Offtake Agreement
An offtake agreement is the contract under which a BESS project sells its capacity, services, or output to a creditworthy counterparty — a utility, load-serving entity, trader, or government body — for a defined term, creating the contracted cash flow the project's debt is sized against.
It is the revenue cornerstone of project finance: lenders will not lend against merchant price forecasts at anything like the leverage they will lend against a signed contract, so the offtake largely decides how much debt the project can carry.
The family is broad — tolling agreements, capacity and resource-adequacy contracts, contracts-for-difference, revenue floors, government schemes — but the job is the same: convert an uncertain revenue stream into one a credit committee will underwrite.
Reviewed August 2026 by Sergey Syrvachev
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One label, four families of contract
"Offtake" is a family name, not a single structure. At the firm end sits the tolling agreement: the offtaker takes dispatch rights and pays a fixed availability-based fee whether it uses the battery or not — the shape lenders underwrite most comfortably, because the project stops carrying market risk entirely. In some markets the same deal trades under the label BESA — the same initials as the Battery Energy Supply Agreement elsewhere in this glossary and an entirely different contract, so check which one a term sheet means.
Next come capacity contracts — in the US, resource-adequacy contracts with California load-serving entities are the canonical example. Softer still are contracts-for-difference, revenue floors, and hedge agreement structures, which leave dispatch with the project and only cap the downside; and government schemes, which vary by jurisdiction. The pattern is consistent: the softer the structure, the more merchant behaviour the lender has to underwrite, and the less debt it supports.
Contracted share sets leverage, merchant share sets upside
The cleanest way to read a BESS revenue stack: the contracted portion determines how much the project can borrow, and the merchant portion is where equity makes its return. A fully tolled project supports the most debt but caps upside at the toll fee; a fully merchant project keeps every arbitrage dollar but finances mostly on equity.
Most financed projects sit in between — an offtake covering part of the capacity or part of the term, with revenue stacking of merchant energy and ancillary services on the remainder. This is why an executed offtake is commonly a condition precedent in the financing agreement, and why bankability discussions circle back to the same question: how much of the base case is signed paper, and how much is a price forecast.
The body's families are tolling, capacity contracts, the CfD / floor / hedge group, and government schemes, which vary by jurisdiction and so carry no traits to draw. The merchant tail is not a family — it is what a project runs on when an offtake ends or never covered the term — and it sits here as the benchmark the other columns are measured against. Each family's mechanics live in its own entry.
- Who signs
- Project company + creditworthy offtaker (utility, load-serving entity, trader, government)
- What it does
- Creates the contracted cash flow project debt is sized against
- Firmest form
- Tolling agreement — offtaker dispatches, project earns a fixed fee
- Term structure
- Set tenor with extension provisions; shorter than the debt = refinancing bet
Tenor and counterparty: the two quiet deal-killers
Tenor first. Offtakes typically run for a set term with extension provisions, and lenders line the debt up against it. An offtake shorter than the debt tenor means the model assumes a refinancing or a merchant tail — a bet that markets, and the battery, will still look attractive when the contract rolls off. Some lenders will take that bet with a cash sweep; none will pretend it isn't there.
Counterparty second — and this is the part most term sheets skate over: a revenue floor from a thinly capitalised counterparty is not a floor. The contract is a credit instrument, worth exactly the balance sheet behind it, which is why lenders push for parent guarantees, letters of credit, or investment-grade offtakers before giving the contract full weight in the debt sizing.
Performance tests — where the offtake reaches backward
Payments commonly start at commercial operation date and continue only while the project performs. Tolls and capacity contracts carry availability guarantees and periodic capacity tests — demonstrate the contracted MWh, or fees abate and liquidated damages accrue. Under a toll the offtaker usually pays for charging energy, so round-trip efficiency guarantees appear too.
Here is where the offtake reaches backward through the rest of the contract stack: the availability you promised the offtaker has to be underwritten by the availability the integrator guaranteed in the LTSA, and the capacity you promised over a ten-plus-year term has to be underwritten by an augmentation plan someone is contractually obliged to fund. Negotiate the offtake's performance regime before the LTSA and O&M agreement are fixed — reversing the order leaves the project company holding the gap between two mismatched guarantees.
A contracted revenue floor takes the downside off the table.
In reality: A floor is only as good as the balance sheet behind it. Lenders treat the offtake as a credit instrument: if the counterparty is a thin trading subsidiary with no parent guarantee, the floor gets discounted or ignored in debt sizing, and the project is priced as merchant anyway. Counterparty credit support — guarantees, letters of credit, an investment-grade rating — is what turns the paper into leverage.
Offtake Agreement, in context.
The Grid-Scale BESS course covers offtake agreement — and the rest of the system — from the ground up, the way it actually gets deployed.