In the recent webinar organized by ATA Insights Channel, representatives from Wärtsilä Energy Storage & Optimisation shared a comprehensive view on hardware design for Battery Energy Storage Systems (BESS) and how to address costs and operational performance in this context.

Neha Sinha, the company’s hardware product manager, highlighted key strategies for improving the efficiency of these systems, particularly in a scenario where cost reduction is as important as long-term performance.

Her main focus revolved around the total cost of ownership of a BESS site. According to Sinha, although batteries have always represented the largest portion of expenses, costs have decreased in recent years. “Historically, batteries have been the biggest cost factor, but we are seeing battery costs decreasing,” she states.

This reduction has shifted attention to other system components, such as equipment and engineering and construction (EPC and BOP) costs. The rapid integration of new, higher-capacity cells emerges as a crucial strategy to capitalize on these technological improvements as soon as possible.

According to the latest IRENA report, between 2010 and 2023, the costs of battery storage projects dropped dramatically by 89%, from 2,511 USD/kWh to 273 USD/kWh. This notable reduction is due to expanded production, improved material efficiency, and optimized manufacturing processes. During the same period, annual additions of battery storage capacity increased from 0.1 GWh to 95.9 GWh.

Additionally, lithium-ion battery costs also showed a significant decrease, falling by approximately 82% between 2013 and 2023. In Germany, costs decreased by 72% from 2014 to the first quarter of 2023. The predominant battery chemistry has been lithium iron phosphate (LFP), which reached a cost of 95 USD/kWh in 2023, 32% cheaper than other alternatives.

Finally, in 2023, the global average cost of turnkey energy storage systems ranged between 325 USD/kWh and 260 USD/kWh, with lower prices for longer-duration systems. This trend suggests a promising future for energy storage, driving its adoption in the energy sector.

On the topic of hardware, Sinha emphasizes the importance of reducing both the individual cost of components and the total number of units needed on-site.

The executive explains that “the fewer we have on-site, the lower the total equipment cost will be,” noting that increasing the capacity of each BESS system reduces the number of enclosures and optimizes inverter design. A new development in this field is the AC block system, which offers greater flexibility in the operation of BESS systems.

“An AC block allows independent control of each rack, giving you the ability to structure your system very differently than you would with DC blocks,” adds Sinha.

Logistics also play a critical role. The trend toward using standard 20-foot containers facilitates transportation but poses challenges due to the increased weight of higher-capacity systems.

“As the capacity within your system increases, those higher-capacity battery modules come with a greater weight, indicating that we’ve really started to reach that upper limit,” she warns. The challenge, therefore, is balancing capacity increases while maintaining low transportation costs.

Consideraciones de diseño de hardware para el costo total de propiedad de BESS, de acuerdo con Neha Sinha de Wärtsilä Energy Storage & Optimisation.

Other Key Factors

Another highlighted aspect was the role of supply chain localization, which helps reduce transportation costs by bringing component production closer to installation sites. With the growth of the energy storage market in various regions, supplier diversification and local production have become essential. “The more we can diversify our supply chain and locate ourselves where our sites are, the shorter the distance the equipment has to travel,” emphasized Sinha.

In the commissioning and lifecycle phases, hardware design should facilitate access to components to simplify installation and maintenance tasks. “A lot of that comes from making the components more accessible,” Sinha said, explaining that this can reduce downtime and minimize service costs during the 20 years that these battery sites are expected to operate.

Finally, Sinha emphasized the importance of real-time monitoring and control to ensure optimal performance and avoid costly downtime. “The more we can monitor your equipment’s performance and control it in real time, the faster we can react if something goes wrong,” she stated. The implementation of advanced battery control software has become a key strategy to maximize the use of systems and, ultimately, the revenue generated by these sites.

This webinar made it clear that energy storage not only depends on technological innovations in batteries, but also on a holistic approach that considers costs, transportation, longevity, and system control to ensure long-term efficiency and sustainability.

The Drop in Electricity Prices Brings a Slowdown in the Battery Market

A recent report by SolarPower Europe highlights that, while the battery energy storage market in Europe continues to grow, a slowdown is expected in the coming years due to the reduction in electricity prices.

In 2023, Europe installed 17.2 GWh of new BESS capacity, nearly double the 8.8 GWh installed the previous year. This increase marks the third consecutive year of doubling annual growth, bringing the total capacity on the continent to 36 GWh. However, the report forecasts a more moderate growth in the future. For 2024, it is expected that installed capacity will increase by only 31%, reaching 22.4 GWh.

The report also warns that, despite the current growth, the continent is still far from reaching the 200 GW of storage capacity needed to unlock the full potential of renewable energy on the continent by 2030. Barriers such as restrictive grid policies and the lack of clear market signals are hindering progress.

Walburga Hemetsberger, CEO of SolarPower Europe, stressed the importance of adapting infrastructure and markets to maximize the role of batteries. “The increase in storage capacity and battery flexibility represents a fundamental shift from our current market vision centered on the electrical grid,” she stated.

Despite the challenges, total capacity is projected to multiply sevenfold to reach 260 GWh by 2028, with a growing combination of large-scale storage and residential systems.

By that year, batteries installed behind the meter will have contributed more than half of the total storage capacity, while large-scale batteries will represent 44%, a significant increase from the 9% projected for 2024.