An industrial battery energy storage system, often abbreviated BESS, is a significant investment, and for most businesses the first question is not technical...

An industrial battery energy storage system, often abbreviated BESS, is a significant investment, and for most businesses the first question is not technical but financial: does the case hold together, and what does it actually cost us? A BESS is a facility that can store electricity and deliver it back to the grid when it is most valuable. It does not, by itself, change how much energy the business uses. What it changes is that the system's flexibility becomes something that can be sold on the electricity markets.

This article is intended as a combined overview for a CFO, an owner-manager, or a board. We explain what a system typically costs with us, how the payment model is structured, why it corresponds to payback over six years, how we ourselves earn money, and how risk is allocated. At the end we answer the questions a finance decision-maker most often asks. The purpose is not to sell, but to make the model transparent enough that you can assess for yourselves whether it fits.

We deliberately avoid words such as guaranteed return or risk-free investment. The model is a commercial agreement between two professional parties, not a financial product, and it is described most accurately as a fixed contractual payment model with a clear payback profile and a clearly allocated risk.

What an industrial BESS costs

Our current standard module has a capacity of 261 kWh and a power rating of 125 kW. Capacity in kWh indicates how much energy the system can store, while power in kW indicates how quickly it can charge and discharge. A single installed module is typically around 396,000 DKK excluding VAT. All prices and calculation bases in this article are excluding VAT, unless otherwise agreed in a specific quotation.

The price is not the price of a battery in isolation. It is a combined, turnkey project price that by default covers the battery module, electrical panel, contractor work, authorised electrical contractor, IoT and communication, setup, metering, integration, and project coordination. Everything is included except special add-ons such as backup power and reserved backup capacity, which we return to below. The reason we combine it into one price is practical: a BESS project requires coordination between supplier, electrical contractor, civil contractor, and the distribution system operator (the company that owns the local electricity grid), and if that coordination sits with the customer, the project often becomes both more expensive and less certain.

In practice, we rarely install only one module. A large share of the costs of a system, for example installation, connection, and project work, do not scale down linearly. A small system therefore carries relatively more fixed costs per kWh than a somewhat larger one. For that reason, most commercial customers start at two to three modules:

Two modules: 522 kWh / 250 kW, approximately 792,000 DKK excluding VAT.
Three modules: 783 kWh / 375 kW, approximately 1,188,000 DKK excluding VAT.

There is no fixed upper limit. Size depends on consumption, on your site, and on what makes commercial sense. Two systems with the same number of modules can also end up with different prices, because the conditions around the system vary. Whether a system can be connected quickly and cheaply depends among other things on how much spare capacity there is in the local electricity grid, and the distribution system operator determines the connection point after a concrete assessment, as described by Green Power Denmark. A system of up to 125 kW per module falls in a category that the distribution system operator can connect under relatively simple rules, while larger systems require more technical documentation and an actual grid connection agreement, as described by Cerius. The battery owner also pays a connection contribution and ongoing tariffs to the distribution system operator, as explained by Green Power Denmark. Site, panel capacity, distance to the connection point, fire conditions, and any add-ons are therefore the items that most often move the price from one address to another.

Payment structure: 40 percent and 60 percent

The purchase itself is paid in two instalments. The customer pays 40 percent of the purchase price as a deposit when the agreement is signed. The remaining 60 percent falls due at technical completion of installation, and no later than the commercial operation start date, which is the date when the system is installed, connected, tested, communications-ready, and approved to participate in the markets through our chosen BRP (balance responsible party) or trading partner.

It is a common structure for a plant project, where part of the payment falls at order and the rest when the system is actually in operation. The customer purchases and owns the physical hardware under the agreed payment and transfer terms. Software logic, algorithms, trading strategies, optimisation models, and know-how are not transferred and may belong to us or our partners.

The fixed availability payment: calculation base divided by 72

Once the system is in operation, the fixed availability payment begins. It is a fixed monthly payment from us to the customer for the right to commercially control the system's flexibility for six years. The payment is consideration for the customer making that flexibility available. It is not interest, investment return, or a bank-guaranteed payment.

The payment is calculated from a calculation base that as a baseline equals the customer's total purchase price excluding VAT. The formula is simple:

Monthly payment = Calculation base / 72

There are 72 months in six years, and the payment is the same every month. Two examples make it concrete:

Calculation base of 792,000 DKK (two modules) gives a fixed monthly payment of 11,000 DKK.
Calculation base of 1,188,000 DKK (three modules) gives a fixed monthly payment of 16,500 DKK.

If the agreement runs for the full period without suspension, reduction, or termination under the agreement's terms, the customer receives total fixed availability payments equal to 100 percent of the calculation base excluding VAT. In other words: over 72 months the model pays the calculation base back, if the agreement runs without interruption. Those caveats are not fine print, and we review them concretely further down, because they are essential to understanding what the model is and what it is not.

Why this corresponds to a six-year payback

The arithmetic behind the model is easy to follow. If you pay 792,000 DKK for a system and receive 11,000 DKK per month for 72 months, you have received 792,000 DKK back by the end of the period. That corresponds mathematically to approximately 16.7 percent of the calculation base being paid back per year (100 percent spread over six years). At the same time, the customer still owns the system.

Here it is important to be precise with the language. The 16.7 percent is a description of the payback rate on the calculation base, not a return in a financial sense. We therefore do not call it a 16 percent guaranteed return, because that would give a wrong picture of what the customer is buying. The accurate description is that this is a contractual payment model corresponding to full payback over 72 months if the agreement runs without suspension, reduction, or termination. The difference is not cosmetic. A return implies a gain on top of the invested amount, while payback means that the invested amount comes back over time. The value for the customer then lies in the fact that the system is still the customer's asset when the period ends.

How we earn money on the model

A fair objection from a CFO is: if the customer gets the entire calculation base back and keeps the system, how does ZynexGroup make money? The answer is that we earn at several levels, and that we are open about it, because that is precisely why the model can hold together.

First, there is a margin on the overall delivery. We deliver a turnkey solution where hardware, installation, communication, control, metering, and project coordination are combined in one commercial model, and there is a margin on that work. That is no different from any other supplier of technical equipment and installation.

Second, and this is the core, we earn on the ongoing commercial optimisation of the system over the six years. We commercially control the system's flexibility and bid it into the markets where a battery can create value. A battery does not earn money by itself. It requires software, market access, and ongoing operations, and that is handled through a balance responsible party, a so-called BRP or trading partner, in our case Hybrid GreenTech. The central markets in this article are Energinet's balancing markets for ancillary services (Energinet is Denmark's national transmission system operator), particularly aFRR and mFRR. aFRR, the automatic frequency restoration reserve, responds within a few minutes to signals from Energinet, while mFRR, the manual reserve, is activated for larger, longer-lasting imbalances. On both markets there is both a capacity payment for being available and a payment for the energy actually delivered or absorbed, as set out in Energinet's product overview for DK1 and DK2 (Denmark's two electricity price areas). In addition to ancillary services, a system can under the right conditions also create value through energy arbitrage, that is by storing electricity when the price is low and delivering it when the price is high, a logic that follows price formation on the day-ahead market. Peak shaving can be included if it supports the overall optimisation.

The customer receives the fixed monthly payment. We keep the net revenues that sit above that payment, after market costs, fees, and similar items are deducted. The model is therefore not altruistic. It rests on our expectation that we can optimise the system better than the fixed payment we have committed to towards the customer. If things go as expected, we earn on the difference. If things go worse for a period, that is ordinarily our problem, not the customer's, as long as no agreed exception applies. Service and operations form part of the overall professional model.

Predictable payment rather than market upside

The consequence of the model is clear: in the first six years the customer does not share in the market revenues. The customer gets the fixed availability payment and ownership of the asset, while we have the exclusive right to optimise the flexibility commercially and keep the net revenues. That is a deliberate trade-off. The customer forgoes the possible upside from the market in return for a predictable cash flow.

For many businesses, that is precisely what makes the model relevant. The market for ancillary services can swing sharply and periodically become saturated. When earnings from frequency regulation in eastern Denmark were high, it created strong interest in batteries, but the market has since become more saturated, and the industry is now building broader business models, because revenues from ancillary services rarely stand alone. A variable revenue-share model, where the customer shares the revenues, also means that the customer shares the uncertainty. A CFO, an owner-manager, or a board that needs to budget, finance, or approve an investment often prefers a predictable amount over a fluctuating income, even if that means less potential upside.

The model rests on an expectation that the need for flexibility will rise. Energinet expects the need for ancillary services to grow substantially towards 2040 as more wind and solar enter the electricity system, and flexibility is widely described as a central tool in the energy system of the future. That is an expectation, not a guarantee, and we deliberately do not write that the market will develop in a particular way with certainty. The point is the opposite: because the future is uncertain, it is we and not the customer who bear ordinary market risk in the standard model. The balancing markets are moreover regulated, both under a common EU framework for balancing and by the Danish regulator Forsyningstilsynet (the Danish Utility Regulator), which among other things approves Energinet's methods for purchasing ancillary services. That does not make future revenues certain, but it means that the markets we operate in are not unregulated.

The model therefore fits best for businesses that want to own a physical asset and let a specialist operate it commercially, but that do not themselves want to understand, manage, or bear electricity market volatility. If the customer instead wants to take market risk actively in order to capture the full upside, a fixed availability payment is not the right choice, and then the six-year payback case does not apply in the same way either.

What the customer owns, and what we control

Ownership is simple to describe once the two layers are separated. The customer owns the physical hardware under the agreed payment and transfer terms. That covers the battery modules and the technical components described in the agreement. We retain the intangible layer: software logic, algorithms, trading strategies, optimisation models, and know-how. Those parts are not transferred and are a prerequisite for the optimisation to work at all.

During the six years we have an exclusive right to commercially control the system's flexibility. The customer therefore cannot freely use the system for their own purposes during the period, or let another party control it, unless that is agreed. That is a natural consequence of the fact that this is the flexibility we pay for. The customer may freely develop their business and change their ordinary electricity consumption, but must notify us within a reasonable time if a change, for example new large electricity consumers, solar panels, or a changed metering structure, could affect the system's metering, market access, or optimisation.

After the six years our exclusive optimisation right ends automatically, unless the parties enter into a new agreement. The system remains the customer's. We return to what that means concretely in the FAQ section below.

ZynexGroup's approach to system assessment

When we assess whether a system makes sense for a specific facility, we start from a few pieces of information: your grid connection, your consumption profile, and preferably historical consumption data. With that data we can have a data-based discussion of whether there is a match, and what size a system should realistically have at your site. We use the information for an initial assessment, not to promise a particular outcome in advance.

It is also in that dialogue that we explain the 6-year payback guarantee we offer on BESS systems. It should be understood precisely as described above: a fixed contractual availability payment that, under an uninterrupted agreement term, corresponds to full payback of the calculation base over 72 months. It is part of the agreement's structure, not a promise of a particular market outcome, and it assumes that the customer participates in market optimisation on the agreed terms. Part of our work is to make both the payment model and the caveats clear before anything is signed.

Frequently asked questions from finance decision-makers

Below we answer the questions we most often receive from CFOs and boards. The answers follow the actual contract terms, and where there are caveats, we put them forward rather than smooth them over.

What if the market falls? Ordinary swings in market prices, reserve prices, and volatility do not change the customer's fixed payment. It follows from the agreement that we by default bear the risk of ordinary changes in market conditions (contract clause 16), and that such conditions do not in themselves give us the right to reduce the payment. If the market falls, it is therefore primarily our problem, not the customer's, as long as no agreed exception applies. There are, however, extraordinary circumstances, for example binding changes in law, authority orders, technical impossibility, or force majeure such as grid collapse or cyber attack on critical infrastructure, where the agreement can be affected proportionately under the concrete terms. In those cases the parties first try to find a practical solution. That is not the same as an automatic, total suspension of all obligations, and payments already due are by default unaffected.

What if ZynexGroup does not pay? That is a fully legitimate question, and the answer sits in ownership. If we do not pay on time and do not remedy it within 20 banking days after written demand, the customer can initiate a transition process and ultimately bring our exclusive optimisation right to an end. Regardless, the customer keeps the physical hardware. The customer's security therefore lies in owning the system, not in a bank guarantee. It is important to say clearly: there is no bank guarantee behind the payment. If the optimisation right is brought to an end, we must pay amounts due and payment up to the termination date, but we do not automatically owe the remaining payments for the period after termination, unless otherwise agreed or required by mandatory law. The customer is then left with a system that the customer owns and can freely have another party operate.

What if the battery breaks? The system is serviced and monitored within the manufacturer's technical limits and warranty terms. Faults attributable to our circumstances, our control, or our installation, we remedy at our own expense. Faults attributable to the customer's circumstances are borne by the customer. The model is built around the battery still having a documented technical value after the agreement period, and therefore the battery's health condition is a central element. We work with a State of Health (SoH) threshold, that is remaining capacity relative to the starting point, of 80 percent at the end of the agreement period, and a cycle consumption of up to 6,000 full equivalent cycles within the manufacturer's framework. Eighty percent as a meaningful threshold is not a figure we invented. It is the reference value that manufacturers and research often use as the technical end of life for cells, and lithium iron phosphate cells have in tests retained capacity for more than 5,000 full cycles before it fell below 80 percent. Actual lifetime does, however, depend on operating conditions such as temperature, depth of discharge, and power, which multi-year cycle studies of LFP cells and NREL's work on battery lifespan illustrate. We therefore do not state a particular residual value in kroner, because it cannot be set seriously in advance.

What if we sell the property? The customer owns the system, and the agreement's terms continue according to their content. A sale of the property does not in itself terminate the agreement. In practice the relationship must be handled concretely, among other things because the system must be able to remain installed and in operation during the agreement period, and because a potential buyer or mortgagee must respect our rights during the period. It is therefore a matter we take up in a concrete dialogue, rather than something that can be answered with a fixed formula. The point for a CFO is that ownership is the customer's, and that the agreement does not disappear upon a change of ownership of the property.

What if we want to use it for backup power? Backup power, STS, and reserved backup capacity are not part of the standard model. A BESS can technically be used for several things, but economically one has to choose what is prioritised. If the customer wants backup power or reserved backup, that is an add-on that requires separate technical design. Backup cannot be assumed to come automatically with a grid-connected system. If the customer reserves capacity for their own purposes, there is less capacity we can optimise in the market, and therefore such an add-on can reduce the calculation base and thereby the fixed monthly availability payment. That is a real trade-off, not a free extra function, and we describe it openly so the choice can be made with clear awareness.

What happens after 6 years? When the agreement period expires, our exclusive optimisation right ends automatically, unless the parties enter into a new agreement. The system remains the customer's. The customer can then choose to continue with us on a new agreement, choose another aggregator, choose a new BRP or trading partner, or use the system more for their own optimisation. We would like to continue the collaboration and offer a new contract, but we do not promise particular future terms, amounts, or market conditions, because we do not know those in advance. Value after year 6 depends on the system's actual SoH, on future market conditions, on technical requirements, and on what the customer wants. That is precisely why we keep the description sober and do not put a number on it.

The deeper articles, and when to go further

This article is an overview. The articles below go deeper on each topic. They can be read separately, depending on what is relevant.

What does an industrial BESS cost?: What a combined project price covers, and what moves the price from site to site. Relevant when you need to budget the investment.
How does ZynexGroup's fixed payment model work?: The fixed availability payment and the 72-month profile explained. Relevant when the board needs to understand cash flow.
Fixed payment vs. revenue-share: Which BESS model fits an industrial business best?: Comparison of fixed payment and revenue-share. Relevant when you choose contract model.
Who bears the risk in a BESS agreement?: Allocation of market, site, and technical risk. Relevant before contract negotiation.
What happens if ZynexGroup cannot pay?: What happens upon default and where the security sits. Relevant for CFO and board.
Who owns the battery, and what may the customer use it for?: Ownership, optimisation right, and limitations during the period. Relevant when legal counsel needs to qualify the agreement.
How does a BESS affect the business's electricity bill?: Separation between own consumption and the battery's commercial operation. Relevant for operating economics.
Financing BESS: How do you present the case to the bank?: What the bank typically asks about. Relevant when financing needs to be put in place.
What happens after 6 years when the BESS agreement expires?: Choices after the optimisation right expires. Relevant in long-term planning.
How much is the battery worth after 6 years?: SoH, residual value, and what can and cannot be promised. Relevant at exit or renewal.

Overall perspective

The financial case for an industrial BESS with us rests on a few clear building blocks. A module of 261 kWh / 125 kW is typically around 396,000 DKK excluding VAT, and most start at two to three modules, that is approximately 792,000 to 1,188,000 DKK excluding VAT. The purchase is paid 40 percent at agreement signing and 60 percent at commercial operation start. Thereafter the customer receives a fixed monthly availability payment of the calculation base divided by 72, which under an uninterrupted agreement term corresponds to full payback of the calculation base over six years. The customer owns the asset throughout.

In return for that predictability, the customer forgoes the market revenues for the six years, which we optimise and keep. We bear ordinary market risk, while the customer bears the risk of their own circumstances, and technical and extraordinary risks are allocated according to who is closest to bearing them. There is no bank guarantee; the customer's security lies in ownership of the hardware. After six years the system remains the customer's, and the future is the customer's choice. It is not a risk-free construction, and it is not a promise of a particular return. It is a fixed contractual payment model with a clear payback profile and a transparent risk allocation, intended for businesses that want to own the asset but do not themselves want to bear market risk.

Get the potential assessed for your facility

If you want to know whether the model makes sense for your specific business, you can contact us. With information about your grid connection, consumption profile, and preferably historical consumption data, we can have an initial, data-based discussion of whether there is a match, and how a system would realistically look at your site. We use that information for an initial assessment, not to promise a particular outcome in advance.

The financial case for BESS: How an industrial battery can pay itself back over 6 years