Battery energy storage is expanding rapidly, and with it comes an increasing need for strong, well-structured supplier agreements. These contracts define how your system will perform, but too often they contain vague or incomplete language that can leave project owners exposed to risks. Small differences in definitions or guarantees may translate into significant financial impacts over the life of a system.
The encouraging part: by understanding how key terms are defined—and how they play out in practice—you can reduce risk and negotiate agreements that truly support your project’s goals.
Why definitions matter
Terms like capacity test, round tripefficiency (RTE), and availability guarantee may look straightforward on the surface. In reality, they are only as reliable as the detail behind them.
Take capacity tests as an example. The results can shift depending on the charge profile specified:
- Constant Power (CP) charging stops as soon as the upper voltage is reached.
- Constant Voltage (CV) charging allows the system to “top up,” capturing additional energy.
The difference may seem small—around 5%—but for a 200 MWh system, that equates to 10 MWh of capacity and roughly $2 million incapital cost.
Similarly, differences in round trip efficiency (RTE) can add up. Over 20 years of daily arbitrage, a system at 81% efficiency versus 86% requires purchasing an additional 45 GWh of electricity. That’s the equivalent of moving your payback period out by a year and losing a full percentage point on your internal rate of return.
How availability guarantees can expose you to risk
Availability clauses are another area where risk creeps in. One supplier contract we analyzed contained an equation with 25 variables. Despite its complexity it was still ambiguous. The same data set could be interpreted as either 91% or 98% availability. That’s a swing of 25 days per year. So, in the worst case, your system could have been unavailable for 25 days (91% availability), but the vendor might interpret the same dataset as saying the availability was at 98%. If they have guaranteed you 98% then you end up in a dispute over liquidated damages.
And those 25 days matter. In ERCOT, half of all battery revenues in 2023 were earned on just 13 days. If a 200 MWh asset was unavailable during the whole of August 2023 it would have missed out on the following revenues: $20 million in ERCOT, $4 million in CAISO, or $2 million in PJM.*
The takeaway: ensure your availability definitions are transparent and tied to how the system will actually be used.
Other critical terms you shouldn’t overlook
Beyond capacity, efficiency, and availability, many other clauses deserve careful attention. Even seemingly small items can have meaningful consequences:
- Data logging and ownership – Ensure you always have access to your own data without restrictions or hidden costs.
- State of Charge accuracy guarantees – Push for accuracy but avoid terms that restrict flexibility.
- Maintenance windows – Align service schedules with revenue opportunities, not against them. And ensure you can request preventative maintenance to maximize performance and uptime.
- Performance guarantees – Make sure you have future flexibility in the use of your system and that it is based on a duty cycle that represents your intended use.
- Liquidated damages – Define outages clearly and watch out for carve-outs that weaken protection.
- Balancing definitions – Insist on clarity around rebalancing procedures, since they directly affect performance and availability.
Even topics like degradation during shipping or accelerated aging can’t be overlooked. If they’re not spelled out in the contract, they can become expensive blind spots later.
Turning data into better deals
Contracts can feel overwhelming when each term carries potential financial implications. What helps is perspective. By comparing contract terms against real-world benchmarks from operating systems, it’s possible to see what’s typical, what’s unusual, and where the risks lie.
With that clarity, you walk into negotiations better prepared: ready to ask sharper questions, recognize which terms are worth challenging, and secure agreements that reflect the realities of battery operation.
Conclusion
Supplier agreements set the foundation for every battery project. They shape not only technical performance but also financial outcomes. While the language in these contracts may seem like small details, they often carry outsized consequences—affecting payback periods, market revenues, and long-term reliability.
The good news is that these risks can be managed. With careful attention to definitions, transparency in performance measures, and a grounding in real-world data, project owners can move from uncertainty to confidence.
In the end, clarity in contracts doesn’t just protect against downside—it also unlocks more value from every megawatt-hour delivered, helping projects perform as intended and advancing the broader energy transition.
* ElectricReliability Council of Texas (ERCOT), California Independent System Operator(CASIO) and Pennsylvania-New Jersey-Maryland Interconnection (PJM).
