Welcome back to The Battery Buildout.
In Part 1 (episode 01-08), we defined what the factory must do—cell blueprint, process route, yield architecture, material and energy balance, layout, micro-environment and safety. In Part 2 (episode 09-13), we translated those decisions into procurement specifications, acceptance criteria, and data systems. Part 3 begins here, at the point where the factory’s intentions meet physical reality. This edition addresses the first and most important checkpoint: the FAT/SAT strategy and the stage-gate acceptance commitment that determines whether “delivered” becomes “qualified”.
Table of Contents
1. FAT and SAT Are Not the Same Test Run Twice
Do you treat FAT and SAT as two instances of the same procedure—first at the supplier‘s factory, then at the buyer’s site? This framing misses what each test is actually designed to prove.
FAT (Factory Acceptance Test) is conducted at the equipment vendor‘s facility, before shipment. Its purpose is to verify that the equipment is designed correctly, functions as specified, and can produce output at the required speed and quality—all under the vendor’s controlled conditions, with the vendor‘s tooling and their engineers present.
This is the cheapest place to find problems. Everything is still in the supplier’s building. Corrections are made with their labor, their spare parts, and their schedule pressure. Once the equipment is shipped and installed overseas, the cost of fixing a design defect multiplies—not just in money, but in schedule.
SAT (Site Acceptance Test) is conducted after the equipment is installed and connected at the buyer‘s factory. Its purpose is not to repeat FAT. It is to verify three things that FAT cannot: that transport and installation did not damage or misalign the equipment; that the equipment performs correctly under the site’s actual utility conditions—water pressure, air pressure, electrical supply, ambient temperature, and humidity; and that the buyer‘s operators, using the buyer’s real materials, can produce output that meets specification.
The distinction matters because the failure modes are different. A FAT failure is a design or manufacturing problem. A SAT failure is an integration problem—between the equipment and the site, between the equipment and the materials, between the equipment and the operators. Both must be verified, but they require different test protocols and different acceptance criteria.
You may say we can control that through payment, will that enough?
2. The Payment Milestone Structure That Aligns Interests
The commercial mechanism that makes FAT/SAT enforceable is the payment milestone structure. In a well-structured equipment contract, payment is not triggered by shipment. It is triggered by performance evidence.
A typical milestone structure for battery production equipment follows a pattern: advance payment upon contract signing, payment upon passing FAT , payment upon passing SAT, and final payment after the warranty period expires.
This structure creates a natural alignment of interests. The supplier has a financial incentive to pass FAT before shipping, because payment depends on it. The supplier has a financial incentive to ensure the equipment performs at the buyer’s site, because the SAT payment depends on it. And the supplier has a financial incentive to support the equipment through the warranty period, because the final payment depends on it.
But here is the question that rarely gets asked in contract negotiations: what happens when the equipment passes FAT but fails SAT—and how does your contract allocate the cost of the gap?