‘Unfettered optimism’ on US BESS degradation hits wall of operational reality

“The industry isn’t seeing a wave of chemistry-based warranty claims yet, instead, we’re seeing systems that can’t hit their nameplate discharge because a handful of cells are out of sync,” he said.

Fenton distinguished between the two ways a battery management system (BMS) handles this:

The first is through passive balancing, or using resistors to “burn off” energy from high-voltage cells to match the lowest common denominator.

The other is active balancing, an approach where current is redistributed to bring lagging cells up to parity.

Fenton recommends owners “run your site hard early” during the commissioning phase. Identifying “bad cells” early allows for warranty claims before they complicate future capacity tests.

Thermal management, ITC-augmentation

Victoria Carey, Director – GRE Technical, at major financial institution Bank of America, brought a financier’s scepticism to the conversation, highlighting auxiliary loads as a recurring blind spot in project modelling.

“I don’t know if anyone was in Arizona recently, but it was 107 degrees,” Carey said, referring to the extreme conditions BESS assets have to operate under.

She warned that many financial models under-appreciate the “aux load” required by thermal management systems to keep cells within their optimal temperature range during high-cycling periods. For a potential investor, this represents a liability as the battery is essentially consuming its would-be profit.

The debate between overbuilding, installing 15-20% extra capacity upfront, and augmentation, adding batteries in Year 5 or Year 7 of BESS operation, has multiple considerations, including the falling cost of lithium, and as Zamiyad Dar, senior director of energy storage strategy at US-based solar and energy storage company Pivot Energy, explained, the investment tax credit (ITC) is the primary driver of current strategy.

“A critical factor in all of this is the ITC and ITC eligibility, and we know that it’s going to be very hard, maybe impossible, to get ITC on the augmented [capacity] later down the road, but there’s a good chance that [by] overbuilding that capacity at the start, you can capture those tax credits,” Dar said.

Consequently, Pivot Energy uses mixed-integer programming models to find the “sweet spot” where overbuilding reduces the depth of discharge, slowing the degradation curve.

Carey noted that her team “loves overbuild” for the revenue durability it provides, but many developers are still banking on “unfettered optimism” regarding future technology compatibility.

She further stated, “When we’re looking at it from an engineering lens, it’s basic things like, do you have sufficient space on site for the containers at the current energy density, not at a theoretical future energy density? If the cell chemistry evolves over the next decade, how are you planning to integrate it?”

Long-term service agreements

As systems age, the “finger-pointing” between cell manufacturers, OEMs, and integrators can become a major operational risk. Carey noted a shift toward “wrapped” Long-Term Service Agreements (LTSAs).

By ensuring the inverter and the battery are covered under a single service umbrella, owners avoid the “he said, she said” dynamic when a system ages. Carey advised the industry, “Commercial protections aren’t enough if you haven’t done the technical work to ensure the system can actually perform to those claims.”

Pam Hewitt, renewables/SCADA senior sales engineer at specialist software group Power Factors, noted that while the LTSA provides the legal safety net, the energy management system (EMS) must provide the actual data to trigger those warranty claims.

“Having an active and effectively managed alarm system gives you extra data to present your claims against. I just encourage people to think of it holistically”, Hewitt said.

Fenton’s experience has been that companies have to vouch for themselves while working with OEMs to provide the necessary data to satisfy the claim.

Carey added that an industry saying has been that having LTSAs provides “one throat to strangle” in terms of resolving claims issues, rather than having to hold multiple partners, suppliers and contractors to account.

Field diagnostics

Babikian asked the participants about field diagnostics in confirming risks in installed systems.

Hewitt stated that anything unexpected should be stored, ideally for 20 years. While retaining large amounts of historical data can be expensive, “If events do occur and you have the ability to retain those on a sub-second basis, or at least a second basis, the more accurate, the better.”

Fenton emphasised the importance of identifying core metrics worth preserving, “Keep your core metrics for the life of your project. It’s an insurance policy. [Data] storage isn’t that expensive in most cloud providers, what’s expensive is using it. But you don’t have to use it if you don’t have an insurance claim. If you have an insurance claim, you’re going to want it.”

Carey reinforced the need for data transparency, noting that Bank of America increasingly requires “anonymised, aggregated data that is differentiated by the types of equipment, the types of providers, the age of the system” to properly assess risk and make informed financing decisions.

When asked what the industry will wish it had done differently in a decade, the panelists offered sobering perspectives.

Dar pointed to decommissioning and recycling as major unknowns, and stated, “We don’t really know how much it’s going to cost us to decommission the whole plant or recycle it, and that could be a big expense at the end of project life.”

Hewitt noted, “Ten years out, the industry is going to wish that they had taken a very proactive stance on maintenance, predictive and proactive and automated efforts, and monitoring the effectiveness of that.”

Carey posed the question, “There’s a lot of brand new manufacturers who are the number one manufacturer in the world, and finding out in 10 to 15 years, are they still going to be around to support the strong LTSA that you signed up for?”

Fenton stated, “The industry really needs to find a better way to measure degradation. When you do a capacity test, you’re measuring imbalance and degradation together,” making it difficult to distinguish between the two failure modes.

He continued, “Ten years from now, you’re going to wish you preserved optionality. If you can overbuild, you don’t degrade your battery as much to hit your financial returns from the start.”

As the industry transitions from proving batteries work to managing them profitably over decades, the panel made clear that success will depend less on technological breakthroughs and more on disciplined operations, transparent data practices, and looking past the “unfettered optimism” that has characterised the sector’s early years.

Our publisher Solar Media will host the Battery Asset Management Summit USA in San Diego, California, this fall, 15-16 September 2026, at Hyatt Regency Orange County. See the event website for more information.