Battery storage in property portfolios - five legal issues investors often underestimate

1. Who owns the battery storage facility and controls access to the site?

Ownership must be assessed in light of the Swedish rules on fixtures forming part of real property. The facility’s purpose, method of installation and the identity of the installer may all affect its legal classification. Equipment installed by someone other than the property owner generally remains separate from the property, but ownership arrangements and subsequent changes can alter that position. A contractual label or ownership clause does not, by itself, determine the outcome.

The legal structure of the site arrangement should reflect whether it covers land, space within a building, or both. The agreement should define the demised area, maintenance access, cable routes and rights to replace equipment. The property owner should also consider future redevelopment: a compact battery footprint may require rights over a significantly larger area.

2. Does the grid connection support the intended operation?

An existing grid connection should not be assumed to accommodate the battery’s intended charging and export volumes. Under Swedish law, the grid connection rules also apply to increases in agreed connection capacity.

Due diligence should cover the grid agreements, import and export capacity, technical conditions, any restrictions, and the connection timetable. It should also establish who holds the relevant agreements and who is responsible for any necessary upgrades.

These conditions should be tested against the revenue model. If projected returns depend on charging or exporting electricity at particular times, the grid arrangements must support that use. An operating or revenue-sharing agreement is not a substitute for this analysis.

3. Which permits and safety requirements apply?

Location and design determine the approvals required. Battery storage developments may require building permission under the Swedish Planning and Building Act, and early engagement with the municipality is advisable. Environmental approval or consultation requirements must also be assessed on a site-specific basis.

Fire safety warrants particular attention. Under Sweden’s building fire regulations, battery storage exceeding 20 kWh must generally be located in a separate fire compartment, subject to certain exceptions. Whether the requirement applies depends on the building and the scope of the proposed works - it is not a universal siting rule for all standalone battery installations.

The project should identify the applicable regulations, including any transitional provisions. Binding requirements must be distinguished from regulatory guidance and insurers’ conditions. Compliance with building regulations does not, in itself, establish that the proposed operation will be covered by insurance.

4. Who bears responsibility when something goes wrong?

The property owner, battery owner, operator and installer may each have distinct obligations. The party legally responsible for an electrical installation must ensure that ongoing safety inspections are carried out. Swedish legislation also imposes specific liability rules for electrical damage, while property owners and occupiers have separate fire prevention duties.

The agreement should allocate responsibility for inspections, maintenance, repairs and incident response. Liability for installation defects, fire damage and operational interruptions should be considered alongside any contractual limitations and insurance arrangements.

An operator’s agreement to accept extensive responsibility does not automatically discharge other parties’ statutory duties. Moreover, an indemnity is only as effective as the counterparty’s - or its insurer’s - ability to meet the claim.

5. What happens on a sale or decommissioning?

On a property sale, the enforceability of the site rights against a new owner must be examined. In a share deal, the contracting entity normally remains unchanged, although change-of-control provisions may apply.

Due diligence should cover transfer restrictions, consent requirements and continued access to the facility. The agreement should also address disconnection, removal and site reinstatement at the end of the arrangement. Insolvency scenarios require a separate assessment of ownership protection and the enforceability of contractual obligations.

A bank guarantee or other form of security may be negotiated to cover decommissioning costs. Its effectiveness will depend on the amount, duration and the conditions for drawing on it.

In our view, investors should establish a coherent allocation of rights, operating requirements and responsibilities before committing capital. The investment case should also account for residual risks that remain with the investor after contractual protections and insurance have been exhausted.