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Supporting the growth in the

energy storage market through


scale and accelerating execution
The utility scale energy storage market is expected to reach 2.6 GW in the US by 2020 per
GTM Research. To achieve such explosive growth, the energy storage industry will need
to scale while continuing to drive costs down standardization of system designs will be
pivotal to get the industry there!
The energy storage industry is as exciting as it has ever been. This was evident during the
Energy Storage Association conference in Charlotte this past April. The number of companies
that are entering the space continues to grow, and the ones that have been around for a few
years are clearly improving their product, costs and value propositions. This is a good thing as
the industry matures and gears up to support what is projected to be substantial growth over the
next few years. One key takeaway from the discussions I had was the sophistication of costs
models. As the industry has gained experience this is clearly being leveraged to provide a more
accurate and tailor view of systems costs. Such models reveal a clear cost reduction path for
batteries over the next 5 years. Generally speaking, this will be obtained through improvements
in module energy density and manufacturing processes, and scale. However, the cost reduction
path for the balance of the system isnt very clear at all. As we know, the specifications for utility
scale battery energy storage systems have varied significantly from project to project. While
there is an impact on the batteries from a configuration perspective, the basic building block, i.e.
the cells are mostly common enabling manufacturers to leverage volumes and scale despite
variability in specification at the system level this is one of the reasons the cost reduction path
in cells is so clear based on the expected growth in the industry. In the balance of the system
the situation is not like this. Varying requirements affect the electrical, structural, and thermal
characteristics of the system making it difficult to standardize and ultimately drive volumes and
repeatability in integration which in turn would bring costs down. The situation is not an easy
one to address since different end users may have different requirements based on their
experience, preference, and existing assets. This is the kind of challenge that attracts a
company like Flex to enter the fray, where we believe that by modularizing the overall system as
building blocks, supported by a robust and flexible platform for containerized energy storage
systems standardization and repeatability can be achieved. This in turn enables larger volumes
in material and efficiencies in the manufacturing process which in turn will reduce the balance of
system costs.

Energy Storage: an industry in transition


Standardization and harmonization of requirements across markets is dependent on the
maturity of the industry as a whole. Only through experience and proved performance certain
designs emerge as the norm. In the context of the energy storage industry we can see that from
a historical perspective we may be entering this maturity phase.

Period
1960 1970
1970 1980
1980 1990
1990 2000
2000 2010
2010 Today

Activity in the industry


Research and construction of pumped hydro plants
Volatility in oil prices lead to the development of more pumped hydro
storage plants as well as research in batteries
R&D continues + deployment of pumped hydro storage
R&D + Proof of concept/Pilot deployment of several technologies
R&D, Proof of concept/Pilot installation, and proving use cases beyond
bulk storage
R&D, Proof of concept/Pilot installations of emerging technologies,
refining use cases and stacking, financial/commercial/ownership models
enabling widespread deployments
Table 1. Timeline of the energy storage industry

Researching the Department of Energys Global Energy Storage database sheds some light into
the state of the industry. We can see the that the 60s, 70s, and 80s where dominated by the
deployment of pumped hydro plants. It wasnt until the 90s when the first electrochemical
energy storage system deployment was recorded. Within the context of modern energy storage
this marks the beginning of what we see today in the industry. Significant research and
development took place during this period as well as in the 2000-2010 period. As it can be seen
from Figure 1 deployments have really taken traction in the 2010-Today period. While this is a
relatively short amount of time to think that standardization and harmonization of requirements
is under way some key trends have become clear.

Figure 1. Deployment of electrochemical energy storage projects in the US

It is clear from the database that the majority of systems deployed in the 2010-Today are
electro-chemical systems. The footprint, modularity, project execution risks and capex
requirements of these systems are such that the market has reacted positively to a wide variety

to chemistries. While there are other technologies that are very promising and/or have clear
advantages for certain use cases batteries are here to stay.
Figure 2 reveals another key trend, Lithium-ion batteries have dominated the deployment of
battery energy storage systems. Also, based on recent project announcements Lithium-ion
continues to gain momentum and its poised to be the most deployed technology over the next 3
to 5 years. This trend is resulting in the consolidation of opportunities and projects around a
technology. This in turn is enabling costs to decrease by reusing designs from project to project
as well as improved costs due to economies of scale. As a word of caution Lithium-ion is not the
perfect battery technology, but its mature in comparison to other chemistries. The intricacies of
deploying systems including sizing, performance, fire suppression, permitting, etc. have been
worked out by several project developers and the technology is starting to be recognized and
understood. This is a huge advantage as we expect the industry to grow as previously
mentioned.

Figure 2. Electro-chemical category of energy storage systems installed through 2015

Figures 3 and 4 depic another trend where certain use cases and value streams are becoming
predominant. In the category of grid support services bulk frequency and voltage regulation are
2 of the main use cases for battery energy storage systems. This has mainly been enabled by
the market structure in PJM (regional transmission organization in the north east and mid
atlantic of the US). In PJM these grind support services are compensated at a rate in which not
only the power capacity and provided kWhr are taken into consideration but performance too.
The performance and flexibility of energy storage systems enables them to capture this market
enabling profitable deplooyments. This compensation structure is expected to roll out into other
regional transmission organizations in the US, expanding the available market for these use
cases. While there are many technologies that have gone into this market, Lithium-ion is one
that has gained significant traction for such use cases. From a technical requirements
perspective these systems need to provide fast discharge rates (provide high power for
seconds) and very precise reaction times to market signals. In addition, these systems will
typically support multiple charge and discharge cyles per day. These items ultimately yield
systems that have specific cells for the use case (higher C discharge rate), higher capacity
thermal management systems to deal with the heat disipated during high power discharge
cycles, larger conductors to support the required currents and minimizing losses, as well as
battery packs that are tailored to provide high amounts of power for short durations of time. This
clarity is enabling manufacturers to aim their designs to cater to very specific set of
requirements enabling standardization and repeatibility.

Figure 3. Grid tied energy storage system installations by grid support applications

Use cases related to bulk energy utilization are described in Figure 4. Time of use shifting and
renewables capacity firming are the dominant use cases in this category. In contrast to the
requirements of grid support services applications these systems store energy in bulk and their
discharge rate is rather slow in the order of hours. Technical requirements in turn are different,
with battery packs engineered to support 1 to 2 cycles per day, low C rates, and low current
carrying capability when compared to systems engineered for grid support services.
Consequently, the thermal management system and power connectivity is engineered to deal
with lower amounts of heat dissipation and current carrying capability respectively. Providers
supplying solutions capture these use cases have the opportunity to standardize their designs
driving repeatability and reducing overall costs. The volume projections in the industry should
provide enough motivation to invest in this optimization since the expected cost reductions
obtained through this standardization of designs in the balance of the system is significant.

Figure 4. Grid tied energy storage system installations by power plant support applications

Cost structure of a containerized battery energy storage


system
The economic viability of an energy storage system is driven by the value they provide and its
costs. As previously mentioned, battery manufacturers have been working for several years now
to obtain cost reductions in their cells and modules. The balance of system needs to go through
this same process in order to reduce its costs.
Containerized energy storage systems are made up of several components tailored to the
battery chemistry and performance requirements of the overall system. If we omit the inverter
we are left with the following components:

Battery modules and mounting fixtures


Engineered and modified container
Fire detection and suppression
Thermal management system
DC power connectivity
DC cabinet
AC cabinet
Controls

Accessories

All of these sub components are closely interrelated and are designed and engineered to
support the system requirements and intricacies of the battery chemistry selected. The
mounting solution of the batteries is not trivial; it influences structural integrity as well as the
performance of the thermal management system. It also rules the layout of the batteries within
the container which in turn limits the amount of kWhr one can fit. Major battery manufacturers
typically provide their own solution and standard EIA racks are used by several of them. These
racks are then used as standard building blocks for the BESS. The batteries together with their
mounting solution represent the largest cost driver. Market price of this portion of the scope
ranges from 150 600 USD/kWhr with flow batteries being in the lower side of that range,
Lithium-ion right in the middle, and specialized batteries offering better life expectancy, number
of cycles, and performance in the upper end of the range. One item to take into consideration
when evaluating costs is the fact that not all manufacturers package their product in the same
manner, as a result not all USD/kWhr figures one comes across are directly comparable. Some
manufacturers include racking, battery monitoring system, cable connections, and short circuit
protection in their stated figure while others do not. Having a clear understanding of the scope of
supply relative to the USD/kWhr figure of a particular manufacturer is very important when
evaluating vendors since the items mentioned above are needed in the system.
The second largest cost driver in containerized solutions is the container itself. Based on the
size, complexity, source of the structure, and volumes costs range between 25k 85k USD.
Beyond materials, these structures are costly due to their engineering and labor content.
However, there is typically significant cost reduction potential when driving volumes up. There 2
main reasons for this; commodities utilized to build the structure can be purchased in bulk and
stocked, also, volumes enable the possibility of investing in a manufacturing environment where
production line layout and automation work together to dramatically reduce the number of
manual labor ours required to produce one unit this is only possible with scale. Another
element that should not be disregarded is logistics. Transportation and rigging of the unit can
also be a surprisingly expensive item. Adhering to ISO standard container dimensions is critical
to ensure cost effective solutions for transportation and rigging. This becomes a significant
challenge when designing manned enclosures due to NEC workspace requirements. With most
manufacturers utilizing standard EIA racks it becomes a challenge to fully utilize the space
within the container. Space underutilization within the container will ultimately result in a less
competitive solution from a USD/kWhr perspective.
The thermal management system is another intricate aspect of the design of these solutions. It
ensures the environment has the adequate temperature and humidity maximizing the life
expectancy of the battery pack. The battery chemistry and use case determine the
requirements, the solutions range from passive ventilation, force air (fans), and air conditioning.
Costs vary greatly from solution but overall they range from 2 to 7 USD/kWhr.
While most installations require fire detection, some battery chemistries have a risk of thermal
runaway and may require a fire suppression system. The requirements are not 100% clear in
the US from jurisdiction to jurisdiction and NFPA is expected to provide guidance and
recommendations in the 2017 version of the NEC. In the meantime, most installations using
chemistries with a risk of thermal runaway are being equipped with fire detection and
suppression systems. In containerized solutions the costs of this system is in the range of 6-12
USD/kWhr.

The rest of the components are summarized in Tables 2 and 3. These tables present a high
level reference point for 20 and 40 containerized battery energy storage systems based on 0.8
and 2 MWhr energy capacity respectively. Figure 5 and 6 illustrate the proportion of each
component as a system cost driver. From this point it can be seen that the balance of system
costs in the DC building block is around approximately 20% for a 20 BESS and 16% for a 40
BESS. While the batteries are the bulk of the costs in a system it is clear the balance is not
insignificant, as such, finding a clear path for cost reduction in this area is critical to improve
overall system costs.

Table 2. Sample costs of a 0.8 MWhr 20 BESS containerized system

Figure 5. Sample costs of a 0.8 MWhr 20 BESS containerized system

Table 3. Sample costs of a 2 MWhr 40 BESS containerized system

Figure 6. Sample costs of a 2 MWhr 40 BESS containerized system

Improving
balance
of
system
costs
modularization, standardization, and scale

through

With the US utility scale market expected to reach 2.4 GWhr by 2020 the industry is expecting
to ramp up to 600-1200 containerized BESS per year. To achieve this while curbing the balance
of system costs system designs should be modularized and standardized. Flex has been
following this approach by collaborating with technology providers and aggregating customer,
system, and performance requirements. Such requirements in combination with the different
possibilities offered by vendors have enabled a standard platform that is versatile enough to
accommodate a wide variety of electro-chemistries yet common enough to leverage volumes
across different project opportunities. This in turn is driving scale and resulting in cost reductions
in several of the aforementioned component in balance of the system. One example is the
modified container. By having a platform approach, we are able to consolidate volumes around
a single design which in turn can be manufactured at volume taking advantage of the cost
reduction opportunities that we mentioned previously. This is similar to the automotive industry,
were different and unique car models are built from the same common platform. An analysis of

this effect reveals great opportunity and perhaps a clearer roadmap toward addressing the costs
of the balance of the system as seen in Table 4. This particular example is for a 40 2 MWhr
battery energy storage system. There is a double digit cost reduction opportunity in all sub
systems when reaching volumes of 50 units per year as an example. Another item to note is
lead times, today most systems require 20-24 weeks to be built approximately. With scale and
standardization system modules can be stocked, pre-assembled and staged reducing lead
times and integration hours.
The energy storage industry has come a long way and we are starting to see the signs of
consolidation in use cases around particular technologies which are driving volumes up for
some vendors at the battery level. For those that are willing to invest the time and effort to
harmonize their offering there is great opportunity to achieve efficiencies and cost reductions in
the balance of the system. We have some exciting times ahead of us as we rapidly transition
from pilot and custom deployments to repeatable solutions.

Table 4. Impact of volumes on system costs

About the author:

Alejandro Schnakofsky is the Director of Applications Engineering for Flex Energy. He is


responsible for the support and development strategy of products and technical services in
energy storage, power electronics, and T&D. In his role, Alejandro defines product and service
development initiatives that yield flexible and adaptable solutions that could be used across the
industry, achieving standardization and accelerating time to market. Prior to joining Flex,

Alejandro worked for ABB Inc. where he held a variety of technical roles including Global lead
product manager for the HV protection, automation, and control business. Alejandro holds a BS
and MS in electrical engineering from Florida International University and the University of Idaho
respectively.

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