How to plan for a successful BESS implementation?

Beyond regulatory stability, BESS projects should consider three key components for success: technology selection, commercial models and delivery strategies. There are many alternatives for each of these pillars, and each project can use a different combination of them according to their location’s energy needs, site conditions, level of investment and internal resourcing capability and maturity of the developer.

Below, we explore technology options, commercial models and delivery strategies to help you find the best fit for your battery energy storage system.

Not all batteries are created equally. The choice depends on how long you need to store the energy and how often you will use it.

Lithium-ion batteries are the “workhorse” of batteries dominating today’s market and having the longest track record at scale. They are compact, fast and efficient, making them suitable for large projects. An example is the Hornsdale Battery in Australia, which works to stabilise the grid and support renewable integration and has been in service for approaching a decade.

Flow batteries work like rechargeable fuel tanks, storing energy in large tanks of liquid electrolytes when they are being charged. They are found to be most competitive for longer-duration applications (eight hours or more) and can cycle thousands of times with minimal degradation.

Compressed air energy storage is a newer technology being deployed in several regions around the world but requires the right geology, such as salt caverns or depleted gas reservoirs.

There are also emerging technologies, which are still in the early stages of development. These include gravity systems, solid-state batteries and metal-air batteries, each with the potential to make storage safer, longer-lasting and more cost-effective. Advancements and innovations within existing technology types, such as Sodium-ion (akin to Lithium-ion but with a different working chemistry), are also readily sought-after in the pursuit of improvements to cost, efficiency, safety and sustainability.

There are also different system durations. While the specific definition may vary region to region, Short duration systems generally provide under four hours of energy storage, respond in seconds to stabilise the grid and smooth fluctuations in renewable energy generation like wind and solar. They also provide services like frequency regulation and black start. 

Medium duration systems last between four to eight hours and are designed to shift renewable energy like solar from midday to the evening peaks. This reduces reliance on gas plants, improves market efficiency and helps with transmission congestion.

Long duration systems, which last for more than eight hours, are essential for bridging multi-day or even seasonal gaps when renewables aren’t producing energy. Technologies like flow batteries, compressed air and iron-air are emerging to fill this need.

How BESS projects can generate money is key to their success. In the case of commercial models, there are three primary options: the merchant model, the contracted model and the hybrid model, each differing in the level of flexibility and amount of revenue streams.

The merchant model is the most flexible, with an example being  energy arbitrage where the battery charges when electricity is cheap and discharges when prices are high. Other merchant examples include essential and ancillary services like frequency regulation. While merchant projects can be very profitable, they are also highly volatile as revenues fluctuate with market prices due to supply and demand. This model works best in places with strong price signals and high volatility, such as California or Australia.

The contracted model focuses on stability, with the battery’s output tied to long-term agreements, usually spanning 10 to 20 years. These agreements support predictable cash flow, making the project bankable for lenders and investors. Contracts can take various forms, including capacity markets, government-backed schemes, off-take agreements and virtual tolling. An example is Ontario's LT2 procurement programme, which offers up to 20-year contracts, significantly lowering risk and attracting large institutional investors.

The hybrid model or value stacking involves a single battery earning money through multiple revenue streams often referred to as revenue stacking. A common stacked example participating in both ancillary and energy markets (i.e. arbitrage). This approach maximises value but requires advanced control systems and clear market rules to avoid conflicts between different services. California and Australia are leaders in this model, with many projects stacking three or more services.

Understanding which model is suitable for your needs can help you navigate the challenges of implementing BESS and leverage its full potential in the energy transition.

Each project must also have the right delivery strategy, as different approaches determine the level of involvement and can have varying impacts on project outcomes. There are many different delivery strategies for BESS projects that vary in levels of involvement and risk management for the project owner. Some common ones are provided below:

The turnkey engineering, procurement and construction (EPC) strategy is a more hands-off approach where the contractor is responsible for the majority of the project from start to finish. Here, the owner gets the keys to the completed project.

A single split contracting strategy involves a wrap-around contract with the supplier for long-lead equipment and another wrap-around contract with the design and construction (D&C) contractor for more typical balance of plant.

An integrated project team strategy involves the owner working closely with vendors and contractors, managing the day-to-day operations and interfaces.

The early contractor involvement (ECI) strategy involves the contractor early in the project often before providing final costing for construction phases to front-load constructability and engineering studies, reducing risks and premiums.

Battery energy storage systems have grown during the past decade, with successful projects in Canada, the United States, Australia and the UK to name a few. These BESS projects have provided grid stability, reduced GHG emissions and supported renewables. Each project has a tailored combination of technology selection, commercial model and delivery strategy that best work for their energy needs and investor confidence.

Explore the versatility and scalability of battery energy storage systems in different regions and their critical role in supporting the energy transition. Learn more about the technologies, commercial models and delivery strategies used by the Oneida Energy Storage Facility, the Victorian Big Battery, the Hornsdale Power Reserve, Form Energy’s Iron Air Battery, the Oxford Super Hub and TransAlta’s Summerview BEST.