Understanding

the Hidden Costs

of Self-Integrating
Your Energy
Storage Solution
Building your own computer is easier than The complexity comes from numerous
factors:
ever today—the instructions, user manuals
Energy storage is bidirectional—both
and required components are just a click away. absorbing and discharging energy.

Even so, most companies don’t go this route, Modeling battery degradation and
augmentation strategies across
even when their core business is computer different operating profiles requires
technology or software. unique knowledge.

Software and hardware architecture

So why is that? are critical to system reliability and
performance and there are no well-
defined standards.
One of the main reasons is that do-it- Over the past few years, the solar industry
yourself (DIY) integration of complex has bucked this trend. Solar developers The energy storage industry is in the
technologies, from personal computers shifted to self-integration of their solar middle of rapid growth where everything
to automobiles, is fraught with hidden plants to great success and many are is changing, from module and inverter
challenges that impact the design, now looking to do the same with energy design to new market rules.
software capability and performance of storage technology.
the system over time. It is easier, lower Unfortunately, a number of project
The reality is that solar integration and developers around the world are learning
risk, and often lower cost to partner with
energy storage integration are very different. the hard way about the hidden costs of self-
a seasoned technology provider than it is
While solar is largely a plug-and-play integration. To help shine a little light into
to build the technology yourself.
integration that is optimized for maximum this opaque world, this paper identifies how
energy production, energy storage to quantify some of the risks and hidden
technology is exponentially more complex. costs of self-integration.

FACTORS THAT IMPACT OVERALL ENERGY STORAGE PROJECT SUCCESS

FACTORS INFLUENCING ECONOMICS Revenue Capital Expenditure Operating Expenditure Transaction

(CAPEX) (OPEX) Costs

FACTORS INFLUENCING SUCCESS

Working with One

Trusted Partner

Adaptive Technology 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1
0 1 0 1 0 1 0 1 0 1 0 1 0 1
1 0 1 0 1 0 1 0 1 0 1 0 1 0 1
0 1 0 1 0 1 0 1 0 1 0 1 0 1

Platform

Long-Term Value
Maximization

Collaborative Supplier
Relationships
One Trusted Partner
Integrating components and software into The DIY approach to energy storage has Look for a solution provider that has access
a finished product that works around the several commonly overlooked risks: to best-in-class components that have been
clock is challenging. Let’s take the example No single supplier is responsible for pre-integrated, tested and are guaranteed
of computers—you buy the motherboard, system performance. When system-level to work together. Leading solution providers
processor, hard drive, memory, graphics cards, problems arise, conflict and finger- should be able to demonstrate that they
power supply and operating system and pointing between component suppliers have qualified, credible vendors and have
piece them together into a system. But then are common and it can be difficult to tested their components in a laboratory
when you go to power up, you find that it determine responsibility and fix the setting to ensure that the deployed energy
doesn’t work. Where do you turn for help? problem quickly. storage system will perform safely and
correctly from day one.
Each of the component manufacturers is not Resolution of system-level issues can
responsible for the success of the overall be time consuming because of lack of Working with one company that is responsible
system. The system-level responsibility access to leadership at the component for complete system performance delivers
ultimately falls to you. suppliers. The ability to mobilize the right peace of mind. Instead of chasing down
set of people with the needed technical multiple vendors and troubleshooting the
Our homes are another good example. The capabilities is critical. system directly, customers can relax in
duct system, plumbing, electrical and several
Upgrades to a DIY system will likely be knowing that seasoned energy storage
other sub-systems must work together
one-off and highly customized. professionals, backed by fleet-wide data and
seamlessly to provide a comfortable condition
insights, are resolving the highly technical
within the home. If you work with a home All parts of an energy storage system must
challenges of the system.
builder who is responsible for the integration, work together smoothly as a coherent whole
you have a contact who will support you if to earn revenue from the asset. However,
something fails anywhere within the home. with the energy storage industry still in its
early stages, there are no set standards for
IMPACT ON FINANCIALS
the integration of subsystems. Incompatibility
? issues can occur across multiple layers within Revenue loss due to safety or
KEY QUESTIONS TO ASK incompatibility-related challenges
a given storage system resulting in delays,
downtime and lost revenue. or due to lack of timely tech
Whose job is it to perform a
support to resolve an issue.
root cause analysis when things
go wrong? Additionally, self-integrators run the Increase in OPEX costs due to lack
risk that routine software upgrades may of optionality in components or
If the different suppliers aren’t in
not be backwards compatible with other due to custom upgrades required
agreement, whose responsibility
components in their system. Integration for the system in the future.
is it to fix the system?

If the system does not pass

issues can even result in safety-related Increase in transaction costs from
the qualification tests or incidents stemming from unrecognized product design changes needed to
interconnection certification, incompatibility of components. resolve incompatibility issues.
who is responsible for resolving
these items?

What type of defects on

components purchased are
covered under the warranty?

What type of risk exposure

exists on the purchases?

What happens if a component

supplier goes bankrupt?

What happens if the standards

change and you can’t get
access to specific spares
needed for the system over the
next 15-20 years?
Adaptive Technology Platform
Building the capabilities to design and experienced providers can deliver better
deploy energy storage technology requires solutions. This feedback mechanism for
NOTES FROM THE FIELD
significant investments over time, similar improving product design adds significant
to those needed for building gas or wind value for end customers and is not replicable
Fluence was one of the first
turbines in the generation industry. with a DIY approach to system integration. companies that developed
the algorithms required for
Energy storage technology requires a broad The time and effort required to deliver a self- an energy storage system to
range of expertise, ranging from battery integrated solution that works and remains perform services in Europe, at
modeling and application algorithms to competitive in the market for the next 15-20 Kilroot Power Station in Northern
experience with interconnections, in order to years would be significant. Ireland. The Irish Single Electricity

create a customized solution that works well Market rewards a response time of
Bringing together a global supply chain of less than 150 milliseconds, which
for customers over the full life of the system.
components under a common architecture Fluence's platform had validated by
independent parties. Fluence’s
The leading energy storage solution providers allows end customers to access the best
engineers started with an initial
typically invest significant capital to build available technology at the best prices.
algorithm design that was deployed
these capabilities up over time.This process In contrast, vertically integrated suppliers in a project in Chile and further
takes several years due to the complexity of typically lock customers in for the long term, advanced it to provide a response
getting energy storage right. removing optionality from the underlying time of less than one second. This
components in their storage system. control logic is now available at
Seasoned solution providers have learned no cost to Fluence customers
lessons from what has worked in the field and worldwide.
IMPACT ON FINANCIALS
what has not and can apply these insights to
future storage platform designs. Customers of Revenue loss due to market rule
these solution providers receive this changes and inability of software
continuous learning” benefit at zero cost. to adapt to the changes.

By using market and customer feedback Increase in OPEX due to increased

to continuously inform technical product
?
system wear and tear resulting
design roadmaps, algorithm designs, battery from inability of system design to KEY QUESTIONS TO ASK

performance and warranty/terms discussions, adapt to new market conditions.

What options exist within
the technology platform for
providing additional market
services over time?

Is the architecture of the

system set up in a manner
to provide long-term risk
diversification?

Is there a demonstrated history

of performance of the system?

Have there been design

improvements made to the
system based on historical
experience and feedback from
the market?

Does the software architecture

allow for the interoperability of
different components over the
life of the system?

How many versions of software

have you deployed for assets
already being served by your
solution?
Long-Term Value
Maximization NOTES FROM THE FIELD

For the Zeeland 10 MW energy

storage project, the software was
Delivering turnkey storage solutions is not just fleet-wide storage performance, market
initially designed to provide frequency
a question of cost. Successful energy storage information, and expertise in the complex
control services. Due to changing
project delivery requires a deep understanding decision-making required to optimize
market conditions, the Fluence team
of the market value that the storage system overall system performance. updated the algorithms so that the
is expected to provide. Market needs and project could earn additional revenues
requirements always change over time, from the R2/balancing market. Being
therefore the energy storage system must be IMPACT ON FINANCIALS adaptable to changing market
able to adapt to new market conditions. conditions is a key success factor.
Increase in CAPEX due to
Look for a storage solution provider with a overdesign in comparison to

specialized team that brings deep expertise market requirements.

in energy markets. Make sure you have Reduction in revenue because

?
access to the right set of capabilities ranging of inability to deliver multiple
from technical solutions to wholesale services as required in the market. KEY QUESTIONS TO ASK

markets to system operations. High quality Increase in OPEX due to new What are the market services
solution providers should be able to market pulls from system that the project should deliver today?
demonstrate access to broad information could not be addressed effectively What services can be delivered
data sets from the technology side, by the dispatch software. simultaneously?

How should the system be

dispatched to meet market
needs while not deteriorating
battery performance?

How can you get maximum

performance from each battery
module and still deliver all
possible services to the market?

How can the software

system interfacing with the
hardware components be
tuned continuously to deliver
maximum performance to earn
higher revenues in the market?

ADDITIONAL LONG-TERM VALUE FROM WORKING WITH A SOLUTION PROVIDER

Fleet-wide data insights

Algorithm improvements
System Value

Machine learning

Ongoing system optimization

Software upgrades

Time
Collaborative Supplier
Relationships NOTES FROM THE FIELD

“I was tasked by the project owner of

Grid-scale energy storage competes with the Availability AES Laurel Mountain to find replacement
automotive and electronics industries for It can be difficult to get access to Tier 1 battery modules for the 32 MW battery
sourcing certain components, so having well- suppliers if you aren’t purchasing at energy storage system located in West
established collaborative supplier partnerships scale, and it is expensive to manage and Virginia. The first issue was that the
original vendor of the battery modules
is critical. When delivering a complete storage maintain relationships for future support
used in this project had gone bankrupt
solution, access to quality supplier relationships or purchasing. In contrast, leading solution
and was bought by another company
and being able to source components at providers often have strong relationships
that doesn’t manufacture these
volume are important factors to consider. with Tier 1 suppliers from working together
modules anymore. So even availability
for several years and solving problems of parts was challenging. Eventually
Availability, price, terms (such as warranty, use
along the way. Solution providers can even when I found the new company that
profile, recourse, remedies) and timeframe for
influence suppliers’ future product design by makes the parts, the cost of these
delivery are all impacted by volume purchasing
providing insights from data sets from real modules was extremely high. I can tell
and supplier relationships. Each of these
use cases in the field. you that this was a real challenge for
elements has a direct line item impact on the the project O&M.”
capital, operating and transactional cost of the Price of Components
Jeff Gibbons, Director – Services, Fluence
complete storage solution. Smaller purchasing volumes are subject
to higher prices and lesser attention from
? suppliers. Solution providers who are
at scale have greater purchasing power
KEY QUESTIONS TO ASK go wrong on the storage project. Experienced
and volume which is reflected in price
providers have usually worked through these
Do you have access to Tier 1 suppliers advantages for end customers.
challenges and can demonstrate a clear path
in order to purchase at scale?
Terms to resolution while continuing to provide a
Do you have the capability to single point of contact for the customer.
Industry commercial terms on batteries
get guaranteed availability of
components to deliver the project on
and inverters are not fully transparent and
Timeframe for Delivery
a timely basis? are changing rapidly. The less experience
Leading solution providers get preferred
you have in negotiating terms with a
Have you negotiated terms and delivery timelines and can meet aggressive
specific supplier category the greater
conditions for purchasing with project schedule requirements due to
suppliers? Do those terms have the transactional cost will be. The time
greater access to suppliers at the senior
provisions for handling warranty and investment for validating vendors and going
management level. This is also important
usage of battery? through terms can be significant.
when it comes to resolving any issues related
Do you have a clear escalation path Experience to delivery or product quality.
to suppliers’ senior management if
Inexperience with the complex details
things go wrong on delivery or post-
project installation?
of warranty and usage terms can lead to
IMPACT ON FINANCIALS
unexpected surprises with suppliers if things
Reduction in CAPEX due to volume
purchasing of components and
preferred relationship with suppliers.

Reduction in OPEX due to clear and

transparent way of resolving issues
and cheaper pricing of components.

Reduction in transaction costs due

to a single vendor taking responsibility
of the overall performance obligations
of the system, with a clear warranty
structure and established track record
of financing projects.
 Conclusion
Energy storage integration is complex, and it takes
years to build up the capabilities and supplier
relationships to get the job done right. Do-it-
yourself integration or working with inexperienced
solution providers who are simply integrators
carries significant risks that may not be apparent
at the outset. Working with a seasoned solution
provider will minimize risks related to cost,
revenue and safety and provide a more seamless
experience. The best solutions providers should
also be able to work with you to maximize the
value of your system over its full life and realize
the full potential of your energy storage solution.

Fluence, a Siemens and AES company, is the leading global energy storage technology solutions
and services company that combines the agility of a technology company with the expertise,
vision, and financial backing of two industry powerhouses. Building on the pioneering work of
AES Storage and Siemens energy storage, Fluence’s goal is to create a more sustainable future
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by transforming the way we power our world. Fluence offers proven energy storage technology
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transforming energy landscape, providing design, delivery, and integration in over 160 countries.
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