By AGILE Consulting Engineers, Solar PV and Battery Energy Storage Systems (BESS) specialists.
Lenders don’t finance a battery storage project on the strength of a developer’s pitch deck. They finance it on independent confirmation that the technology, contracts and site will actually deliver the cash flows in the financial model, and that confirmation comes from technical due diligence. DNV’s involvement in the roughly AUD 650 million financing of Akaysha Energy’s Orana battery project in New South Wales is a public example of how central that role is: technology, design, grid connection, construction and operations contracts, safety and fire controls all get independently assessed before debt is committed.
Table of Contents
- Why Financiers Need Independent Technical Input
- The Role of a Lender’s Technical Advisor
- What Technical Due Diligence Actually Covers for BESS
- Bankability Risks Specific to Battery Storage
- Construction Monitoring and Drawdown Support
- How the Capacity Investment Scheme and CEFC Programmes Fit In
- Choosing the Right Advisor for a BESS Project
- What to Do Next
- FAQ
Why Financiers Need Independent Technical Input
A financial model for a battery storage project rests on assumptions about capacity, availability, degradation, revenue stacking across energy arbitrage and Frequency Control Ancillary Services (FCAS), and construction cost and schedule. Lenders and equity investors aren’t equipped to verify those assumptions themselves, and a developer’s own technical claims are, reasonably, not treated as sufficient on their own. Independent technical due diligence exists to close that gap: an engineering team with no stake in the outcome reviews the project against what’s actually achievable, and flags where the model’s assumptions don’t match the technical reality.
The Role of a Lender’s Technical Advisor
A Lender’s Technical Advisor (LTA) is typically engaged either directly by the lending syndicate or by the project on the lender’s behalf, and the role runs across the project’s life rather than stopping at financial close. Before close, the LTA assesses bankability: technology risk, contractor track record, permitting status and grid connection certainty. After close, the same advisor or a related team typically moves into construction monitoring, drawdown certification and, once operational, ongoing performance review. We’ve set out how this role differs from a project’s own Owner’s Engineer in our article on lender’s technical advisor versus Owner’s Engineer, a distinction that matters because the two roles serve different parties and sometimes need to operate independently of each other on the same project.
What Technical Due Diligence Actually Covers for BESS
Technical due diligence for a BESS project typically works through the same broad areas as any generation asset, permitting status, grid connection agreements, construction and operations contracts, insurance, and environmental and regulatory compliance, but battery-specific projects add several areas that standard generation due diligence doesn’t fully address. These include capacity degradation trajectories, battery and inverter warranty structure, revenue dependent on multiple, sometimes overlapping, market services, and fire and safety controls specific to electrochemical storage. Depending on project complexity and how complete the documentation is, the process commonly takes three to six months from engagement to a bankable report.
Bankability Risks Specific to Battery Storage
Batteries degrade, and the rate and shape of that degradation, along with how augmentation or replacement is handled under the supply agreement, directly affects whether a 15 or 20-year revenue forecast holds up. Warranty terms for batteries are also more complex than for solar modules or wind turbines, often layering performance guarantees, availability guarantees and capacity guarantees with different triggers and remedies, and a due diligence review needs to genuinely parse those terms rather than take a summary at face value. Revenue risk compounds this: a project relying on a mix of contracted revenue, merchant energy arbitrage and FCAS participation carries a different risk profile than one with a single offtake agreement, and lenders expect that mix to be stress-tested, not simply averaged.
Construction Monitoring and Drawdown Support
Once financing is in place, the technical advisor’s role typically shifts to monitoring construction progress against programme and budget, certifying milestones for drawdown, and confirming that as-built work matches what was approved during due diligence. For BESS projects specifically, this includes verifying that installation follows the safety and separation requirements set out in AS/NZS 5139, and that commissioning testing, particularly around protection settings and grid connection performance, is genuinely completed before the asset is signed off as operational. An independent engineering review at key milestones gives lenders confidence that reported progress reflects what’s actually been built.
How the Capacity Investment Scheme and CEFC Programmes Fit In
Government support mechanisms increasingly shape how battery storage projects get financed in Australia. The federal Capacity Investment Scheme’s Tender 6, seeking 2.4 GWh of dispatchable capacity with a minimum two-hour duration, sat alongside Tender 5’s generation target, with results for both expected around March 2026. The Clean Energy Finance Corporation’s Distribution Connected Accelerator Program, a $100 million commitment made in partnership with Infradebt in 2026, targets smaller distribution-connected projects, up to 5 MW, with flexibility for larger ones, and is intended to finance up to sixteen hybrid solar, battery and retrofit projects reaching construction in 2027. These programmes don’t replace commercial due diligence, but they do change the revenue and contracting structure a technical review needs to assess.
Choosing the Right Advisor for a BESS Project
Not every engineering firm with solar experience has genuine depth in battery-specific risk areas: degradation modelling, warranty structuring, fire safety and multi-service revenue stacking are specialised enough that generic renewable energy experience doesn’t automatically transfer. Developers preparing for a financing process benefit from engaging technical advisors early, well before a term sheet is being negotiated, so that any gaps in permitting, contracting or design are identified while there’s still time to address them rather than during a compressed due diligence window under deal pressure.
What to Do Next
Getting technical due diligence right protects both sides of a financing transaction, lenders get a defensible basis for their risk assessment, and developers avoid late-stage surprises that can delay or derail financial close. If you’re preparing a battery storage project for financing, AGILE’s BESS engineering service can support technical due diligence, bankability review and independent engineering through the financing process.
FAQ
What is the difference between a Lender’s Technical Advisor and an Owner’s Engineer?
A Lender’s Technical Advisor acts on behalf of the financing parties to protect their interests, while an Owner’s Engineer works for the project developer, and while their scopes overlap, they can reach different conclusions because they’re assessing risk from different perspectives.
How long does technical due diligence take for a BESS project?
Commonly three to six months from engagement to a bankable report, depending on project complexity, technology maturity and how complete the supporting documentation is at the outset.
Why is battery degradation a bankability issue?
Because a project’s revenue forecast over its debt term depends on the battery retaining enough capacity to deliver contracted or merchant services, so degradation trajectory and any augmentation or replacement provisions in the supply agreement are assessed as core financial risks, not just technical details.
Does government funding reduce the need for technical due diligence?
No. Programmes like the Capacity Investment Scheme or CEFC financing change the revenue and contracting structure of a project, but lenders and equity investors still require independent technical due diligence before committing capital.
What happens after financial close on a BESS project?
The technical advisor typically moves into construction monitoring and milestone certification for drawdown, then into operational performance review once the asset is commissioned and generating revenue.
When should a developer engage a technical advisor?
As early as practical, ideally before a term sheet is negotiated, so permitting, contracting or design gaps can be addressed while there’s still time, rather than surfacing during a compressed due diligence process.
