Tolling Agreements in 2026: How Gas Plants and Batteries Monetize Firm Capacity Without Selling Power

A tolling agreement lets a power plant or battery owner sell dispatch rights to an offtaker instead of selling energy into the market directly: the toller pays a fee to convert the asset’s output into a contracted revenue stream, and the offtaker decides when the asset runs. Noreva, an energy market data and analytics provider (formerly Karbone Research), tracks these structures because tolling pricing sits at the intersection of three curves the firm forecasts daily – capacity, power, and now natural gas.

For project finance teams, asset owners, and trading desks, a tolling agreement is less a fixed contract than a bet on future spreads. In 2026, that bet has gotten more expensive to price wrong. Capacity markets have tightened, natural gas forecasts have diverged, and data centers are bidding for firm supply in ways that reshape who wants a toll and what they will pay for one. This piece skips the beginner explainer – the structure is defined in two sentences above – and spends the rest of the space on how gas and battery tolls are actually priced, what changed in 2025 and 2026, and how to value one with forward curves.

Who Bears the Risk in a Tolling Agreement?

In a gas-fired toll, the offtaker typically supplies or reimburses fuel and controls dispatch: it decides, interval by interval, whether running the plant is economic. The owner collects a fixed capacity or reservation payment regardless of how often the plant runs, and retains the risk that the unit performs when called – availability, heat rate degradation, forced outages, and O&M cost overruns sit with the owner. The offtaker, in exchange for that fixed payment, captures the option value of dispatch: it runs the plant when power prices exceed the cost of fuel plus the tolling fee, and does not when they do not.

A battery storage toll (BESS toll) mirrors that logic without the fuel leg. The offtaker controls charge and discharge scheduling – effectively the dispatch decision a gas toll offtaker makes, minus the fuel procurement – and pays a capacity payment tied to guaranteed available power (kW) and energy (kWh). The owner’s equivalent of “heat rate risk” is degradation: cycling the battery harder to capture more arbitrage and ancillary revenue accelerates capacity fade, so contracts cap annual cycles and set minimum state-of-health guarantees the owner must maintain.

Risk Allocation: Gas Toll vs. BESS Toll vs. Merchant vs. PPA

How Is a Gas-Fired Tolling Agreement Priced?

A gas toll’s price has two components. The fixed component – a capacity or reservation payment, generally quoted in $/kW-month or $/kW-year – compensates the owner for standing the plant ready to be dispatched, and is benchmarked against the capacity price the asset could otherwise earn on its own in the relevant capacity market. The variable component compensates the owner for actually running: a per-MWh tolling fee or heat rate markup on top of the offtaker’s fuel cost, plus variable O&M.

The mechanics run through the spark spread – the difference between the power price an offtaker can sell into and the cost of the fuel needed to produce it, calculated as power price minus (heat rate multiplied by gas price), minus variable O&M. Because the offtaker only dispatches when the spark spread is positive after the tolling fee, and never dispatches when it is negative, the toller’s economic value to the offtaker is structurally equivalent to a strip of call options on the spark spread – one option per dispatch interval, with the plant’s heat rate curve setting the option’s effective strike. This is why gas toll pricing converges toward option-pricing logic rather than a simple discounted cash flow: the fixed capacity payment prices the “always-on” reservation, and the implied value of the variable dispatch rights prices the optionality embedded in spark spread volatility. Specific tolling fee levels vary by region, plant efficiency, and contract tenor and are not publicly disclosed in a way that supports a general benchmark here; Noreva’s asset valuation work builds these curves bottoms-up from power, capacity, and fuel forecasts rather than published deal comps.

How Are Battery Storage Tolling Agreements Priced?

BESS tolls are priced almost entirely off the fixed capacity payment, typically expressed in $/kW-month, because the asset has no fuel cost to pass through. That payment is tied to an availability guarantee – a minimum percentage of hours the battery must be able to deliver its contracted power and duration – with liquidated damages if the owner misses it. Degradation and cycling limits function as the BESS equivalent of heat rate risk: the contract caps the number of full-equivalent cycles per year and sets a minimum guaranteed usable capacity (state of health) over the contract term, because an offtaker that cycles the battery harder for arbitrage revenue accelerates the owner’s replacement and augmentation costs.

In exchange for the capacity payment, the offtaker captures the revenue stack the battery generates: energy arbitrage (charging in low-price hours, discharging in high-price hours), ancillary services (frequency regulation, spinning and non-spinning reserve), and, where the market credits storage for it, capacity revenue. Some BESS toll structures split that stack – the owner retains a share of arbitrage or ancillary revenue above a threshold – but the baseline structure transfers dispatch control, and with it the upside and downside of that revenue stack, to the offtaker.

Tolling Agreement Pricing Components: Gas Toll vs. BESS Toll

What Changed in the Tolling Market in 2025 and 2026?

Three developments have moved toll pricing over the past eighteen months. First, capacity markets tightened. PJM’s Base Residual Auction for the 2026/2027 delivery year cleared at the FERC-approved cap of $329.17/MW-day RTO-wide, a roughly 22% increase over the $269.92/MW-day that cleared in the previous cycle. The 2027/2028 auction, held in December 2025, cleared at $333.44/MW-day RTO-wide – a further 1.3% increase – with the entire RTO footprint, including Fixed Resource Requirement areas, falling short of the reliability requirement by 6,623 MW (PJM, 2026/2027 Base Residual Auction results, July 22, 2025; 2027/2028 Base Residual Auction results, December 17, 2025). Every one of those data points raises the benchmark value of the fixed capacity payment inside a toll: firm capacity is worth more when the market is short of it.

Second, gas price forecasts have diverged rather than converged. The EIA’s near-term outlook is comparatively tame: Henry Hub is projected to average $3.43/MMBtu in 2026 and $3.28/MMBtu in 2027 (EIA, Short-Term Energy Outlook, September 9, 2026). Noreva’s August 5, 2026 press release states that its inaugural report “argues that most long-term forecasts underestimate the potential for structurally higher and more volatile natural gas prices over the next decade” (Noreva press release, August 5, 2026), pointing to reserve replacement slowing even as producers spend roughly three times what they spent in 2021, and to LNG exports set to grow 160% by about 2030, about 25 Bcf/d of incremental export capacity – with select U.S. hubs potentially trading above $10/MMBtu under Noreva’s high-price scenarios. That gap between a calm near-term consensus and a bullish structural view is exactly the risk a gas toll’s variable payment is priced to absorb over a 10-to-15-year tenor, and it is why the fuel curve behind a toll matters as much as the capacity curve.

Third, data centers have become active bidders for firm supply. As hyperscalers and colocation developers compete for power that does not depend on weather, they have pushed demand toward exactly the kind of dispatchable, contracted capacity a toll provides – a dynamic Noreva has covered in the context of how data center builders are solving the power problem. That demand adds a bidder to both sides of the toll market: more counterparties willing to pay for firm capacity, and more competition for the gas and battery assets that can supply it.

How Do You Value a Tolling Agreement Using Forward Curves?

Valuing a toll – whether you are the owner pricing the fixed fee to ask for, or the offtaker deciding what to bid – starts with three forward curves layered on top of each other: a capacity price forecast (near-term auction-clearing based, long-term reserve-margin and accreditation based), a natural gas forward curve, and a power forward curve at the relevant node or hub. The capacity curve sets the floor value of the fixed payment. The gas and power curves, combined through the plant’s heat rate, generate the spark spread distribution that determines the value of the dispatch rights.

Because none of those three curves is known with certainty over a toll’s typical 10-to-15-year term, a defensible valuation runs scenario ranges rather than a single point estimate: a conservative case (compressed spreads, lower capacity prices), a base case aligned to the forward curve, and an aggressive case (wider spreads, tighter capacity markets, higher gas prices consistent with a structurally bullish view). The merchant tail – the years after a toll expires, when the asset reverts to selling into the market directly – is a separate and often underweighted piece of the valuation: it is fully exposed to whatever capacity market design, reserve margin, and power price environment prevails at that point, and its value should be stress-tested under the same scenario framework, not treated as a residual plug. Noreva’s asset valuation service builds these merchant-versus-contracted comparisons and capacity revenue and capture-rate models from transaction-informed curves rather than theoretical proxies, which is the same discipline that should sit behind any toll pricing exercise.

What Is Noreva’s Role in Pricing Tolling Agreements?

A toll is only as good as the curves behind it. Noreva provides capacity price forecasts across PJM, MISO, NYISO, ISO-NE, SPP, and CAISO, fuels coverage including the natural gas practice launched in August 2026, and power and merchant curve modeling through its forecast and valuation platform – spanning 1 to 5 year transaction-based forwards and fundamentals-based merchant curves up to 25 years, covering the 10 to 20 year window used in project finance. For project finance teams and trading desks structuring or bidding on a toll, that means the capacity, gas, and power inputs come from one transaction-informed source. For PJM-specific work, see Noreva’s PJM capacity coverage and its analysis of PJM auction repercussions for project finance.

Frequently Asked Questions

What is a tolling agreement in energy markets?

A tolling agreement is a contract under which the owner of a power plant or battery storage asset sells dispatch rights to an offtaker for a fee, rather than selling electricity into the market directly. The offtaker controls when the asset runs (and, for a gas plant, typically supplies the fuel), while the owner earns a fixed capacity payment for keeping the asset available and bears the O&M and performance risk of delivering when called.

What is the difference between a tolling agreement and a PPA?

A power purchase agreement (PPA) sells a defined quantity of energy (or the asset’s full output) at an agreed price, with the seller generally responsible for generating and delivering that energy. A tolling agreement instead sells dispatch rights and fuel conversion capacity: the offtaker decides when the asset runs and captures the resulting energy margin, while the owner is paid primarily for availability rather than for output sold at a fixed price. In short, a PPA prices energy; a toll prices optionality on capacity and dispatch.

How is a tolling fee calculated?

A tolling fee combines a fixed capacity or reservation payment with a variable dispatch component for gas assets, or rests largely on the fixed payment alone for batteries – see “How Is a Gas-Fired Tolling Agreement Priced?” and “How Are Battery Storage Tolling Agreements Priced?” above for the full mechanics. In both cases, the variable or dispatch-linked portion is effectively priced as an option, so its value depends on expected price volatility over the contract term, not just average price levels.

Who bears fuel price risk in a gas tolling agreement?

The offtaker. In a standard gas toll, the offtaker supplies or reimburses the fuel needed to run the plant, which is precisely what allows it to control the dispatch decision – it decides whether burning that fuel is economic at current power prices. The owner is insulated from fuel price risk and is compensated instead through the fixed capacity payment for keeping the plant available to run.

How does a BESS tolling agreement differ from a merchant battery strategy?

In a merchant strategy, the battery owner keeps dispatch control and captures energy arbitrage, ancillary services, and capacity revenue directly, bearing full exposure to price volatility and to the degradation that results from its own cycling decisions. In a BESS toll, the owner hands dispatch control to an offtaker in exchange for a fixed capacity payment and an availability guarantee, trading upside participation in arbitrage and ancillary revenue for revenue certainty and a contractually capped cycling and degradation schedule.

Price and Stress-Test Your Next Toll with Noreva

A tolling agreement is only as reliable as the capacity, gas, and power curves used to price it. Noreva delivers transaction-aligned forecasts across all three – built for project finance teams, asset owners, and trading desks who need to underwrite a toll’s fixed payment, model its spark spread optionality, and stress-test its merchant tail before signing.

Book a demo to see how Noreva’s capacity, power, and natural gas curves support tolling agreement pricing and valuation.