Thought Piece:

MAKING
BATTERIES
WORK

Photo courtesy of Fluence

Thought Piece:
MAKING BATTERIES WORK

Contents
Why Large Scale Battery Energy Storage Works 3

CAPEX and OPEX Considerations 5

Battery Layouts and Housing 6

The benefits of a Tender exercise 7

Battery Performance and Flexible Warranties 8

Battery Lifecycle and Augmentation Strategies 10

Revenue Stacking and Flexible Control Systems 11

Safety, Fire Risk and Insurance Costs 11

Value Additions 12

Conclusion 13
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Thought Piece:
MAKING BATTERIES WORK

Why Large-Scale Battery Energy Storage Works

With increasing renewable energy penetration to electricity grids all over the
world, a significant problem of unbalancing and uncertainty in generation
supply, primarily due to the intermittent nature of renewable energy generation,
has come to the forefront of concerns for grid operators and utilities alike.

Grid unbalancing refers to the phenomenon of frequency and voltage fluctuation

in the electric network. The former feature, frequency, is what is called a global
variable, and is effectively the same across any electricity network. This is the
most important parameter that grid operators need to maintain in order to
protect the overall supply of electricity and the equipment that delivers this
supply.

Traditionally, flexible gas-fired plants or other flexible generation, have been

used to overcome any unbalance in the grid. This is due to their flexible ramp up
and ramp down times and operating range thus allowing the grid operator to
balance the system accordingly. However, advancements in battery technology
and the possibility of co locating batteries with renewable power plants have
led to a new and possibly cheaper solution in providing these balancing services
and thus a new market.

While the concept of energy storage is not new, nor is the use of Battery
Energy Storage, the use of batteries in providing large scale grid storage and
ancillary services (frequency support, voltage support, black start) has become
increasingly popular in the past 5 years given the modularity, simplicity and
decreasing costs of the battery systems. For example, in the UK, according to
National Grid Monthly Balancing Services Summary , the cost of grid balancing
services for August 2019 was £50.7m (45% of overall costs) with £32.49m (29%
of the overall costs) spent on Ancillary services.

More and more countries are opening their doors to the idea of integrating
electric storage into their networks to alleviate constraints, particularly with the
distribution and sometimes transmission level infrastructure.

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Thought Piece:
MAKING BATTERIES WORK

In order to develop energy storage projects for optimal cost, while at the same
time delivering efficient and effective services, one needs to look at the entire
techno economical life cycle of the project.
This thought piece focuses on MWh scale Li Ion battery systems, as these
are most suitable for grid scale projects in providing the services that many
utilities and off takers require today. These services typically include (among
others):
• Time shifting (storing excess generation during times of high production
and discharging during times when there is high demand);
• Frequency response services (the battery can inject or absorb active power
in order to assist with raising or lowering the system frequency when
instructed by the grid operator).
• Capacity services (Availability, the battery is available to support the grid if
required across a range of services, developers are paid a capacity payment
monthly for maintaining the asset in an available state);
• Operating Reserve. Similar to availability, the battery effectively serves as a
type of spinning reserve that the grid operator can call upon during times
of system instability;
• Reactive Power Services (Voltage support, the battery can inject or absorb
reactive power in order to raise or lower the voltage of a particular area of • Battery layouts and housing;
the network which it is connected to); • Tendering process;
• Black start (Ability to restart parts of an electric network after a black-out). • Battery Performance and Flexible Warranties;
Due to the current limitations in battery technologies, these systems are sized • Battery lifecycle and Augmentation;
to completely charge/discharge between 30 minutes to 4 hours.
• Revenue Stacking and Flexibility of the control system;
This thought piece explores WSP’s views on the different factors which need
to be considered for cost optimisation in grid scale battery projects, focusing • Safety, fire risk and insurance;
on Li Ion technologies, including the following aspects: • Value Additions.
• Capex and Opex considerations;

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 Thought Piece:
MAKING BATTERIES WORK

CAPEX and OPEX Considerations Additionally, the pie chart below depicts the CAPEX breakdown for a typical
BESS system once installed and commissioned.
The graph below shows varying CAPEX and OPEX prices (average) with the
scale of the system installed. As is apparent, the larger the system, the lower
the per kWh price is. However, there is an economic optimum capacity limit Other 10%
to which Li-Ion should be installed, this is based on the length of storage
duration required. Typically for longer duration storage, 4 hours and upwards,
Battery System 46%
other technologies such as flow batteries are considered to be more efficient.
These prices reflect the average prices quoted by different suppliers across
Balance of Plant 30%
a range of project sizes. The typical CAPEX costs range between £300/kWh
installed down to £200/kWh installed for large installations. Similarly, the
OPEX ranges from £8/kWh/year to £2/kWh/year depending on size and Grid Connection 14%
specific warranty arrangements
350 9

8
300

7
300
6
Figure 2 - Breakdown in BESS CAPEX price
GBP/kWh installed

GBP/kWh/year
200 5

150
4 The majority (typically 46%) of the cost is taken up by the BESS modules,
racking, container, HVAC and Power Conversion System (PCS). Civil and
3 Electrical Balance of plant makes up 30% of the cost with the grid connection
100 and telecoms, security and site facilities comprising the remainder (24%).
2
As with other technologies, including solar PV plants and wind farms, the
50
1 majority of the cost learning curve over the years with BESS systems has been
with improving the underlying technology, namely the battery cells/modules.
0 0 This technology has become more energy dense and cheaper. Common
10MWh 50MWh 100MWh >100MWh system such as HVAC and internal cabling have limited cost savings over time
CAPEX (GBP/kWh) OPEX (GBP/kWh/year) as they are established components. Civil and Electrical Balance of Plant costs
vary substantially on a site-by-site basis depending on the complexity of the
Figure 1 - Average CAPEX and OPEX pricing for 2-hour Li Ion Battery Systems connection or installation.
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Thought Piece:
MAKING BATTERIES WORK

Battery Layouts and Housing

Currently, the most popular grid level battery systems
are stored in containers, while some others are
housed in large warehouses. The below figure is from
an Enhanced Frequency Response project in the UK.
The BESS containers are usually 40ft x 8ft (12.2m x
2.43m) shipping style containers, however certain
suppliers choose to provide containers of 20ft x 8ft
(6.06m x 2.43m) and some even 52ft x8ft (15.85m x
2.43m). These ‘containerised solutions’ can house
the battery cells, the battery management systems,
HVAC and fire suppression systems and provide
energy densities anywhere from 300kWh/container
to 5MWh+/container for Li Ion batteries. Considering
that every square foot of land is expensive, these
energy densities and container layouts become a
critical part of the design and cost of the system.
While the higher energy densities of some containers Figure 3 Co-Located BESS in a PV + BESS Project, UK photo courtesy of Anesco
can be attributed to better energy density per the overall solution may be less technically robust Maintenance (O&M) activities.
battery cell, it should be noted that it is also based and durable.
on the arrangement of the other hardware within While certain projects have comprised of indoor
the container and whether or not this is optimised Certain BESS integrators are adopting an additional grid scale battery systems, this is highly dependent
for space saving. safety element to their utilisation of a standard on location and availability of land or existing
container. These suppliers are now choosing to place infrastructure. Space and accessibility constraints,
For example, a reputable BESS supplier has now access doors along the longer sides of the container possible requirements of structural support for
offered a 52ft x 8 ft container with an energy density and access all the hardware from the outside of buildings for large battery systems and a higher
of 6MWh. While this is very impressive and does the container. This means no personnel will have fire risk have all added to lesser number of indoor
suggest a better battery cell energy density, it should to enter the container and removes significant battery systems. These along with IP65 or higher
also be noted that this supplier chooses to keep risk (such as electrocution, fire hazard, working in rating of newer battery and Balance of Plant (BoP)
its HVAC systems outside the container, thereby a confined space) to the person while meaning equipment have seen outdoor battery systems
allowing more cells to be placed within the container. that any additional space can be fully utilised for gaining popularity. Unless, there is a very specific
Thus, merely choosing the supplier providing the module racking. Additionally, this is said to make need for an indoor grid scale battery system, an
higher energy density does not mean one always replacement of racking and modules quicker and outdoor containerised solution is typically considered
gets the best optimisation on land usage and indeed easier and thereby save time for Operation and a preferable solution.
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Thought Piece:
MAKING BATTERIES WORK
The Benefits of a Tender exercise
Energy storage and batteries
Not all large power projects, in particular battery
projects may require a full procurement and
tender exercise, however the benefits of running
one often lead to greater clarity, improve cost
savings and an overall smoother engagement
with the final contractor and suppliers.
The main risk of not engaging in tender exercise
is that Clients are limited to one supplier and
would likely not derive the benefits of a diversified
offering and market competitiveness. This said,
there are further costs involved in running a first-
class competitive tendering process, however the
benefits of this are considered to outweigh the
costs when refining offers with bidders following
this process.
WSP have undertaken many grid scale battery
projects in an Owners Engineer role and have
assisted our clients in preparing detailed Minimum
Functional Specifications (MFS), Invitation to
Tender (ITT) documents and providing support
through bidder clarifications, evaluation, preferred
bidder selection and through to Financial Close
(FC).
WSP firmly believe that running a competitive
tendering process has enabled all of our clients to
see a wide range of solutions and cost optimisations
for their projects and realised considerable
commercial and technical improvements.
CAPEX and OPEX optimisation
During our evaluation of battery projects over
the years, it has been observed that projects that
have undergone a competitive tender process
are around 5% cheaper on overall CAPEX than
similar projects where a supplier was approached
without a tendering process. Additionally, bidders
returned with further reductions of between 8%
and 10% at BAFO (Best and Final Offer) stage. This
is a significant reduction in the CAPEX and OPEX
costs to the Client.
Value additions and other benefits
WSP have observed that bidders, during a
competitive tender process and negotiation,
almost always provide greater value additions,
take up most of the site risk, provide improved
commercial terms (such as bonds and securities)
and provide greater flexible energy retention
warranties.
Photo courtesy of Fluence
Multi-faceted evaluation
A robust tender process ensures that the bids
received for a project are evaluated not just on
general design conformation and price but on all
the many other facets that comprise a technical
proposal.
For example, one of the most well-known grid level
battery suppliers on the market today chooses to
not supply fire suppression equipment with their
battery system. This particular aspect may not
be immediately apparent and whilst this risk is
manageable, having the clear understanding of
the nuances of various offers provides our clients
with a more informed view upfront, resulting in
fewer issues later on. These issues incur further
unnecessary development costs prior to Financial
Close. Whilst some clients have chosen this
supplier based on their reputation, others may
not be aware of the lack of fire suppression system
until the negotiations had progressed significantly.
However, the same project, if it underwent a
detailed tender process, would have brought this
point to the client’s attention at an earlier stage.
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Thought Piece:
MAKING BATTERIES WORK
Battery Performance and Flexible
Warranties
Most Li Ion suppliers currently prefer to provide
2-hour battery systems with a very specific battery
operating temperature range (<30 °C). This is
mainly because of the limitations of the Li Ion
technology and the higher capacity degradation
associated with faster operation and higher
operating temperatures.
If a project requires faster operation, the module
suppliers either provide a lesser guaranteed
degradation profile or oversize the battery
significantly to account for the increased
degradation that the battery will incur.
Furthermore, if the battery is to be operated at a
location with a higher ambient temperature, the
suppliers limit the performance during battery
cycles or add additional HVAC systems to maintain
the operating temperature within acceptable
limits. These approaches either affect the actual
operation of the system or add cost to the system.
WSP have observed that warranties are usually
defined by the following operating parameters.
• Charge rate;
• Discharge rate;
• Depth of discharge;
• Operating temperature;
• Capacity (MWh);
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The duration within which the battery guarantee is
re calculated (daily, monthly, quarterly or annually).
Based on these parameters, 3 different types of
warranties are typically proposed by the suppliers.
1. Fixed warranties – The battery supplier
guarantees a specific degradation profile
based on the operation profile shared by the
Client. There is no flexibility and the warranty
is based on strict operating parameters. Any
variation in this profile or parameters will void
the warranty.
2. Adjustable warranties – The battery supplier
guarantees an initial degradation profile
based on the operation profile shared by the
Client. However, the supplier allows for certain
variation in some operating parameters, while
other parameters remain fixed. The supplier
then reviews these over fixed time periods and
updates the degradation profile accordingly.
3. Flexible warranties – The battery supplier
guarantees an initial degradation profile based
on the operation profile shared by the Client.
The supplier allows for variation in almost all
parameters (within a specific range) and thus
allows the client to operate the battery in a
flexible manner and allows for variations in the
operating parameters. The supplier agrees a
formula with the Client and uses this formula
over an agreed period to calculate the new
degradation profile (this can sometimes occur
on a real time basis). This allows the Client to
take full advantage of the battery in optimising
its operation to generate revenues or benefits.
Further to this the Client may, through the
live SCADA monitoring system, reduce or
increase the operation of the battery in coming
operating periods with confidence.
Therefore, there is a need for flexible warranties for
delivering battery projects that provide grid support
services. The unpredictability of the operation of
a battery providing grid support services means
that a fixed guaranteed degradation profile is not
a true reflection of the battery operation and thus
does not give the advantages to the Operator of
the battery system. WSP have worked with major
battery suppliers who are currently developing
flexible warranties for their customers, and there
are many different approaches taken by suppliers
for this purpose.
Flexible warranties will also assist clients in
determining optimal, cost effective operating
strategies without affecting the battery capacity.
WSP consider these flexible warranties to be more
common place in the large-scale grid storage
market and would strongly recommend that these
be negotiated and added into any contractual
warranty documents for a grid scale battery project.
It is essential to create a mechanism to link the
battery supplier’s warranty terms through to any
PPA or off-taker agreements. If the operation of
the BESS is not controlled by the client, then as
a minimum the client would still be protected
through this mechanism back to the battery
supplier.
The figure opposite shows an example flexible
Thought Piece:
MAKING BATTERIES WORK

warranty curve for a certain BESS operation.

The black line shows a fixed warranty profile.
This is effectively a fixed usage case at a fixed
Crate (the C-rate is the measure of the rate
at which a battery is discharged relative to
its maximum capacity. A 1C rate means that
the discharge current will discharge the
entire battery in 1 hour) and a fixed number of
cycles per day. This guarantees a fixed energy
retention (capacity) at the end of the battery
lifetime (in the example case shown below,
after 10 years the battery will operate at 70%
of its original capacity).

An alternative to this is an adjustable warranty

which means if the usage deviates from
the fixed warranty line (the black line) then
the guaranteed capacity at the end of life is
adjusted accordingly however the gradient
(or rather, usage parameters) of the battery
are not adjusted, meaning that the battery
cannot be cycled more times per day or have
a higher throughput for any given year. This
leads to a purely flexible warranty which
allows the user to vary all the parameters of
the battery usage, and the warranted energy
retention is adjusted in real time - this is shown
by the blue curve in the graph opposite. Figure 4 - Flexible Warranty Example

In a flexible warranty, the OEM provides for maximum flexibility to the owner to vary C rate, depth of discharge and other battery
parameters and will provide updated project specific degradation rate guarantees

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Thought Piece:
MAKING BATTERIES WORK

Battery Lifecycle and

Augmentation Strategies
Battery life times for Li Ion grid scale projects vary
mainly based on the services and the operation
that the system is used for. However, it is clear that
any such battery undergoing at least 1 cycle a day
(full to empty and back to full) shall not be able
to provide the same services at the original power
levels after a number of years. Thus, considering the
business model, augmentation or cell replacement
strategies need to be determined. Most suppliers
are comfortable with guaranteeing capacity
degradation of up to 60%. Beyond this point, the
suppliers usually recommend augmentation. The
usage profile determines the rate of degradation
which in turn determines the number of years it
takes to reach this point. It also does not mean
that the battery becomes unusable after this
point as there is significant capacity remaining.
However, it may not be able to sustain the original
usage profile it was designed for.
It is often observed that developers recommend
oversizing the battery, especially in co located
projects, for over 20 years. This may not be the Figure 5 - Battery Degradation profiles of three Tier 1 Battery Suppliers
most efficient approach. With the current rate of
improvements, it would be best to design for a life of
8 to 10 years even if the entire project is for a longer
time period. This will ensure that the Operator/ Figure 5 shows actual degradation profiles provided different. This is why it is essential to identify the
Owner can get maximum possible usage over this by three of the top Tier 1 battery integrators for correct supplier for the specific application and
period and any augmentation or replacement a MWh scale battery project in the UK. All these to prepare augmentation strategies that help
required will be with more efficient, improved and integrators have used Li Ion modules and have improve or at the very least sustain revenue streams
a possibly cheaper battery technology. designed their system for the same usage profile, and revenue levels.
however, the degradation profiles are significantly

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Thought Piece:
MAKING BATTERIES WORK
While determining the best augmentation
strategy, the following points, among others,
should be considered:
1. Is Augmentation necessary to successfully
achieve the revenues forecasted in the business
model?
2. Will better battery technologies become
available when this augmentation is possibly
needed?
3. New Grid level services are being developed and
required by Network Operators in the future, so
will more lucrative options be available in the
future?
4. Is land available for augmentation?
5. Is the current installed system “Future Proof”
and ready to accept Augmentation?
Based on the above, an augmentation strategy
should be defined during the project development
phase. This will enable Developers to allow for
additional space, funds and negotiate with
suppliers and ensure optimal commercial
outcomes. It should be noted that normally
augmentation should only require a changing
of the BESS modules and potentially the racking
systems that house them. The remainder of the
Balance of Plant (BoP) components can remain
in place and typically do not need to be altered.
However, a change in the type of module, racking
system or HVACs would need additional containers
and thus more land.
Revenue Stacking and Flexible
Control Systems
Most grid scale batteries have enough capacity to
carry out multiple services and not just a single
service. With a flexible warranty, using the battery
for different services becomes a viable option
and thus aids in revenue stacking. Adding more
services to the battery system does not mean
adding new battery cells or Low Voltage (LV) or
Medium Voltage (MV) switchgear equipment.
Almost all controllers and battery management
systems are currently limited by the supplier to
perform only one specific task. WSP have been
involved in projects where negotiations on adding
flexibility to the control systems have taken place.
Here either the battery supplier allows for a fixed
number of additional services for an upfront fee or
charges a fee for every additional service.
An augmentation or dynamic approach to how
the battery system is used and operated can be
adopted. This adds benefits to both clients and off
takers and is considered to be achievable.
Safety, Fire Risk & Insurance Costs
Li Ion battery projects are always considered a fire
hazard. While the specific Li Ion technology used
changes this fire risk, it is also interesting to note
how different battery suppliers approach this issue.
There are currently two market leading chemistries
in Li-Ion battery technology. The first is Lithium Iron
Phosphate (LFP) and the second is Nickel Manganese
Cobalt (NMC). The former option (LFP) is considered
to be less of a fire risk given that the thermal runaway
temperature which needs to be achieved in order
for the cell breakdown and for the installation to
catch fire is very high (given the iron has a very high
relative melting point). The latter option (NMC) can
achieve combustion at a lower (although still high)
temperature due to the chemical compounds.
One reputable major battery supplier chooses
not to supply a fire suppression system with their
battery projects. While this may seem like a concern,
discussions with this supplier have revealed that
they are confident that their HVAC system and
other controls are optimised and thus have no risk
of a fire occurring. In this supplier’s case, if a fire does
occur, it is left to burn and the specific container is
merely replaced for the Client. While this approach
does bring in a small reduction in CAPEX due to the
removal of the fire suppression system, WSP have
observed that this does add to the insurance costs
for the project. Additionally, based on the location
and site-specific conditions, such an approach may
not be feasible.
Other suppliers provide built in fire suppression sys-
tems while some have an additional fire suppression
system that can be operated from outside the con-
tainer. This is growing in popularity and is currently
used by a few of the major BESS suppliers.
In early 2019, the New York city fire department has
released a document which details an increased
level of fire and safety regulations from permitting
to component selection to active monitoring and
supervision of battery systems. During some of our
recent projects, WSP observed that many of the main
battery integrators have already started developing
and implementing systems based on this stringent
fire and safety standard.
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Thought Piece:
MAKING BATTERIES WORK

Value Additions
Almost all the major battery suppliers currently
provide value additions to their battery system,
including the following

1. Trading software – Battery suppliers have

developed specific software for their battery
solutions to be used in the trading market
relative to the country in which the system is
being installed. Here the software will ensure
that the battery is charged and discharged at
times that deliver the best returns and most
effectively, as the battery supplier is operating
the battery so the risk on warranty is almost
removed from the Client.

2. Financing options – Battery suppliers are

providing financing options or are providing
equity financing to projects in the form of
reduced costs for profit sharing. These options,
other than providing financial support to the
Client, ensure that the battery suppliers deliver
a sound system quickly.

3. Additional fire safety systems- While the fire

suppression systems are being implemented,
currently some manufacturers offer this as a
value addition.

4. Flexibility to the system. Flexible Warranty,

Augmentation etc.

Photo courtesy of Fluence

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Thought Piece:
MAKING BATTERIES WORK

Conclusion
As we conclude the previous highlights and discussion points, there is a clear for further information contact
benefit of battery energy storage to electrical networks. Through providing
Paul Glendinning
buffer storage and grid support services, BESS ensures grid stability while
Director, Networks and Renewables
allowing for the integration of more intermittent generation combined with
grids becoming more flexible to users’ demand. WSP UK Ltd
paul.glendinning@wsp.com
The declining costs of battery systems has enabled the technology to be
economically feasible to install and operate when competing with other more Ioannis Andronikidis
traditional storage technologies and peaking or grid balancing plant such as Solar PV and Energy Storage Sector Lead
diesel or gas engines. WSP UK Ltd
ioannis.andronikidis@wsp.com
The risks associated with developing and implementing a large scale
storage project are better understood and mitigated when engaging with a
professional partner, who has experience in all parts of the project’s execution
plan.

From a battery suppliers viewpoint, the evolution of battery system warranties

has provided much needed certainty and flexibility to both system operators
and battery system operators and owners by re-risking the warranty
uncertainty.

The Client along with a technical consultant can optimise project specifications,
performance requirements, system warranties and supplier negotiations to
ensure the development of the most cost effective and most suitable system.

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