Strike and premium hedges for BESS and gas peakers
Strike plus premium structures are becoming the default hedge for BESS and gas peaking assets, but most drafts only build in rights for the buyer.
A nominable dispatch window only protects the buyer. The structure needs to protect both sides.
Strike plus premium structures are becoming the default hedge for BESS and gas peaking assets, but most drafts only build in rights for the buyer.
The structure itself is straightforward. The seller is paid a fixed premium for making capacity available, and settles against a strike price only within a nominated dispatch window, with commercial caps on strike exposure and on volume, typically expressed in GWh per quarter. That part of the negotiation is largely settled market practice now, for both BESS and gas peaking assets.
The gap shows up in what happens when the buyer nominates a window and then does not call it, or only partially calls it. Without a secondary dispatch right, the asset sits idle inside its own nominated window, earning the premium but missing the spot opportunity it was built to capture. The seller carries the cost of the buyer's unused option.
The fix is a secondary dispatch right for the seller, triggered once the buyer's nomination window has passed without a call. The seller can then dispatch independently into spot for the unused volume, within the same quarterly cap. The buyer keeps first call on the asset. The seller is not penalised for the buyer not using it.
Implication. Before signing a strike and premium structure, check who holds the dispatch right once the buyer's window lapses. If the answer is nobody, the structure is quietly asymmetric.