​Battery energy storage has rapidly become a cornerstone of Australia’s energy transition, but unlocking investment at scale requires more than just strong merchant fundamentals. A bankable offtake contract, such as a virtual toll, is increasingly central to getting projects financed. In the National Electricity Market (NEM), structuring and pricing these agreements poses unique challenges and opportunities.

This article explores how developers can approach physical and virtual tolls for batteries in the NEM, what benchmarks exist to guide pricing, and how contract structures shape both risk and upside.

​What to consider when structuring a BESS offtake contract

The economics and structure of a tolling agreement depend on how risk and reward are shared between asset owner and offtaker. Several elements are critical:

• Price: Sets the guaranteed revenue. Owners seek prices that meet their target returns and minimum debt repayments. Offtakers push for levels that limit their exposure to low market returns.
• Contract length: Often needs to match debt tenor. Shorter contracts may provide greater value but offer less stability.
• Contract size: New financial derivative-based offtake contracts offer owners flexibility in what proportion of a battery to contract against.
• Warranty cycling restrictions : Cycling limits and degradation affect future battery value available to an offtaker.
• Locational risks: Marginal loss factors (MLFs) and grid constraints can erode revenues, especially for large projects in weaker parts of the network.

Each of these factors influences the level and bankability of the offtake contract. Physical tolls naturally shift most operational risks onto the offtaker, whereas virtual tolls keep that risk with the owner.

​This is the second article in a two-part series on tolling agreements in the NEM. Read the first part for an explainer on offtake structures and an overview of the contracts live in the NEM as of 2025.

A case study: pricing and structuring an offtake contract for a 4-hour, 200 MW project in New South Wales

Tolling agreements allow investors to exchange uncertain merchant revenues for predictable contracted cash flows. At their core, these agreements are about achieving a target internal rate of return (IRR).

By forecasting revenues for a BESS and comparing them to the IRR hurdle, we can determine the offtake price and structure that secures the desired return. To illustrate this, consider a representative .