How to Structure Bankable, Enforceable, and Realistic Commitments
Performance guarantees and Service Level Agreements (SLAs) are often the weakest link in energy storage projects. When poorly designed, they create disputes, undermine investor confidence, and turn technically sound systems into commercial failures.
In modular energy storage projects, guarantees and SLAs must reflect how storage actually behaves: degrading over time, operating under variable dispatch strategies, and evolving as systems expand.
This article explains how to design performance guarantees and SLAs that are realistic, enforceable, and bankable—without overexposing EPCs or underprotecting investors.
1. Why Traditional Guarantees Fail for Storage Projects
Many storage contracts still rely on models borrowed from:
- PV plants (fixed output)
- Diesel generators (dispatchable fuel-based systems)
Storage is different:
- Value depends on how it is operated
- Performance degrades gradually
- Revenue is use-case dependent
- Dispatch authority matters
A guarantee that ignores operational reality is not a guarantee—it’s a future dispute.
2. Modular Storage Changes How Guarantees Should Be Defined
Modularity allows guarantees to be:
- Segmented
- Phased
- Adjusted over time
Instead of one monolithic promise, modular projects can define:
- Module-level availability
- System-level performance bands
- Phase-specific guarantees
This dramatically reduces risk concentration.
3. Core Performance Metrics That Actually Work
3.1 Availability (Preferred Primary Metric)
Defines whether the system is technically capable of operation.
Best practice:
- Guarantee technical availability, not dispatch availability
- Clearly exclude grid outages, force majeure, and operator misuse
- Measure at the module or PCS level
Availability is predictable, measurable, and bankable.
3.2 Capacity Retention (Degradation Guarantee)
Instead of fixed end-of-life numbers:
- Use capacity retention curves
- Define acceptable degradation bands
- Test under defined conditions
Example logic:
- ≥90% after year 1
- ≥80% after year 5
- Adjusted for agreed cycling profile
3.3 Response Capability (Not Revenue Output)
For grid or industrial applications:
- Response time
- Ramp rate
- Power availability windows
Avoid guaranteeing:
- Specific market revenues
- Perfect peak capture
- Optimization outcomes
4. What Should NOT Be Guaranteed
High-risk guarantees to avoid:
- Fixed annual revenue
- Savings without baseline clarity
- Battery lifetime under undefined usage
- System efficiency without test protocols
If EPCs guarantee outcomes they cannot control, investors should be worried.
5. SLA Structure That Aligns Responsibilities
A good SLA separates technical performance from commercial operation.
Typical SLA Components
- Availability targets
- Fault response times
- Maintenance schedules
- Monitoring and reporting obligations
- Escalation procedures
Key Principle
Guarantee what you control. Contract around what you don’t.
6. Dispatch Authority Must Match Guarantee Responsibility
One of the most common contract failures:
- EPC guarantees performance
- Owner or aggregator controls dispatch
This is structurally unsound.
Best practices:
- EPC guarantees technical readiness
- Operator controls dispatch
- Revenue risk sits with the party making dispatch decisions
7. Modular SLAs: A Practical Advantage
With modular systems:
- Each module has its own SLA
- Faults do not invalidate system-wide guarantees
- Expansion modules inherit updated SLA terms
This supports:
- Phased deployment
- Easier refinancing
- Partial upgrades without renegotiation
8. Penalties, Remedies, and Caps
Effective contracts:
- Use service credits, not punitive penalties
- Cap EPC liability
- Allow cure periods
- Define step-in rights clearly
Avoid:
- Unlimited liability
- Ambiguous “best efforts” language
- Penalties tied to market prices
9. Measurement & Verification (M&V): The Hidden Risk
Most disputes arise from poor M&V definitions.
Contracts must specify:
- Measurement points
- Data ownership
- Data resolution
- Testing frequency
- Independent verification rights
If performance cannot be measured unambiguously, it cannot be guaranteed.
10. What Investors Actually Look for in Guarantees
From an investor perspective, good guarantees:
- Reduce downside risk
- Are conservative but credible
- Align with operational reality
- Are enforceable without litigation
Investors prefer:
- Slightly lower guaranteed performance
- Over aggressive promises that fail under scrutiny
Good Guarantees Build Trust, Not Just Protection
In modular energy storage projects, performance guarantees and SLAs are not about maximizing claims—they are about aligning expectations.
Well-structured guarantees:
- Protect investors
- Keep EPC risk manageable
- Enable phased growth
- Reduce disputes
- Improve long-term project bankability
The most successful storage projects are not those with the strongest guarantees—but those with the most realistic ones.
