Battery Energy Storage Systems (BESS) are becoming central to Australia’s clean energy future, helping integrate renewables and stabilise the grid. Financing these projects is complex due to fragmented revenue streams, technical risks, and evolving regulations. Yet market confidence is growing, driven by long-term contracts, robust legal frameworks, and targeted government support. Well-structured projects can attract conventional project finance, moving BESS from a high-risk investment to a scalable, bankable asset class. This article explores the financing landscape, key legal considerations, and public incentives shaping Australia’s BESS sector.

Key points

• BESS is critical to Australia’s clean energy future, enabling grid stability and the renewable integration to meet net-zero emissions target by 2050.
• Financing BESS is complex due to fragmented revenue streams and operational risks, but market confidence is significantly improving with long-term contracts and public sector support.
• Strong legal frameworks and tailored risk management is essential to making BESS projects bankable and scalable.

Introduction: Australia’s demand for BESS project financing

BESS is fast becoming a cornerstone of Australia’s clean energy transition. By firming renewable generation and stabilising grid fluctuations, BESS projects provide the flexibility required for a decarbonised, high-renewables electricity system.

Propelled by the Paris Agreement and Australia’s legislated net zero emissions status by 2050, demand for renewable energy and supporting storage infrastructure has surged. Globally achieving net-zero emissions by 2050 will require an average annual global investment of US$3.5 trillion between 2021 and 2050.¹

Australia is already stepping up, with clear momentum across the sector:

• A$4.9 billion committed to battery storage development nationally;
• Installed capacity is forecast to grow from 1.7 GW in 2024 to around 18 GW by 2035;²
• Quarter 1 of 2025 marked a record start, with six projects valued at A$2.4 billion reaching the financial commitment stage;³ and
• Launch of the A$500 million Battery Breakthrough Initiative (opened August 2025), designed to accelerate deployment and unlock private investment.⁴

Despite the inherent challenges of financing large-scale energy storage, such as revenue volatility, evolving regulation, and technical complexity, BESS infrastructure presents significant opportunities for investors, financiers, operators and developers. In this article, we explore the evolving project financing landscape in Australia, key legal and commercial risks, and the growing role of government support in catalysing BESS deployment.

Project financing for BESS: emerging market dynamics

Securing traditional project finance for utility-scale BESS has historically been complex⁵, primarily due to a combination of technical, commercial and regulatory risk, such as:

• Construction and design risks (see Managing design, construction and operational disputes in Australian BESS projects), including land and regulatory hurdles (see our discussion in BESS projects: land considerations);
• Revenue uncertainty from multi-layered, volatile income streams; and
• Technology and performance risks with uncertain lifespans and rapid technological evolution.

Unlike conventional renewable energy projects such as wind or solar, which generate electricity and typically secure long-term power purchase agreements (PPAs), and are backed by historical operating data, utility-scale battery assets operate on multi-layered and market volatile revenue streams.⁶

The revenue derived from a multi-layered “revenue stack” includes:

• Energy arbitrage – buying electricity from the grid during low-price periods and selling during peak pricing periods where prices are high;
• Frequency Control Ancillary Services – delivering rapid responses to maintain grid stability, preventing blackouts and loadshedding;
• Capacity markets – earning revenue simply by being available during critical demand periods;
• Carbon credits – monetising emissions reductions or avoided emissions; and
• PPAs – synthetic or corporate offtake arrangements via PPAs that offer partial revenue certainty but lack the long-term stability of traditional PPAs.⁷

The resulting fragmented “revenue stack” introduces significant commercial uncertainty, particularly for lenders who typically prioritise stable, long term contracted cash flows to ensure serviceability of its facilities.⁸

Due to the inherent complexities of financing a multi-layered revenue stream, battery projects have traditionally leaned on sponsor-level banking rather than asset-level debt. This approach has relied heavily on equity funding, concessional finance, or off-balance-sheet capital from infrastructure funds and specialist investors.

As a result, BESS projects have faced limited access to conventional project finance, leading to conservative capital structures characterised by low debt to equity ratios, a higher interest cover, and the need for sponsor injections, guarantees or other forms of credit enhancement. These measures are often necessary to demonstrate loan serviceability and establish the “bankability” of the BESS project in the face of revenue uncertainty and evolving market mechanisms.⁹

While financiers continue to require strong security packages to ensure bankability, confidence in the BESS financing landscape is clearly strengthening as demonstrated by:

• Quinbrook Infrastructure Partners’ A$722 million financing of its 300 MW / 600 MWh Supernode battery in Queensland – Australia’s largest standalone BESS financing to date.¹⁰  Strategically located at the central node of Queensland’s electricity network, the project secured long-term offtake agreements with Origin Energy and is expected to reach a combined capacity of 780 MW / 3,096 MWh, reflecting strong lender confidence in grid-critical storage assets; and
• NAB’s commitment to EnergyAustralia’s A$700 million Wooreen battery project in Victoria – a 350 MW / 1,400 MWh four-hour system co-located with the Jeeralang gas-fired power station. NAB supported this project as a strategic contribution to Australia’s net zero transition, reinforcing the role of ADIs in financing clean energy infrastructure.¹¹

Both projects benefitted from various government incentives, including support under the Capacity Investment Scheme, which played a critical role in de-risking early-stage investment and catalysing private capital deployment (see “the role of public sector support” below).

Taken together, these recent transactions mark a shift from the historic reliance on equity and concessional capital toward greater commercial financier participation. They reflect a growing confidence in the financing and operational viability of large-scale storage projects in Australia – confidence that is further reinforced by the presence of long-term revenue contracts and government incentives, which provide critical revenue stability and risk mitigation. This evolution signals a maturing market and underscores the increasing “bankability” of well-structured BESS assets within the broader transition to green finance portfolios.

Structuring finance: legal considerations, security, and performance risk 

Because BESS projects rely on diverse, often short-term revenue sources and face evolving market and regulatory conditions, their financing structures remain notably more complex than those of traditional generation projects. Financiers typically favour projects with predictable cashflows, supported by contracted revenue streams such as capacity service agreements with utilities, PPAs, or government-backed incentives (see “the role of public sector support” below).

For financiers, the challenge is to ensure debt serviceability in the face of uncertain cashflows. The balance is struck by a financing approach that embeds contractual provisions and targeted risk mitigation measures that span the entire project lifecycle. These typically include:

• Staggered drawdowns – debt is released in tranches aligned with project milestones, thereby reducing exposure to delivery risk and ensuring capital is deployed against verified progress;
• Conditions precedent, undertakings and representations and warranties – these legal mechanisms ensure compliance with regulatory, environmental, and contractual obligations throughout the project term, providing lenders with enforceable recourse;
• Audited financial reporting requirements – regular, transparent reporting on project performance and revenue composition enables financiers to monitor cashflow health and detect early signs of financial stress;
• Conservative financial covenants – higher interest cover ratios and lower debt-to-equity gearing are typically required to reflect the volatility of merchant-exposed revenue streams and preserve lender downside protection;
• Robust financial modelling – detailed projections demonstrate market need, revenue strategy, and stress-tested scenarios for the operating BESS, forming the backbone of lender due diligence; and
• Connection agreements and contractual due diligence – grid access, dispatch rights, and ancillary service arrangements are scrutinised to ensure operational viability and revenue reliability.

Together, these measures form a framework that enables financiers to better understand, allocate, and manage risk, ultimately improving the bankability of BESS projects in a rapidly evolving energy landscape.

From a security perspective, the package must align with the borrower’s corporate structure, the facility’s purpose, and the level of sponsor or mezzanine financier participation through equity injections. Typically, BESS projects are held through special purpose vehicles backed by a financially robust sponsor. Subject to lender due diligence, the security structure will often include:

• Real property security – securing land rights and physical project assets;
• Right of entry agreements – providing access to the site for enforcement or operational continuity;
• Share pledges – enables control over the Special Purpose Vehicle (SPV) in default scenarios;
• Sponsor guarantees – provides credit support;
• Sponsor equity undertakings – ensuring capital commitment and alignment of sponsor interest;
• Intercreditor or subordination deeds – clarifying priority and enforcement rights among stakeholders; 
• Tripartite deeds – provided with respect of the connection agreement and/or network services agreement (as applicable) between the financier, network service provider, registered participant and/or the operator; and
• General security agreements – capturing all assets of the SPV entities, including project assets and contractual rights (including intellectual property ownership and licensing provisions, as discussed in Charging up IPT protection for Battery Energy Storage Systems (BESS)).

By directly linking security and contractual protections to specific project risks, financiers can more effectively allocate risk, enhance credit confidence, and safeguard debt serviceability. Flexibility to act on either the project assets or the SPV is a critical consideration, ensuring enforceability and responsiveness in distressed scenarios. In turn, these measures strengthen the bankability of BESS as a scalable asset class, an essential step to a low-carbon economy.

The role of public sector support

The inherent complexities and revenue uncertainties of BESS financing have historically dampened bankability and limited financier appetite. Yet the demand for storage as critical grid infrastructure is undeniable. To bridge this gap, state and federal governments have introduced a suite of targeted incentives and funding programs to attract private capital, de-risk investment, and enable a more conventional approach to project finance for BESS assets.

Agencies such as the Clean Energy Finance Corporation and the Australian Renewable Energy Agency (ARENA) provide concessional debt, equity co-investment, and grant funding designed to accelerate investment in battery storage infrastructure – the most recent being ARENA’s A$500 million Battery Breakthrough Initiative which opened on 19 August 2025 to support domestic battery manufacturing and supply chain development.

Policy momentum in Australia is increasingly focused on underwriting long-term revenues to accelerate clean energy investment. Two cornerstone mechanisms are leading this shift:

• The Capacity Investment Scheme – A Commonwealth initiative, supports new dispatchable capacity by providing revenue guarantees to investors through contracts-for-difference mechanisms. This directly addresses market volatility and provides investors with greater certainty;¹²  and
• The Generation Long Term Energy Service Agreement (LTESA) – Offers optional 20-year contracts with price floors and upside sharing arrangements, giving developers and operators confidence to bid into merchant markets while protecting downside risk.¹³

Together, these schemes form a robust policy toolkit to unlock private investment in grid-scale batteries and dispatchable renewable generation.

Conclusion

Australia’s ambition to lead the global energy transition significantly depends on the successful deployment of large-scale BESS projects. While financing these assets remains complex due to multi-layered revenue streams, performance risks, and evolving regulatory frameworks, market momentum, targeted government support, and growing financier sophistication are transforming their bankability.

By structuring projects to balance operational flexibility with financier confidence, and leveraging public incentives and long-term revenue mechanisms, sponsors and financiers can unlock capital through conventional project finance structures. This approach opens the market to a broader range of participants, an essential step in scaling storage infrastructure to reach our net zero energy targets.

In doing so, BESS projects can move from a capital intensive and experimental asset into a reliable, investable class central to Australia’s clean energy future.

Dentons’ global footprint and deep expertise in BESS projects ensure we bring international perspectives and proven strategies to Australian sponsors and financiers.

As the energy transition accelerates, our team is uniquely positioned to help navigate complex regulatory frameworks, structure bankable deals, and unlock capital for grid-scale storage.

We’re committed to supporting the growth of Australia’s clean energy future, so please don’t hesitate to reach out.

1. Laura Rodriguez, ‘Why Australia is a market leader in BESS and what to learn from them’, RatedPower (Web Page, 20 May 2025) <https://ratedpower.com/blog/australia-market-leader-bess/>.
2. Ibid.
3. Clean Energy Council, “Renewable projects quarterly report | Q1, 2025” (Report, 29 May 2025) <cec_renewable-projects-quarterly-report_q1-2025.pdf>.
4. Australian Renewable Energy Agency, ‘Supercharging battery manufacturing in Australia’ (Web Page, 19 August 2025) <Supercharging battery manufacturing in Australia - Australian Renewable Energy Agency (ARENA)>.
5. Pacific Green, Making project finance work for battery energy storage (Report, 2025).
6. Ibid.
7. Australian Renewable Energy Agency, ‘What is Frequency Control Ancillary Services?’ (Web Page, 10 August 2017) <https://arena.gov.au/blog/what-is-frequency-control-ancillary-services/>.
8. Pacific Green, Making project finance work for battery energy storage (Report, 2025).
9. Ibid.
10. Quinbrook, ‘Quinbrook Closes AUD$722 million debt financing for landmark Supernode battery storage project’ (Web Page, 21 January 2025) <https://www.quinbrook.com/news-insights/quinbrook-closes-aud722-million-debt-financing-for-landmark-supernode-battery-storage-project/>.
11. National Australia Bank, ‘EnergyAustralia’s Wooreen battery project shines light for clean energy’ (Web Page, 19 June 2025) <EnergyAustralia’s Wooreen battery project shines light for clean energy | Business Research and Insights>.
12. Department of Climate Change, Energy, the Environment and Water, ‘Capacity Investment Scheme’, Australian Government (Web Page, 2025) <https://www.dcceew.gov.au/energy/renewable/capacity-investment-scheme>.
13. Australian Energy Market Operator, ‘Long-Term Energy Service Agreements’, Australian Government (Web Page) <https://asl.org.au/services/generation>.