Australia has been a world leader when it comes to the roll-out of utility scale energy storage solutions.When the Tesla Hornsdale Battery Project north of Adelaide in South Australia was commissioned in 2017, it was the largest lithium-ion battery in the world at 100MW/129MWh.Battery Energy Storage Systems (BESS) have since become an important feature in the Australian energy market. Many new renewable projects are requiring battery storage as a means to improve the ‘dispatchability’ of renewable energy, while many existing renewable energy production facilities are looking to add this capability.While the legal issues relating to battery projects are in many ways similar to other energy projects, batteries do create a number of new and unique legal and commercial issues for their developers and owners:Technology/Supplier Risk – batteries remain an emerging technology with a limited number of suppliers who are able to manufacture and supply sufficiently to meet demand. Projects are at risk of delay because they compete with other projects taking up finite manufacturing capacity.Intellectual Property – battery manufacturers will wish to ensure that they remain in control of the key intellectual property used in battery technology. A purchaser/owner of a BESS will need to consider how it will ensure it has sufficient rights to the intellectual property to secure the long-term use and operation of the BESS if the technology is upgraded or the product is no longer supported by the supplier in the future.Delivery Risk – given the limited number of manufacturers and supply, it is much more difficult for the developers of a BESS to achieve the level of risk transfer typical of the EPC Contract used in other renewable projects. It is common for a developer to engage with the battery manufacturer and Balance of Plant Contractor separately – without the benefit of a single party ‘wrapping’ delivery risk. This impacts liability caps and the overall risk position driven by interfaces and potential ‘gaps’ between contractor’s and supplier’s liability.Performance Guarantees and Liquidated Damages – battery performance is complex and may involve aspects of availability, round-trip efficiency and active power capacity. A number of these parameters may be affected by the use and operation of the BESS. For example, round-trip efficiency may be impacted adversely by an auxiliary service mode of use instead of a cap trading mode of use – who should take the risk in such circumstances?Off-take – the income stream for a BESS is variable and is likely to evolve in the coming years. Auxiliary services have been a profitable means of utilising BESS in the early stages – but is it likely that an arbitrage model will become the more common revenue model in the medium term?Financing – given the key differences in risk/uncertainties in delivery and performance as well as the variability in revenue streams compared to other renewables projects – project financing will remain challenging. Extended manufacturer’s warranties from creditworthy suppliers (10-12 years is becoming more common) will help but the technology remains nascent and the commercial lending market remains focused on some of the practical issues involved in co-locating storage with generation assets.With projects such as the Big Battery in Victoria (300MW/450MWh) and the Riverina Energy Storage Systems (combined 150MW/300MWh) underway and many other projects planned, these issues will be carefully considered by their proponents.Thomson Geer has been at the forefront of Australian BESS projects, acting for Tesla in the Hornsdale Battery Project.Since then we’ve advised numerous clients on procuring/delivering BESS as stand-alone or as part of an integrated energy project.AuthorsJosh Marchant | Partner| +61 3 9641 8863 | jmarchant@tglaw.com.auJae Lemin | Partner | +61 3 8080 3588 | jlemin@tglaw.com.au