Why CAPEX-free battery optimisation makes the business case work
Performance-based fees change how battery optimisation gets approved inside a company. Here is how the model works, why incentives line up, and where operators still push back.
The biggest reason industrial energy-optimisation projects stall is not technical risk. It is not operational risk. It is procurement.
Someone at the site sees the P&L case. The controls integrator can build it. The plant manager wants it. Then it hits a finance conversation and dies. The CapEx line item competes with production equipment, safety upgrades, and every other capital request on the same page.
Performance-based fees exist to route around that failure mode. Here is how the model works, why it changes the internal conversation, and where it still hits friction.
How it works
Under a performance-based fee model, the vendor invests the up-front cost of the control layer. The edge controller. The integration work. The safety envelope. The market participation setup. The customer pays nothing to deploy.
Revenue then splits according to a pre-agreed formula. A typical shape:
- Customer keeps 100 percent of on-site savings (peak-shave, tariff optimisation).
- Grid revenue (FCAS / Reserve AS / arbitrage) is split 70/30 in the customer's favour, after aggregator fees.
- No fixed monthly fee. No minimum term beyond the first 12 months.
The maths for the customer: zero at-risk capital. Meaningful revenue upside. A guaranteed backup performance. The maths for the vendor: recurring revenue proportional to how well the software actually performs.
Why this alignment matters
The traditional integrator-plus-CapEx model has a well-known failure mode. Once the system is installed and paid for, the integrator's incentive to keep tuning the dispatch drops to near zero. Any additional performance is uncompensated work. Sites end up running a system that was configured well on day one and drifts away from optimal as tariffs change, load profiles shift, and market products evolve.
Performance-based fees flip that. The vendor's revenue depends entirely on ongoing dispatch quality. If Singapore's Reserve AS market rules change, the vendor has a first-dollar reason to re-optimise before the customer even notices. If the customer's load profile shifts because a new production line went in, the vendor has a first-dollar reason to re-tune around it.
We see this in our own operations. Sites we run under performance-based fees consistently outperform sites we ran under a fixed-fee model in the early pilots. Not because the technology is different. It is the same control layer. The operating team's attention just stays on those sites, month after month.
The internal-approval story
Most industrial operators can approve performance-based fees at the plant-manager level. They are an OpEx line, not a CapEx line. They do not need capital committee approval. They do not have to compete against safety spend or production spend in the annual budget.
That one fact, OpEx classification, is what makes deployments happen. Not the ROI. Not the payback period. Not the technical case. The classification.
Where operators still push back
Three real objections we hear.
"We want to own the software."
This is a coherent objection for operators who plan to run the software themselves. Almost none actually do. Building an in-house dispatch capability means hiring energy-market specialists, controls engineers, and a 24/7 ops team. For a battery that produces maybe USD 200,000 of gross revenue a year. The maths does not work at a single site. It starts to work at 20+ sites, at which point the operator is basically building a small aggregator.
"We do not like variable revenue."
This is the honest one. Performance-based fees produce variable revenue by design. Some months are better than others. Finance teams that live on flat monthly numbers find this uncomfortable. The counter is that they should compare it to not installing at all. Zero is always more variable than "sometimes 40k, sometimes 60k".
"Aggregator dependency."
Legitimate in Australia. The aggregator holds the wholesale market registration. If they underperform, you have limited recourse. Less so in Singapore, where multiple licensed retailers offer equivalent products. We disclose which aggregator we work with in each market up front. We are happy to review contract terms with the operator's counsel.
The bottom line
Performance-based fees are the reason retrofit projects deploy at meaningful scale. They convert a CapEx procurement conversation that dies in finance into an OpEx decision a plant manager can approve. They align the vendor's incentives with the customer's for the full life of the deployment. They leave the customer's balance sheet unchanged.
If you want to run the numbers for your specific site under a performance-based model, talk to us.