's every reason to believe that we can make some announcements around that in a very short time period. But also, we think that's the start of a journey. And as we mentioned before, things like the $1.7 billion Made in Australia funds, the $500 million battery breakthrough fund. They're really going to become crystallized next year. And so we wouldn't be very well positioned. And we think we are very well positioned to be able to go and tap into those and get some funding that we think consider alongside private investment as we start to grow and set our sights on becoming a meaningful player in the energy storage market. So thanks, everyone, and we appreciate your ongoing support and happy to -- for, Mi and I, on to answer any questions from now.

[Operator Instructions] First question, what's the expected storage capacity of the X10, sort of in roughly kilowatt hours and how much bigger is that then the current battery stake that you have?

Craig, so perhaps what I can do is provide a reference point, I guess, what we call our energy pods. So our current energy pods has 20 hours of ZBM3 batteries in, each of which are worth -- have sized a 10-kilowatt hours. So start to think about those module is that those energy pods that we're delivering our systems in and we did an earlier version for Energia that 2-megawatt system a couple of years ago. That's 200-kilowatt hours. So we can fit 2 of those into a 20-foot container. When we start to think about the first phase of that X10, the goal for us is probably to get up to something about 800-kilowatt hours in terms of the ability to put multiple stacks, large tanks, thermal management system, et cetera, into a 20-foot container. So that's the first phase, and that's probably ideally, we would like to get to with the Stanwell pilot. But as we look forward and we can increase the number of cells and get much higher energy density through that system, our real goal is to probably get between 1.2 and 1.3 or even particularly even higher megawatt hours per annum as we start to refine that model and reach kind of mass production. And so -- and this is the exercise that we did with I say global management consultancy that really tested our thinking and iterated our thinking earlier on this year was a really intensive exercise. But that really came out with a real true north about what the art of the possible could be when we look at that form factor. We look at how dense that we can get those cells and those stacks into that 20-foot container and the performance that we can drive. So just by the way of illustration of that, it's a real step change that we can make. And the feedback that we are hearing is that civil costs becoming a much, much more important component of the cost of implementing a [indiscernible] system. So when you're on a trajectory of at least kind of increasing your energy density by 3x, we think that puts us in a great position. I would also refer to what we've really told our investors that zinc bromine as a core chemistry has much high energy density than any other, we think, nonlithium based system out there. So you're already starting at a competitive advantage with -- versus other sort of iron flow or the [indiscernible] flow based systems and we want to leverage that as much as we possibly can. So we think that's something that we spend a lot of time on. As we said before, as we're going through that development of X10, we spent some considerable time engaging with our customers about what really they value and what they were looking for. And that energy density in that sort of 2-foot containerized base system was a really clear direction for us to focus on. So again, we think it represents a step change but as we said before, there's some engineering elements of design that we need to work towards, but we're still leveraging that real core of our stack technology that we've developed over many years.

Just pick up on that. You mentioned energy density and the importance of that to grid-scale customers. Can you just talk about the density of X10 versus lithium and some of the other batteries just in terms of the [indiscernible] advanced ideas? And then a subset question to that one is, can the X10 be vertically stacked? I know that's been a big drawback for a lot of the lithium batteries given the thermal runway. So just curious as to whether that's a possibility.

Yes. Look, good questions. When you take into account the energy density of lithium. Lithium is always going to be much more energy dense than any other chemistry, just by the amount of power that you can pack into those lithium-based systems. And so when you're starting to think about a ratio, we're probably sort of wonderful 1 to 5 at the moment. Do we think lithium is going to get more energy dense possibly? But on the other side, what we are seeing is really clear evidence is the spacing, the fire departments, et cetera, and developers are now acquiring around lithium systems is actually getting lighter. So while the energy density might be increasing the space that's required between things like mega packs, et cetera, is getting broader and broader. And when we start to think about that, we actually think there's relatively limited elements of margins that we see if we see those kind of trends extrapolating. So that's a key factor. So it's not quite like-for-like but when you take that firmer runaway risk and what we're seeing from fire departments about lithium spacing, we think actually we're in a pretty good position. We do get asked a lot about sort of double stacking for us. From our perspective, we can do it, probably what we believe though is for any flow battery needs a regular maintenance and we're no different from anywhere else. If you're double stacking, you're getting gantry-based elements towards that. And while it might look appealing from an easy density perspective, the timing effect and capital cost to kind of build that we think is actually prohibitive as well. And so what we want to do is leverage that natural energy density that we have being a zinc bromine company. And we think the [indiscernible] to performance, et cetera, that we can drive through the battery, it kind of sits today. We do get asked a bit about double stacking. We're not going to say never, but actually, we think there's -- if we deliver on the X10 like we -- our intention is we think we'll have a very competitive product.

Just staying with X10. You mentioned the levelized cost of storage. Where does RedFlow X10 sit within that at the moment versus other flow batteries and lithium? And how far do you think when you get to scale out of a potential manufacturing base in Queensland, how far can that LCOS decrease?

Well, look, we think -- we don't give that out information out publicly. It's always a bit of an industry sort of behind closed walls when we have sort of conversation specifically about LCOS and CapEx numbers. We are more expensive than lithium at the moment. That's clear. But when you do start to look at levelized cost of storage, actually, that sort of distance narrows significantly when you take into account the augmentation and the degradation that we have with lithium systems versus our systems and also the parasitic load that you get about needing to keep those batteries at sort of certain temperatures versus a little bit more of our kind of flexibility. And so we -- and the lack of the [indiscernible] protection systems, et cetera, et cetera, et cetera. So when we start to think about where we can actually drive our existing ZBM 3, we know this and further cost downs that we are targeted on achieving over the next 12 months but also the step change that we can make around the X10, it brings us to a really compelling CapEx number but it makes even more compelling sense when we think about a levelized cost of storage number. One of the things that we are sort of actively engaged with is moving our battery from a 10-year battery to a 20-year battery. Now if you start to take a step back and think about flow batteries, they are actually machines. There's certain components of that, if you hear the [ key ] flow batteries in the right way, you do regular maintenance and you do regular servicing and we can sort of run that electrode through sort of a reconditioning type process. There's no reason why we can't extend that potentially up to another 10 years. And when you start to look at that, particularly around that longer duration and you start to see people, I think, getting a little bit more savvy about the performance levels around lithium. We think we've got a direct compelling with cost of storage number. And this is -- the other thing -- other thing I'd add, Craig, is these are numbers that we regularly engage with our end customers with. And we use the U.S. Department of Energy LCOS calculator. Sometimes the LCOS can be a bit of a black box, and you don't quite know what's going in and then what's coming out. We've gone down the pathway. We've been very transparent around what the assumptions are. We had around our batteries and the costs, et cetera, and the numbers that we present to our clients, we think are pretty compelling.

Last at the moment on X10. With the increasing level of stack in the containerized battery. Will that entire unit made to be off-line for maintenance? Or can you do maintenance on the individual stacks within that container?

Yes. We were thinking about that is that it becomes a matter of how much do you value sort of redundancy versus how you can drive the cost down. When we're starting to think about sort of the X10 and a 20-foot containerized solution will have modular approaches if you kind of saw that kind of prototype that I showed before in terms of how many of those can be slot into a 20-foot container. So the thinking that we will have is that if we can probably fit about 10 of those into a 20-foot container, that's where you start to have the redundancy point. So your ability to kind of orchestrate those, put those individually into hibernation mode, charge, discharge, et cetera, is going to be probably at that kind of level. So sort of 100, 120-kilowatt hours is where we kind of think the sweet spot of redundancy is and that allow us and the feedback we got from large-scale customers as they're very happy with that level of redundancy and sort of modular size.

You mentioned big footprint in California, growing opportunity within the states for flow batteries. Do you see any changing to funding or the uptake in terms of solar, if there was a change in government? Sort of few questions on here. Does anything change if Trump gets in the power, it would be a very simple question to ask you?