Virtual tolls for battery energy storage have been on the rise in the NEM, with the first contracts going live at the end of 2024. This is part of a wider trend of a shift towards financially-based offtake agreements, instead of traditional physical tolls.
This article explains what a virtual toll is, what other offtake structures exist in the market, and who the main providers of each have been.
Executive Summary
- Virtual tolls are financially settled contracts that offer a fixed fee to asset owners whilst they still retain physical control of the system.
- Gentailers are behind most virtual toll capacity today, but new offtake structures such as revenue swaps are allowing new competition to emerge.
- Financial offtake agreements are rapidly growing in the NEM, set to surpass 50% of long-term deals by 2026.
- Virtual tolls offer shorter terms and partial capacity contracting, providing more flexibility to both owner and offtaker.
What is a virtual toll?
A tolling arrangement in the energy market is a financial contract where one party (the “offtaker”) pays another party (the asset owner/operator) to use their generation or storage asset.
In a , the asset owner provides the physical infrastructure (e.g., battery), while the offtaker takes responsibility for operating, trading, and dispatching energy. In return, the offtaker pays the asset owner a fee. This is typically structured as a fixed fee per megawatt per year ($/MW/year).