Who owns the battery, and what may the customer use it for?

One of the questions that comes up most often when a company considers an industrial BESS system under ZynexGroup's model is ownership. Who actually owns the battery, and what may the company itself use it for while the agreement is running?

The answer has two layers. The customer buys and owns the physical hardware. At the same time, we retain the software, the algorithms, and the know-how that make the system earn money in the market, and for a period of six years we have the exclusive right to commercially control the system's flexibility. This article explains how the two layers fit together, what the customer may and may not use the system for during the period, and how functions such as peak shaving, backup, and emergency power fit in.

All amounts and calculation bases in the model are communicated excluding VAT.

The customer owns the physical system

The basic model is that the customer buys the system. That covers the battery modules and the technical components that form part of the turnkey delivery: switchboard, communications equipment, metering, cabling, and the rest of the installation.

Title to the hardware transfers to the customer under the agreed payment and transfer terms. It is worth being precise here, because ownership does not begin "from day one". The payment structure is 40 percent on signing the agreement and the remaining 60 percent on technical completion of installation or at the latest on the commercial operation date, and title follows the terms the agreement sets. When those terms are met, the customer owns the physical asset.

That the customer owns the hardware has a concrete meaning for peace of mind: the asset sits with the customer and does not disappear, regardless of what happens with the market or with the commercial optimisation. It is ownership of the physical system that is the customer's security, not a bank guarantee.

The software and the logic do not transfer with it

A battery is not just cells in an enclosure. What makes a system economically interesting is the ability to bid the stored flexibility into the electricity markets at the right times. That ability sits in software: control systems, optimisation models, trading strategies, and the knowledge built up about when the system should charge and discharge.

In our model, that software, those algorithms, those trading strategies, those optimisation models, and that know-how are not transferred to the customer. They may belong to ZynexGroup or to our relevant partners. The customer therefore owns the enclosure and the cells, but not the logic that governs how the system acts in the market.

That can sound unusual, but it is in fact a well-known principle in technology. Software and the related intellectual property rights are normally licensed rather than sold, and ownership of a physical product does not in itself transfer the rights to the software that makes it work. U.S. case law has, for example, held that customers of a software product were licensees and not owners of the software itself, even though they had a physical copy. In ordinary technology agreements it is also common that purchase of hardware gives ownership of the physical unit, but not of the embedded software, the designs, or the algorithms that drive it. The split in our model follows the same logic: the customer owns the hardware, while the commercial intelligence remains with the party that developed it.

Exclusive right to the flexibility for six years

The other half of the model is what ZynexGroup receives in return for the fixed availability payment. During the six-year agreement period, we have an exclusive right to control, optimise, and commercially deploy the system's flexibility.

Flexibility here is a technical term. It covers the system's ability to charge or discharge quickly and thereby make capacity available to the electricity markets. That flexibility can be bid into markets for ancillary services and balancing, where Energinet, Denmark's transmission system operator, ensures that there is continuously a balance between production and consumption. It can also be used to charge in hours with low prices and discharge in hours with high prices, so-called arbitrage. In practice, access to the markets happens through our chosen balance responsible party (BRP) or trading partner and, where relevant, through aggregators that pool several customers' flexibility and sell it on the electricity markets.

The exclusive right means that during the period the customer may not let a third party commercially control the system's flexibility or use it commercially themselves. It is precisely this availability that the customer places at our disposal, and that the fixed monthly payment is consideration for. In return, we carry the ordinary market risk: if market revenues swing, that does not change the customer's fixed payment, as long as there is no agreed exception such as force majeure, customer-caused unavailability, missing insurance, damage, or termination.

What the customer may use the system for

Because ZynexGroup has the exclusive right to the commercial flexibility, the customer cannot freely put the system to use for their own purposes during the six years. Own load management, backup, emergency power, or other non-commercial use is not part of the standard model and requires a separate agreement.

That makes sense given how the system is used. The battery's capacity can only be in one place at a time. Every time capacity is reserved for the customer's own purposes, there is less capacity left that can be optimised in the market. A BESS system can technically be used for several things, but economically one has to choose what is prioritised.

That does not mean the customer's own needs are ruled out. It means they must be agreed so that both the technical solution and the economic model reflect them. If a company knows that it needs backup or reserved capacity, it is better to include that from the outset than to assume that it comes with the standard model.

Peak shaving is not a separate add-on

Peak shaving is a term that is often misunderstood in this context, so it is worth explaining precisely.

Peak shaving means cutting consumption peaks by discharging the battery in the periods when the company's total power draw from the grid would otherwise be highest. That is relevant because part of a larger commercial customer's electricity cost can depend on the maximum power draw and not only on how many kilowatt-hours are used. Power-based charges are calculated from the customer's highest power draw measured within a defined interval, and such demand charges are a central factor in the economics of behind-the-meter batteries. In Denmark as well, part of the grid tariff for certain larger customers can be a capacity charge that depends on the capacity the customer has available, which forms part of the time-differentiated tariffs and capacity charges that grid companies apply for high-voltage customers.

In our model, peak shaving is not described as a separate add-on the customer pays for. It is instead something we can use if it supports the overall commercial optimisation and does not impair it. If the customer's power peak falls at a time when discharging makes sense relative to the overall strategy, it can be included. Peak shaving is therefore a possible part of the optimisation, not a product feature that is sold or guaranteed separately.

Emergency power, STS, and backup are options

Emergency power, STS (static transfer switch), and reserved backup capacity sit in a different category. They are not part of the standard model, but options that must be agreed separately.

It is important not to assume that a grid-connected BESS system can automatically deliver backup in a power outage. Backup requires separate technical design and cannot be taken for granted. If a customer chooses emergency power, STS, or reserved capacity, that can have several consequences:

• Technical surcharge: The solution may require extra equipment and a different installation, which the customer pays for.
• Reserved capacity: Part of the system's capacity is earmarked for the customer's own purposes and is therefore not available to the market.
• Lower calculation basis: When capacity is reserved, the basis from which the fixed monthly availability payment is calculated is reduced proportionally, and the payment becomes correspondingly lower.

In other words, there is a direct link between how much the customer wants to use the system for their own purposes and how large a share of the flexibility remains for the commercial optimisation that the payment rests on. It is a real trade-off, and it is best addressed openly and early.

ZynexGroup's approach to system assessment

When we assess a facility, we look at how ownership and use best fit together for that specific customer. We clarify from the outset whether the customer needs backup, emergency power, or reserved capacity, so that the technical solution and the calculation basis reflect that from the start instead of having to be changed later.

Our role during the period is to operate and optimise the system commercially within its technical and warranty frameworks, while the customer owns the asset and receives a fixed contractual availability payment calculated as the calculation basis divided by 72. If the agreement runs without suspension, reduction, or termination, the total payments correspond to full repayment of the calculation basis over 72 months. We offer an actual 6-year payback guarantee on BESS systems.

After the six years, our exclusive optimisation right ends automatically, unless the parties enter a new agreement. The customer continues to own the system and can continue with us, choose another aggregator or trading partner, or use the system for their own purposes.

Overall perspective

Ownership in the model is shared, but clear. The customer owns the physical hardware under the agreed payment and transfer terms. ZynexGroup retains the software logic, the algorithms, and the commercial know-how, and for six years has the exclusive right to commercially control the system's flexibility against a fixed availability payment.

The consequence for the customer is that during the period the system is set up for commercial optimisation, not for unrestricted use for the customer's own purposes. Peak shaving can be included if it supports the optimisation, while emergency power, STS, and backup are options that can reduce the calculation basis because they take up capacity. The earlier those needs are on the table, the better both the technical solution and the economics can be adapted to them.

Assessing the potential for your facility

If you want to know how ownership and usage rights would look for your system, we are happy to have a data-based dialogue. With information about your grid connection, consumption profile, and any need for backup or reserved capacity, we can make an initial assessment of whether there is a match, and how the model would work at your facility. You are welcome to contact us.