Complexity and risk of BESS warranties ‘prohibitive’ for some asset owners

There are two types of warranty: commercial and performance. Commercial warranties are short-term and cover defects, component failures and part replacements at the beginning of life (BOL) of an asset, whereas performance warranties are typically given for 15-20-year terms and guarantee the maintenance of specific performance standards.

Warranties are vital for battery energy storage system (BESS) asset management, but their complexities mean that advanced calculations are required to meet compliance, and the conditions set out can restrict the ability to monetise assets.

Battery storage systems are increasingly playing into merchant revenue opportunities in maturing markets.

Significant portions of annual revenue are earned through just a few days of high electricity demand. However, the authors wrote that performance warranties tend to be structured so that asset owners run the risk of penalising or invalidating their contracts with manufacturers or system integrators by chasing those opportunities.

In ‘Navigating the rigid world of energy storage warranties,’ their deep dive into the space for PV Tech Power, Lorscheid and Kairies detailed many of the characteristics of typical BESS warranties. They analysed the problematic and challenging aspects of each, before offering their take on how improvements could be made.

‘Not just a theoretical issue’

While both commercial and performance warranties have potential pitfalls, performance warranties come with an “added layer of complexity,” given that they pertain to operational limits and guarantees on the State of Health (SoH) and degradation of batteries either at the end of life (EOL) or on an annual basis.

Nonetheless, a well-structured performance warranty can simplify operational and financial planning, supporting the ability to attract investors, sign long-term service agreements (LTSAs), and contract with grid operators or utilities.

ACCURE provides a cloud-based analytics platform the company claims offers a window into battery health and operation enabling more accurate estimates of metrics such as battery SoH and State of Charge (SoC) than through battery management system (BMS) data.

It also potentially avoids a conflict of interest based on relying on suppliers to monitor their own equipment.

“The complexity of BESS warranties isn’t just a theoretical issue,” Lorscheid and Kairies wrote.

“Asset owners frequently face conflicting warranty conditions between different suppliers, especially when battery cells come from one manufacturer and the integration system from another.”

The company has experienced such a situation firsthand, finding that a customer’s system integrator had specified higher maximum operating temperature thresholds in its warranty contract than the battery cell supplier.

Asset owners could get caught up in a battle to assert their warranty rights or litigate against their supplier or integrator, a cost and complexity than many might find prohibitive, the authors argued.

In December, ACCURE launched Warranty Tracker, a new predictive analytics feature for its software platform that continuously monitors a BESS asset through its operational data.

The company claims that violations of warranty conditions can be mitigated by identifying operational issues that may cause a battery to exceed limits on things like temperature and voltage.

Meanwhile, in their article for PV Tech Power, Valentin Lorscheid and Kai-Philipp Kairies argued for better design of warranties from the outset, writing that they should be less rigid.

“A well-designed warranty framework benefits suppliers and end-users alike by ensuring long-term asset reliability while supporting flexible, revenue-optimised usage patterns,” they wrote.

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