​Over the past 18 months, weaker merchant revenues in ERCOT have pushed developers toward tolling agreements. These contracts provide stable revenue streams that help support debt financing while developers wait for market fundamentals to recover.

As of September 2025, ten battery tolling agreements have been publicly announced in ERCOT. These agreements cover 1.6 GW of ERCOT’s battery capacity. Although the underlying terms are largely unknown, available market signals offer valuable insights on how such agreements may be structured and priced.

What factors need to be considered in a tolling agreement?

• The price of the toll: The toll sets the level of guaranteed revenue. Asset owners want a price that secures their target returns without giving away too much upside. Offtakers, in contrast, push for lower tolls to reduce downside risk if merchant revenues fall short of forecasts.
• Contract length: Shorter tolls typically command lower prices, reflecting today’s weaker market conditions. Longer contracts offer stability but increase counterparty risk, as obligations extend over a broader time horizon.
• Cycling restrictions and maintenance agreements: These agreements specify the frequency of battery cycling, assign responsibility for maintenance, and establish availability targets.

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

Subscribers to Modo Energy’s ERCOT Research can read on to find out how to price a tolling agreement.

A case study: pricing a toll for a 100 MW site in Texas

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 toll price that secures the desired return.

To illustrate this, consider a representative project in ERCOT’s Houston Load Zone.