How to Design a Grid-Connected Battery Energy Storage System

Battery Energy Storage Systems, such as the one in Mongolia, are modular and conveniently housed in standard shipping containers, enabling versatile deployment. Photo credit: ADB.

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Size the BESS correctly, list the performance requirements in the tender document, and develop operational guidelines and pricing policy.


A Battery Energy Storage System (BESS) significantly enhances power system flexibility, especially in the context of integrating renewable energy to existing power grid. It enables the effective and secure integration of a greater renewable power capacity into the grid. BESSs are modular, housed within standard shipping containers, allowing for versatile deployment.

When planning the implementation of a Battery Energy Storage System, policy makers face a range of design challenges. This is primarily due to the unique nature of each BESS, which doesn't neatly fit into any established power supply service category. These challenges encompass both technical aspects, like determining storage capacity sizing, and regulatory considerations, including ownership, safety regulations, sustainability, and commercial viability.

A study published by the Asian Development Bank (ADB) delved into the insights gained from designing Mongolia’s first grid-connected battery energy storage system (BESS), boasting an 80 megawatt (MW)/200 megawatt-hour (MWh) capacity. Mongolia encountered significant challenges in decarbonizing its energy sector, primarily relying on coal, despite abundant domestic renewable energy resources like solar and wind. The integration of renewable energy was hindered by limitations in regulation reserves and flexible generation within the power grid, thereby restricting the total installed variable renewable energy (VRE) capacity. Typically, reserves are provided by hydroelectric or gas-fired thermal power plants; however, Mongolia found these resources to be insufficient. The BESS project is strategically positioned to act as a reserve, effectively removing the obstacle impeding the augmentation of variable renewable energy capacity.

Adapted from this study, this explainer recommends a practical design approach for developing a grid-connected battery energy storage system.

Size the BESS correctly.

It is critical to determine the optimal sizing for Battery Energy Storage Systems to effectively store clean energy. A BESS comprises both energy and power capacities. Energy capacity signifies the maximum amount of energy the BESS can store, measured in kilowatt-hours. This capacity sets the total electricity, in kilowatt-hours, that the system can hold. Once the electricity is fed into the grid, distinguishing between electricity generated from renewable and non-renewable sources becomes near impossible.

The size of the BESS should align with its primary objective. In the case of the Mongolian BESS, the primary goal was to harness renewable energy that would otherwise be wasted. Consequently, the system's energy capacity was designed to match the quantity of renewable energy that would have been curtailed. However, if the primary objective differs, for instance, addressing supply shortages during peak hours, an alternative approach is necessary. It is crucial to ensure sufficient energy capacity during these high-demand periods.

Identify the optimal location for the BESS to maximize benefits.

The selection of a BESS location needs to consider both location-specific and non-location specific applications, to maximize the overall impact of BESS. Location-specific BESS applications include variable renewable energy curtailment reduction and load shifting, while non-location specific applications involve frequency regulation.

In the Mongolia project, the objective of the BESS is to support the connection of more variable renewable energy to the entire central energy system, which covers over 90% of Mongolia's energy demand, including that of Ulaanbaatar. Through power system analysis, the Songino substation, situated approximately 30 kilometers west of Ulaanbaatar city center, was identified as the optimal location for maximizing the impact of BESS applications. This choice is justified by Ulaanbaatar being the system’s largest demand center and its proximity to major wind farms.  

Select a transmission company as the BESS owner.

The ownership and operation of a BESS pose significant challenges. Despite a notable decrease in the cost of battery modules, achieving commercial viability for BESS storage services remains elusive. Research focusing on developed countries, particularly Australia and the United States (US), reveals that BESS projects typically depend on financial support from governments or are funded by ratepayers.

In Mongolia, where the BESS plays a crucial role in maintaining power supply reliability due to the growing number of variable renewable energy connections to the grid, a decision was made for the state-owned transmission company, the National Power Transmission Grid, to own and operate the first grid-connected BESS. Given its status as a transmission asset, the costs associated with the BESS are recovered through the transmission tariff. Importantly, this has minimal impact on ratepayers, with estimates suggesting a retail tariff increase of less than 2%.

When determining the ownership of a BESS and devising a financial recovery model, careful consideration should be given to factors such as the maturity of the domestic energy market.

List the performance requirements instead of the technical specifications in the tender document.

Once the values and expected functions of a BESS are determined, the next step is to identify the appropriate battery technology option. It's essential to assess whether the technology landscape is stable or changing rapidly. In the case of rapid changes, it might be more prudent to specify performance requirements rather than technology specifications in the procurement document.

The selection of the right battery technology or chemical material requires careful consideration due to the multitude of options available on the market, each with its own set of advantages and disadvantages. What further complicates the selection process is the rapid advancement of these technologies, leading to dynamic shifts in the benefits they offer. The choice of appropriate battery technology depends on the expected benefits, such as load shifting and grid stabilization.

Similarly, proper treatment and disposal of spent battery cells from a BESS are crucial. In cases where a country lacks battery recycling facilities, the procurement document can specify that the responsibility for the disposal of faulty or used batteries lies with the battery suppliers. Alternatively, an option would be to issue a separate tender for the replacement of batteries at the end of their lifespan.

Develop BESS operational guidelines to reduce operational risks.

Ensuring a Battery Energy Storage System’s operational sustainability is crucial. Regulations for BESS operation and maintenance (O&M) need establishment for two main reasons: preventing overcharging and overdischarging, and allocating funds for battery replacement and overhauls.

Where existing laws lack necessary BESS O&M regulations, government intervention is important. Mandating BESS operators to comply with these regulations is necessary for effective and sustainable operation.

Experience in BESS operations is also vital for sustainability and reaping benefits. While some developed countries outsource O&M, developing nations should focus on building domestic utility staff's O&M skills.

Policy makers must choose between prioritizing domestic BESS operator training or minimizing operational risks. Outsourcing through long-term O&M contracts minimizes risks, while prioritizing domestic training necessitates establishing relevant regulations and training schemes.

Develop an ancillary service pricing policy and guidelines.

To make BESS services commercially viable, it is recommended that an ancillary service pricing policy and guidelines be developed first, and that the BESS be provided with revenue opportunities, such as energy and ancillary service markets. These measures would also remove market barriers for private sector entrants.

Policy makers should carefully assess their legal and regulatory guidelines regarding energy markets.



A. Sakai. 2021. Designing a Grid-Connected Battery Energy Storage System. ADB East Asia Working Paper Series. No. 62. Manila: Asian Development Bank.

Atsumasa Sakai
Senior Energy Specialist, Energy Sector Office, Sectors Group, Asian Development Bank

Atsumasa Sakai is primarily responsible for spearheading emerging technologies and best practices in the energy sector. He led the development of Mongolia's first utility-scale battery station project and collaborative initiatives for regional smart grid integration among Central Asian countries. He currently directs pioneering studies, including Carbon Capture, Utilization, and Storage (CCUS). Prior to joining ADB, he gained valuable experience working with the World Bank and a prominent Japanese power utility.

Asian Development Bank (ADB)

The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

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