NPV, IRR and payback for a C&I battery, with every assumption visible

The inputs, and Zorowatt's defaults

Every default below is an estimate, shown in the report and editable:

• Project life: 15 years.
• Discount rate: 7% a year, nominal. Use the client's own hurdle rate if it has one.
• Price escalation of the savings: 2% a year.
• Calendar fade: 1% of capacity a year.
• Cycle fade: (1 − end-of-life capacity) ÷ warranted cycles, for example (1 − 0.7) ÷ 6,000 cycles = 0.005% per full cycle.
• End of life: 70% of the original capacity; the battery is then replaced at 60% of the original cost (prices assumed to fall).
• Installed cost and maintenance: from the quote. Without one, the examples here assume €450 per kWh and 2% of the cost a year.

The example — illustrative, not a real customer

A metal-fabrication plant in Germany with an 800 kW annual peak (assumption) and a Leistungspreis of €148.56 per kW a year (a vendor example value). A 200 kW / 300 kWh battery cuts the peak by 150 kW and trades with the rest:

1. Peak shaving: 150 kW × €148.56 = €22,284 a year.
2. Arbitrage on 100 kWh of free capacity (assumption): 100 × €18.17 = €1,817 a year. The €18.17 per kWh a year assumes 300 cycles and half of Germany's average 2-hour day-ahead spread of €121.16/MWh: 0.12116 × 0.5 × 300.
3. Gross saving in year 1: €24,101.
4. Installed cost: 300 kWh × €450 = €135,000. Maintenance: 2% = €2,700 a year.

Simple payback

135,000 ÷ (24,101 − 2,700) = 135,000 ÷ 21,401 ≈ 6.3 years. Simple payback ignores the time value of money, ageing, replacement and price changes — useful as a first screen, misleading as a decision.

Capacity fade and replacement

At 250 equivalent full cycles a year (assumption: the arbitrage's 300 cycles on a third of the capacity are 100 full cycles, plus about 150 for peak shaving), the battery loses 1% (calendar) + 250 × 0.005% = 1.25% (cycling) = 2.25% of capacity a year. It reaches 70% after 0.30 ÷ 0.0225 ≈ 13.3 years, so in year 14 it is replaced for 60% × €135,000 = €81,000.

In this example the saving is assumed to fall in proportion to capacity — a simplification. Zorowatt instead re-runs the dispatch at a few capacity levels and bills each one, because a battery often keeps its full peak cut until it gets too small for the worst day, and then loses a lot at once.

NPV, year by year

Each year's net cash flow = gross saving × capacity share × (1.02)^(year − 1) − maintenance − any replacement. Its present value = cash flow ÷ (1.07)^year.

• Year 0: −€135,000.
• Year 1: capacity 100%, saving €24,101, net €21,401, present value 21,401 ÷ 1.07 ≈ €20,001.
• Year 2: capacity 97.75%, saving 24,101 × 0.9775 × 1.02 ≈ €24,030, net €21,330, present value 21,330 ÷ 1.07² ≈ €18,630.
• Year 14: capacity at 70.75% at the start of the year, saving ≈ €22,058, minus the €81,000 replacement: net ≈ −€61,642.
• Year 15: a new battery, saving ≈ €31,801, net ≈ €29,101.

Summed over the 15 years: NPV ≈ €25,550 at 7%; IRR ≈ 10.6%; payback ≈ 6.4 years; discounted payback ≈ 8.8 years. For comparison, the same battery with no ageing, no replacement and no price escalation would show an NPV of about €59,900 — more than twice as much. Fade and replacement are not details.

The sensitivities that decide it

• Installed cost €536 per kWh instead of €450 (the average of one logistics battery programme, €30 million for 56 MWh, Brussels Times): cost €160,800, maintenance €3,216. NPV ≈ −€10,953; IRR ≈ 5.5%; simple payback still about 7.8 years.
• Savings 20% lower than expected: NPV ≈ −€17,761; IRR ≈ 4.0%; discounted payback not reached within 15 years.
• Discount rate 10% instead of 7%: NPV ≈ €3,910.

A battery with a six-year simple payback can have a negative NPV after one plausible change. That is why a report should show the sensitivities next to the headline, not in an appendix.

Reading the three numbers

• Payback answers: how long is the money at risk? It says nothing about what happens afterwards.
• NPV answers: how much value does the battery add, in today's money, at the client's discount rate? Positive means it beats the alternative use of the money.
• IRR answers: what return does it earn? Compare it with the discount rate. When a replacement makes a later year negative, the cash flow changes sign more than once and the IRR can have more than one solution; NPV does not have that problem.

This is a feasibility method, not investment, tax or financial advice. Grants and tax deductions change the result and depend on the client's situation; see Zorowatt's disclaimer.

The free peak-shaving calculator gives a simple payback in two minutes. The Workspace computes NPV, IRR and both paybacks with every assumption above editable, and re-bills the savings of the aged battery instead of scaling them.

Related guides

• What makes a battery report survive the CFO
• How to size a battery for peak shaving
• German grid charges for RLM customers and the 2,500-hour rule

Sources

• EWS, Spitzenlastkappung brochure, 10/2025 (vendor) — the €12.38 per kW per month (€148.56 a year) example value
• Synertics, Europe battery storage potential, updated 29 Jul 2026 — the €121.16/MWh German spread
• solar.red, Batteriespeicher Gewerbe prices, October 2026 (vendor) — the €450 per kWh assumption sits within its 410–450 €/kWh guide values for 100–250 kWh systems
• Brussels Times, Montea €30 million battery programme

Last checked: 2026-10-30. Every figure in this guide comes from the source linked next to it, with the retrieval date Zorowatt's research recorded (28–30 October 2026), or from arithmetic shown step by step. The example's site, sizes and savings are illustrative assumptions from Zorowatt's scenario notes, not a real customer.