Falling Battery Costs Drive Longer Duration Energy Storage Expansion

CERAWeek

Shift to LFP chemistry and falling raw material prices boost two-hour-plus BESS projects, but SoC accuracy remains a hurdle.

Lower Battery Costs Accelerate BESS Deployment

Lower battery prices are transforming the energy storage market by enabling more battery energy storage systems (BESS) with longer durations, according to experts at the CERAWeek by S&P Global conference in Houston. Charlotte Johnson, general manager of InfraFlex (a Kraken unit), stated, "Lower prices have accelerated the deployment of BESS of two hours and more, rather than the one-hour systems."

Battery cells represent about 50% of total project costs, while the remainder goes to labor, operations, and maintenance. As battery cell costs fall, project developers are increasingly building longer-duration BESS to meet grid flexibility and renewable integration needs.

LFP Batteries Drive Cost Cuts but Add Challenges

The price drop stems largely from falling battery raw material costs and a rapid shift to lithium iron phosphate (LFP) battery chemistry. LFP cells are cheaper and more stable than nickel-based alternatives, making them ideal for utility-scale BESS projects.

However, panelists warned of a drawback: LFP systems have less predictable state of charge (SoC) behavior. Inaccurate SoC readings complicate real-time optimization and revenue maximization for grid operators and energy traders.

Outlook: Market Growth Continues Amid Technical Hurdles

While SoC monitoring remains a challenge, the economic advantages of LFP and longer-duration storage outweigh the downsides for now. Developers and technology providers are focusing on improving SoC management tools and software to unlock greater value from low-cost, longer-duration systems.