DESIGNING A

GRID-CONNECTED BATTERY
ENERGY STORAGE SYSTEM
CASE STUDY OF MONGOLIA

Atsumasa Sakai

NO. 62 ADB EAST ASIA

April 2023 WORKING PAPER SERIES

ASIAN DEVELOPMENT BANK

 ADB East Asia Working Paper Series

Designing a Grid-Connected Battery Energy Storage System:

Case Study of Mongolia

Atsumasa Sakai Atsumasa Sakai is a senior energy specialist at the

Asian Development Bank (ADB).
No. 62 | April 2023
Acknowledgment: The author thanks Shigeru
Yamamura (ADB) and Michael Emerson (Integration
Environment & Energy GmbH) for their technical
contribution.

ASIAN DEVELOPMENT BANK

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 CONTENTS

TABLES, FIGURES AND BOXES iv

ABBREVIATIONS v

ABSTRACT vi

I. INTRODUCTION 1

A. Objective 1
B. Background 2
C. Structure of the Paper 6

II. DESIGN CHALLENGES AND SOLUTIONS 6

A. Sizing and Location 7

B. Implementation Arrangement 12
C. Procurement 15
D. Operational Sustainability 18
E. For a Viable Commercial Operation 20

III. SUMMARY 21

REFERENCES23
iv

TABLES, FIGURES AND BOXES

TABLES

1 Overview of the First Utility-Scale Energy Storage Project in Mongolia, 2020–2024 5

2 Major Wind Power Plants in Mongolia’s Central Energy System  8

3 Expected Peak Reductions, Charges, and Discharges of Energy 9

4 Major Applications of Mongolia’s Battery Energy Storage System 11

5 Battery Storage Performance Comparison 16

6 Installation and Commercialization Data 17

FIGURES

1 Daily Power Supply-and-Demand Central Energy System 5

2 Mongolia’s Power Supply Mix 7

3 Pattern of Wind Power Generation in Mongolia’s Central Energy System 8

4 Forecasted Supply and Demand Balance in Mongolia’s Central Energy System, 2015–2030 10

5 Mongolia’s Energy Systems 13

BOXES

1 Implementation of Battery Energy Storage Systems in Developed Countries 14

2 Summary of Policy Recommendations 22

 v

ABBREVIATIONS

ADB – Asian Development Bank

BESS – battery energy storage system
BPMS – battery power management system
CES – central energy system
CHP – combined heat and power
FCAS – Frequency Control Ancillary Services
GHG – greenhouse gas
IPP – independent power producer
Li-ion – lithium-ion (batteries)
MTCO2 – metric tons of carbon dioxide
MW – megawatt
MWh – megawatt-hour
NaS – sodium-sulfur (batteries)
NDC – National Dispatching Center
O&M – operation and maintenance
VRB – vanadium redox battery
VRE – variable renewable energy
vi

ABSTRACT

This working paper aims to advise developing countries on how to design a grid-connected battery energy
storage system (BESS), given that clear BESS design guidance is not yet fully available. This working
paper is based on the lessons learned from the design of Mongolia’s first grid-connected BESS, which
has an 80 megawatt (MW)/200 megawatt-hour (MWh) capacity. That BESS was designed to provide
load-shifting and frequency-regulation services to address technical issues caused by the growing
quantity of variable renewable energy (VRE) in the power grid. Drawing from the lessons learned, the
working paper also provides a hands-on design approach.

The beneficiaries of this paper include developing country governments, especially decision-makers
involved in BESS development plans. During BESS planning, decision-makers are likely to encounter
various design challenges because each BESS is unique and does not belong to any power supply service
category. The challenges are technical, such as determining storage-capacity sizing, as well as regulatory,
such as those related to ownership, safety regulations, sustainability, and commercial viability.

This paper recommends (i) sizing the BESS correctly; (ii) selecting a transmission company as the BESS
owner (because energy-storage services are not commercially viable, though they could eventually
benefit the public); (iii) listing the performance requirements instead of the technical specifications
in the tender document, as this will reduce the risk of overlooking the best BESS technology option;
(iv) developing BESS operational guidelines to reduce fire risk; and (v) developing an ancillary service
pricing policy and guidelines to help BESS services become financially viable in future. If these
recommendations are followed, the enabling environment for VRE deployment will be enhanced, leading
to accelerated decarbonization in developing countries.

The proposed knowledge solution will be most relevant when (i) countries are seeking to increase
their VRE shares and are at the same time heavily dependent on coal; (ii) domestic wholesale energy
markets are underdeveloped; and (iii) transmission networks are obsolete. Countries experiencing these
conditions, such as South Asian countries and Pacific Island states, are expected to benefit most from
this paper.

Keywords: battery energy storage, variable renewable energy

 I. INTRODUCTION

This working paper is based on the lessons learned from the design of Mongolia’s first grid-connected
battery energy storage system (BESS), which has an 80 megawatt (MW)/200 megawatt-hour (MWh)
capacity.1 It was challenging for Mongolia to decarbonize its heavily coal-dependent energy sector in
spite of the rich domestic renewable energy resources such as solar and wind energy resources. The total
installed variable renewable energy (VRE) capacity in power grids has been constrained by the limited
amount of regulation reserves and flexible generation. A reserve is typically provided by hydroelectric
or gas-fired thermal power plants, but none of these resources are found sufficient in Mongolia. The
project BESS will provide the reserve to remove the barrier to increase the VRE capacity.

This introductory chapter presents the paper’s expected beneficiaries and applicable conditions for the
proposed solution, but also briefly discusses the paper’s limitations. It gives an overview of Mongolia’s
current energy sector and shows how the BESS will contribute to decarbonizing the sector.

A. Objective

Transitioning to low-carbon and carbon-neutral societies has been a growing global trend. Many
governments have set carbon neutral targets to be achieved by 2050. Aligned with these targets, electric
vehicles have been replacing combustion-engine vehicles in the transport sector, while VRE sources,
such as solar and wind power, have been steadily expanding their shares of the energy sector. To expedite
VRE deployment, some power utilities have invested in energy storage as a means of addressing VRE’s
main technical issue: uncontrollable outputs that are subject to weather conditions. Energy storage fills
unexpected supply and demand gaps in energy supplies caused by intermittent VRE outputs.

Pumped storage hydropower plants have been the major energy-storage facility for several decades.
Their drawback, however, is a long construction time of typically 5 to 7 years. This can be a disadvantage
when it comes to keeping up with the growing VRE share of the power grids. A BESS requires a shorter
construction period of generally 1 to 2 years. Such systems are now becoming a major form of energy
storage thanks to significant cost reductions. Taking advantage of this opportunity, the Government
of Mongolia decided to install the country’s first utility-scale grid-connected BESS to accelerate the
decarbonization of Mongolia’s coal-dependent energy sector.

During a feasibility study for the BESS, the Government of Mongolia encountered various design
challenges. This was to be expected because few standardized design approaches fully cover the unique
BESS characteristics. For example, a BESS does not belong to the traditional power facility category, as
do power generators or transformers. As it not only produces, but also consumes electricity, Mongolia’s
existing energy laws and regulations were not applicable to BESS solutions. This fact creates various
difficulties for the design of BESS solutions, such as:

1
Asian Development Bank (ADB). 2020a. Mongolia: Energy Storage Option for Accelerating Renewable Energy Penetration.
Consultant’s report. Manila (TA 9569-MON). https://www.adb.org/sites/default/files/project-documents/51282/51282-
001-tacr-en.pdf
2 ADB East Asia Working Paper Series No. 62

(i) Ownership. Under the existing energy regulatory framework, a BESS can be owned by
a generation company, a transmission company, a distribution company, or even by a
consumer, due to its unique multi-value function. No single regulation fully covers the
multiple applications of BESS solutions.
(ii) Discharging tariff level. Because a BESS includes costly equipment, the ordinary
energy market price alone will not suffice to recover the investment cost. The balancing
market price could recover some of it, but balancing market prices are rarely available
in developing countries. The lack of such information makes it difficult for stakeholders,
such as regulators and BESS investors, to agree on adequate tariff levels. Developing
countries may be in a good position in this regard, however, because many of them
can already determine these prices through the operation of a sophisticated energy
balancing market.

As noted above, government planners need to base their BESS designs on amendments to the energy
laws and to the regulatory framework. As can be surmised, this process takes an enormous amount of
time and effort, including discussions and negotiations between the energy regulator, the transmission
system and market operator, and BESS investors.

Besides regulatory framework challenges, BESS planners may encounter technical challenges, including
the choice of battery chemicals such as lithium-ion (Li-ion) and sodium-sulfur (NaS). Intensive research
and development competition has caused even the best battery technology at certain times to become
quickly outdated. Lengthy public procurement procedures could lead to missing the introduction of new
and better battery technologies during bid evaluations if battery technical specifications listed in the
bidding document must be followed.

This working paper will serve as a guide for future BESS planners. It will help developing countries to
avoid spending an enormous amount of time and effort assessing optimal BESS designs. Accordingly,
more BESS solutions will be developed faster, thus enabling more VREs to be connected to power grids
and expediting the achievement of carbon neutral targets.

The expected beneficiaries of this paper are developing country governments, especially policy
makers and energy regulators and other energy-related government agencies involved in preparing
BESS development plans. The proposed knowledge solution will be most applicable when countries
are aiming to increase their VRE share and still heavily dependent on coal; domestic wholesale
energy markets are underdeveloped; and transmission networks are obsolete. Countries with these
conditions, such as South Asian countries and Pacific Island states, are expected to benefit most
from the paper.

A limitation of this working paper is that it covers only grid-connected BESS solutions—specifically,
those concerning power-transmission grids. Systems located behind meters, together with renewable
energy plants, fall outside the scope of this paper, as do systems located in power-distribution grids.

B. Background

Mongolia’s heavily coal-dependent energy sector needs a BESS to achieve its decarbonization target.

Coal-dependent energy system. As of end 2021, Mongolia had 1,549 megawatts (MW) of installed
power generation capacity. The country’s energy mix included coal-fired combined heat and power
(CHP) plants totaling 1,269 MW (81.9%), renewable energy sources totaling 271.2 MW (17.5%), and
diesel power sources totaling 8.6 MW (0.6%). The central energy system (CES) grid—which covers
the major load centers, including Ulaanbaatar, the capital of Mongolia—accounted for 90.4% of the
 Designing a Grid-Connected Battery Energy Storage System 3

country’s electricity consumption in 2021.2 Since the country has limited access to natural gas resources,
its energy system is the most heavily dependent on coal among all the developing member countries of
the Asian Development Bank (ADB). In 2021, coal-fired CHP plants constituted 90.5% of total power
generation in the CES grid. About two-thirds of Mongolia’s greenhouse gas (GHG) emissions were from
the energy sector.

Decarbonizing the energy sector. Mongolia’s nationally determined contribution3 estimated that the
country’s GHG emissions under a business-as-usual scenario would grow to 51.5 million metric tons of
carbon dioxide (MTCO2) by 2030, of which the energy sector’s share would be 81.5%.4 The government
has set a GHG emissions reduction target of 7.3 million MTCO2 by 2030, of which 4.9 million MTCO2
would come from reduced power generation.

Renewable energy potential. To achieve its GHG emissions reduction target, the government will seek
to increase renewable energy’s share of total installed capacity to 30% by 2030, in line with “Vision 2050,”
its long-term development program.5 Mongolia has abundant renewable energy resources, especially
wind and solar, which is equivalent to 2,600 gigawatts. The country’s renewable energy capacity must
reach 540 MW by 2030 to meet the target specified in Vision 2050.

Private renewable energy investment. The government has implemented energy sector reforms
to attract private sector investment in renewable energy. Since Mongolia’s energy sector reform in
2001, the CES has been unbundled into generation, transmission, and distribution subsectors; and
the government has introduced a single-buyer model for market-oriented sector operations. The Law
on Investment was amended in 2015 to support private sector investment in energy infrastructure.
Enacted in 2007, the Law on Renewable Energy aimed to increase the use of renewable energy in
Mongolia and to regulate its generation and supply; it has since enabled sizable private sector
investments in renewable energy.

Following an expansion of renewable energy facilities funded by the private sector and a reduction
in renewable energy prices, the Law on Renewable Energy was amended in 2019 to promote the
competitive procurement of renewable energy. This amendment reduced the upper limits of solar and
wind energy tariffs and removed the lower limits. The government introduced Vision 2050 to encourage
synergized operations among the different sectors. Approved in May 2020, the Vision 2050 program
takes an integrated approach to development that encompasses all sectors of the economy, leading
to the replacement in 2021 of all sector-specific development policies by the same key clauses in the
program.

Grid absorption limitations to evacuate renewable energy. Although Mongolia’s potential renewable
energy resources are more than enough to satisfy the country’s future power demand, they have played
only a marginal role thus far.6 VRE plants producing a total of only 245 MW have been commissioned,
despite the fact that private sector renewable energy projects, with a current approved capacity of about
1,242 MW, have been licensed as part of the CES.7 This is because the total installed VRE capacity in
power grids has been constrained by the limited amount of regulation reserves and flexible generation.

2
Government of Mongolia, Energy Regulatory Commission of Mongolia. 2022. Statistics on Energy Performance 2021.
Ulaanbaatar.
3
According to the United Nations, “A Nationally Determined Contribution is a climate action plan to cut emissions and
adapt to climate impacts.” United Nations. 2023. Climate Action.
4
United Nations Framework Convention on Climate Change. 2015. Intended Nationally Determined Contribution (INDC)
Submission by Mongolia to the Ad-Hoc Working Group on the Durban Platform for Enhanced Action (ADP) Bonn.
5
The Government of Mongolia. 2020. Vision-2050 long-term development policy of Mongolia. Ulaanbaatar.
6
The total installed renewable energy capacity was 241.2 MW in 2019 and 271.2 MW in 2020 and 2021.
7
This comprises 155 MW of wind power and 90 MW of solar photovoltaic power.
4 ADB East Asia Working Paper Series No. 62

As mentioned in Section A under Chapter I, the unexpected energy supply–demand gap caused by VRE
outputs needs to be filled by regulation reserve-like energy storage. A reserve is typically provided by
hydroelectric or gas-fired thermal power plants in addition to energy storage. Because the CES lacks
these types of power plants, this problem will continue to loom as grid absorption remains limited.
Coal-fired CHP plants—Mongolia’s dominant power suppliers—are not suitable as regulation reserves
because they are slow to increase and decrease their output upon request. Mongolia’s renewable energy
investment plan in 2015 estimated a maximum grid absorption capacity of 50 MW for wind power,
though the current total installed capacity of wind power is 155 MW, exceeding maximum capacity.
Therefore, the new connections of wind and solar photovoltaic power plants have curtailed the output
of renewable energy.8 Given stalled hydropower investment and lack of access to natural gas, which is
needed to develop fast-responding power plants, battery storage has become the best available option
for Mongolia to swiftly support the evacuation of renewable energy into the country’s energy system,
which is currently inflexible and dominated by coal.9

Technical assistance support for Mongolia. Upon the government’s request, ADB provided
knowledge and support technical assistance on energy storage options for Mongolia to address the
absorption-limit problem described above.10 The technical assistance led to an optimal BESS design to
address the problem. The resulting BESS will serve this goal in multiple ways, including:

(i) Enhanced frequency regulation support to counter the intermittency of large-scale

wind and solar photovoltaic farms, thus maintaining the energy supply stability of the
CES grid.
(ii) Load shifting to be able to utilize renewable energy that would have otherwise been
curtailed, and to meet peak demand (Figure 1).
(iii) Stand-by reserve in the event of a loss of a critical power generation unit.

These operation modalities are related to different timescales. For instance, enhanced frequency
regulation is a short-term solution, whereas load shifting is medium term in nature.

The government began developing the country’s first utility-scale BESS with ADB support. (Table 1).11

8
By 2018, the total installed capacity of wind power was 155 MW, exceeding the technical grid absorption limit of 50 MW
without curtailment. At 105 MW, the total installed capacity of solar photovoltaic power is below the 125 MW grid absorption
limit without curtailment.
9
To address this problem of grid absorption limits, the government has been working to develop hydropower plants.
The projects, however, have not moved forward due to concerns about environmental impacts and water levels in
downstream basins.
10
ADB. 2018c. Technical Assistance to Mongolia for the Energy Storage Option for Accelerating Renewable Energy Penetration.
Manila.
11
ADB. 2020b. Report and Recommendation of the President to the Board of Directors. Proposed Loan and Administration of Grant.
Mongolia: First Utility-Scale Energy Storage Project. Manila.
 Designing a Grid-Connected Battery Energy Storage System 5

Figure 1: Daily Power Supply-and-Demand Central Energy System

CHP = combined heat and power, MWe = megawatt electric (1 million watts of electrical capacity), PP = power plant,
PV = photovoltaic.
Notes:
1. The data in this figure are based on a simulation for 2022.
2. The values along the horizontal axis indicate the hours during a theoretical day for which energy supply and demand were
estimated.
Source: Asian Development Bank. 2020. Mongolia: Energy Storage Option for Accelerating Renewable Energy Penetration.
Consultant’s report. Manila (TA 9569-MON).

Table 1: Overview of the First Utility-Scale Energy Storage Project in Mongolia, 2020–2024

Item Description
Period From April 2020 to September 2024
Scope Output 1: Large-scale advanced BESS (125 MW/160 MWh) installed a
Output 2: Institutional and organizational capacity enhanced by
(i) developing O&M regulations for the BESS,
(ii) developing an ancillary service pricing policy and guidelines,
(iii) providing training for NDC and NPTG staff, and
(iv) disseminating project knowledge and lessons to other developing countries.
Owner NPTG

BESS = battery energy storage system, MW = megawatt, MWh = megawatt-hour, NDC = National Dispatching Center,
NPTG = National Power Transmission Grid, O&M = operation and maintenance.
a
The BESS capacity was later changed to 80 MW/200 MWh on the government’s request, taking into account the commission
of new wind farms. The government estimated that the curtailed amount would be increased to around 200 MWh on average.
The government also estimated that 80 MW would be sufficient to cover the largest unit losses of active power generation.
Source: Asian Development Bank.
6 ADB East Asia Working Paper Series No. 62

The BESS is intended to supply clean peaking power charged by electricity from renewable energy
sources without curtailment. The regulation reserve for the BESS would enable an additional 350 MW
VRE capacity to be integrated into the CES transmission grid. Upon the start of BESS operations, 44
gigawatt-hours (GWh) of clean peaking power will be supplied and an additional 859 GWh of renewable
energy will be integrated into the CES grid annually. These would result in the reduction of 842,039 tons
of carbon dioxide emissions annually by 2025. The project will also indirectly support the promotion of
electric heating in ger (traditional tent) districts in Ulaanbaatar through the supply of clean electricity
during winter peak demand time, which is one of the major policy actions in the National Program for
Reducing Air and Environment Pollution, 2017–2025.12 In addition, the BESS would help strengthen
energy supply reliability by providing a standby reserve in case of power generation unit loss.

During the BESS design the government encountered various challenges as described in Section A under
Chapter I and identified viable countermeasures. These important lessons are valuable and provide
practical solutions for BESS planners in other developing countries.

C. Structure of the Paper

This section guides readers with specific interests. Readers who have little time are advised to review Box
2: Summary of Policy Recommendations in Chapter III. It summarizes the typical BESS design challenges
and the proposed solutions. The other readers with specific interests are advised to move to individual
sections under Chapter II. It presents typical challenges that BESS planners may encounter during the
design stage and proposes solutions. These challenges can be technical in nature or involve government
regulatory policies.

II. DESIGN CHALLENGES AND SOLUTIONS

This chapter presents the major technological and regulatory-policy challenges likely to be encountered
in developing countries during the design of a grid-connected BESS, including practical solutions to
address these challenges. The Government of Mongolia has encountered challenges that include (i)
selecting the right battery technology and optimally sizing the BESS to ensure clean energy charging,
(ii) determining BESS ownership, (iii) appropriate charging and discharging tariff levels, (iv) BESS safety
regulations, and (v) the handling of used battery cells.

The described design approach will allow countries to significantly reduce their processing time for
BESS development. Although various studies include BESS design approaches, they tend to provide
general guidance.13 This working paper presents a more hands-on design approach based on the actual
experience of designing a BESS in Mongolia.

12
Government of Mongolia. 2017. National Program for Reducing Air and Environment Pollution, 2017–2025. Ulaanbaatar; and
ADB. 2018b. Report and Recommendation of the President to the Board of Directors. Proposed Policy-Based Loan. Mongolia:
Ulaanbaatar Air Quality Improvement Program. Manila.
13
ADB. 2017. Energy Storage in Grids with High Penetration of Variable Generation. Manila.
 Designing a Grid-Connected Battery Energy Storage System 7

A. Sizing and Location

1. Sizing

Policy question: Would the BESS store only renewable energy?

Recommendation: Set the BESS capacity at a level that would include the amount of renewable energy
that would have otherwise been curtailed.

Energy capacity. The first challenge is the need to identify the optimal BESS sizing for storing clean
energy. A BESS has both energy and power capacity. Energy capacity is the maximum amount of energy
that can be stored by the BESS, measured by kilowatt-hours. The energy capacity defines the total
electricity in kilowatt-hours to be stored in the system. In general, once the electricity is evacuated to
the grid, it is not possible to differentiate between electricity generated by renewable energy sources and
that generated by nonrenewable energy sources. As Figure 2 shows, over 70% of electricity in Mongolia
is fueled by coal.

Figure 2: Mongolia’s Power Supply Mix

(GWh)

1,861.8

563.0

156.9
83.1
1.1

7,109.6

Coal fired combined Heat and Power Plants Solar PV

Diesel Generator Wind Power
Hydro Power Electricity Import

GWh = gigawatt-hour, PV = photovoltaic.

Source: Prepared by Asian Development Bank based on Energy Regulatory Commission of Mongolia. 2022. Statistics on Energy
Performance 2021. Ulaanbaatar.

To ensure the charging of clean energy only, the energy capacity of Mongolia’s BESS is matched to the
total amount of electricity from renewable energy plants, mainly wind farms, that would have otherwise
been curtailed. The list of major wind-power generation plants in the CES is provided in Table 2.
8 ADB East Asia Working Paper Series No. 62

Table 2: Major Wind Power Plants in Mongolia’s Central Energy System

(MW)

Location Installed Capacity

Salkhit 50
Tsetsii 50
Sainshand 55

MW = megawatt.
Source: Asian Development Bank. 2020. Mongolia: Energy
Storage Option for Accelerating Renewable Energy Penetration.
Consultant’s report. Manila (TA 9569-MON).

The wind power generation pattern in the CES (Figure 3) results in supply surpluses during the off-
peak hours of early morning. The amount exceeding the demand must be either curtailed or exported.
This will result in economic inefficiency, because the wind power generation is contracted on a take-or-
pay basis. Accordingly, the BESS would be potentially charged by wind energy that would normally be
curtailed and would discharge that energy during the evening peak hours.

Figure 3: Pattern of Wind Power Generation in Mongolia’s Central Energy System

MWe = megawatt electric.

Notes:
1. The data reflect the conditions in 2018.
2. The values along the horizontal axis indicate the hours during a theoretical day for which energy supply and demand
were estimated.
Source: Asian Development Bank. 2020. Mongolia: Energy Storage Option for Accelerating Renewable Energy Penetration.
Consultant’s report. Manila (TA 9569-MON).
 Designing a Grid-Connected Battery Energy Storage System 9

To estimate the optimal BESS size, a power system simulation was performed, modelling the charging
and discharging regime based on the typical daily CES supply and demand profiles provided by the grid
system operator, the National Dispatching Center (NDC), for each month in 2018. As the maximum
charging amount was calculated at 152 MWh (Table 3), the analysis concluded the optimal BESS energy
capacity to be 160 MWh.

Table 3: Expected Peak Reductions, Charges, and Discharges of Energy

Peak Reduction Charge Discharge

Month (MW) (MWh) (MWh)
Jan 56 144 120
Feb 39 149 132
Mar 52 137 134
Apr 47 150 148
May 37 149 130
Jun 33 152 136
Jul 39 146 138
Aug 25 151 135
Sep 0 0 0
Oct 34 135 125
Nov 59 127 129
Dec 52 149 134
Maximum 59 152 148

MW = megawatt, MWh = megawatt-hour.

Source: Asian Development Bank. 2020. Mongolia: Energy Storage Option for
Accelerating Renewable Energy Penetration. Consultant’s report. Manila
(TA 9569-MON).

Table 3 also shows that the discharged power from the BESS would help reduce the necessary supply
capacity during the peak hours by a maximum of 59 MW. As shown in Figure 4, the shrinking supply and
demand gap in the CES has been an urgent issue. The BESS can mitigate this supply shortage risk by
providing additional peak capacity of more than 59 MW during peak hours.

Power capacity. Power capacity is the maximum power that a BESS can provide, measured in kilowatts.
It matters when designing grid-stability applications because it defines the level of power that can be
instantaneously provided to the electricity grid. The determination of the power capacity of Mongolia’s
BESS was based on two factors: the required regulation reserve for accommodating additional VRE to
the CES, and the required standby reserve in case of any grid event.

Regulation reserve. Due to the fluctuating output, the integration of renewable energy into existing
energy grids requires a corresponding regulation reserve to fill the gap between demand and intermittent
supply from VRE sources. The CES has a limited regulation reserve that mostly relies on imported power,
as most domestic power is generated by coal-fired energy plants, whose response to changes in power
is not fast enough to balance supply and demand in a timely manner. The necessary reserve margin is
calculated based on the possible gap between the actual and the forecasted renewable energy output.
Thanks to improved commercially available forecasting technology, 10% of forecasted renewable energy
10 ADB East Asia Working Paper Series No. 62

Figure 4: Forecasted Supply and Demand Balance

in Mongolia’s Central Energy System, 2015–2030
(MW)

2500
CES Capacity Surplus / Deficit
Total CES Firm Capacity (including the import from the Russian Federation)
Total CES Required Capacity (including the reserve margin)
2000

1500 1434
1189 1215

1000 828

500
194 203
24 57 25
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
–26 –59
–150 –230 –299
–500 –373
–450
–532
–618
–709
–1000 –891

–1500

CES = central energy system, MW = megawatt.

Source: ADB. 2020. Report and Recommendation of the President to the Board of Directors: Proposed Loan to Mongolia for the First
Utility-Scale Energy Storage Project. Sector Assessment. Manila.

output on average would be sufficient as the reserve margin. To meet the 2030 renewable energy share
target, the required regulation reserve margin was estimated at less than 50 MW.

Standby reserve. To secure a stable power supply, the standby reserve capacity was estimated based
on the commonly used criterion for reliability: the N-1 standard criterion. Considering the installed
capacity of the largest power generation unit in the CES grid, 125 MW was designated as the optimal
standby reserve capacity.14 Because the estimated standby reserve capacity is larger than the estimated
regulation reserve capacity as seen above, the power capacity of the BESS was set at 125 MW.

14
N-1 standard criterion is a design philosophy to enable the stable power supply in case of loss of a single power facility, such
as a transformer and a transmission line.
 Designing a Grid-Connected Battery Energy Storage System 11

In conclusion, the BESS capacity was 125 MW/160 MWh.15 Table 4 summarizes the major applications
of the BESS in Mongolia.

Table 4: Major Applications of Mongolia’s Battery Energy Storage System

Application Size Factor

Load shifting. Charging surplus renewable energy, mainly during off-peak hours, and discharging peak Energy capacity
power supply. This supports the government’s efforts to achieve its renewable energy share target, and
helps reduce the need for investments in additional power generation required for peak hours.
Enhanced frequency regulation. This enables additional VRE sources to be connected to the power grid Power capacity
(350 MW additional wind; 150 MW solar photovoltaic by 2030).
Standby reserve. This mitigates widespread blackout risk, improving power supply reliability. Power capacity

MW = megawatt, VRE = variable renewable energy.

Source: ADB. 2020. Mongolia: Energy Storage Option for Accelerating Renewable Energy Penetration. Consultant’s report. Manila
(TA 9569-MON).

Development of wind power plants. Additional regulation reserve like that from a BESS
is needed to connect a new renewable energy plant to the existing grid (photo by ADB).

To enable different applications of the BESS to work properly, it is recommended that the system’s
capacity be divided by application, such as load shifting and frequency regulation, within different time
frames. This arrangement would be possible because a BESS comprises multiple battery modules, which
are controlled by a battery power management system (BPMS). For example, if a BESS is intended to
focus more on load shifting than on frequency regulation, 70% of a BESS capacity could be used for

15
The BESS capacity was later changed to 80 MW/200 MWh on the government’s request, considering the commission
of new wind farms. The government estimated that the curtailed amount would be increased to around 200 MWh on
average. The government also estimated that 80 MW would be sufficient to cover the largest unit losses of active power
generation.
12 ADB East Asia Working Paper Series No. 62

load shifting, and 30% for frequency regulation. This arrangement would also ensure safety when using
the BESS for multiple applications. In this regard, the design of a BPMS is critical for the BESS operation
safety. BESS designers need to carefully consider the design of the BPMS, so the system can effectively
coordinate the different applications.

Points for developing countries to consider. The size of the BESS should reflect its primary
objective. As the primary objective of the Mongolian BESS was to utilize renewable energy that
would normally be curtailed, the system’s energy capacity was designed to be the same as the
amount of the renewable energy that would have been curtailed. If there is a different primary
objective (e.g., mitigation of supply shortages during peak hours), a different approach should be
considered—for instance, providing sufficient energy capacity during peak hours.

2. Location

Policy question: Where would the BESS generate the greatest benefits?

Recommendation: As BESS applications for VRE curtailment reduction and load shifting are location
specific, the optimal BESS locations are close to VRE stations and to the largest demand centers.

The project BESS aims to support the connection of more VRE to the entire CES, which covers more than
90% of energy demand in Mongolia, including in Ulaanbaatar. Based on the power system analysis, the
Songino substation, which is around 30 kilometers to the west of Ulaanbaatar city center, was identified
as the optimal location for maximizing the impact of the BESS applications (Figure 5). This is because
the Ulaanbaatar city center is the CES’s largest demand center and is also close to major wind farms. The
power system analysis concluded that these geographical features would maximize the impact of the
BESS on renewable-energy curtailment reduction and on load shifting.

Points for developing countries to consider. BESS applications for VRE curtailment reduction
and load shifting are location specific, while BESS applications for frequency regulation are non-
location specific. The selection of a BESS location needs to consider both location-specific and
non-location specific applications, so that the overall BESS impact can be maximized.

B. Implementation Arrangement

Policy question: Who will provide the energy storage service?

Recommendation: Existing regulations in many countries allow provision by a transmission company or

public utility. Moreover, energy storage services are not yet commercially viable.

The ownership and operation of a BESS is a challenge. Although the cost of battery modules has
been decreasing significantly, BESS storage services are not yet commercially viable. Based on
research covering developed countries, mainly Australia and the United States (US), it was found
that BESS projects are usually either financially supported by governments or shouldered by rate
payers (Box 1).
 Figure 5: Mongolia’s Energy Systems
Designing a Grid-Connected Battery Energy Storage System

Source: ADB. 2020. Mongolia: Energy Storage Option for Accelerating Renewable Energy Penetration. Consultant’s report. Manila (TA 9569-MON).
13
14 ADB East Asia Working Paper Series No. 62

Box 1: Implementation of Battery Energy Storage Systems in Developed Countries

Battery energy storage system (BESS) implementation solutions are under development in
developed countries such as Australia and the United States. Our analysis referred primarily
to Australian knowledge products. These products offer a variety of lessons learned from the
country’s BESS development experience, including the Ballarat BESS (the Ballarat System).

The Ballarat System was commissioned in the state of Victoria in 2018. Installed at the Ballarat
Terminal Station, it has a 30 MW/30 MWh capacity. It is owned by a transmission company,
AusNet Services, which has a contract with a generation company, EnergyAustralia, that grants
it the right to charge and discharge the BESS into the country’s energy market.

The Ballarat System earned significant revenues from the country’s energy market and from the
Frequency Control Ancillary Services market in 2019. However, its knowledge-sharing report
notes that the revenues from these markets would not be enough to support a viable business
without government funding. The Ballarat System was granted $25 million governmental funding
for investment. In general, the major driver for the BESS installation is the need to secure the
frequency regulation reserve, in order to facilitate the connection of further sources of variable
renewable energy to the transmission grid. For this reason, public financing contributions have
been made toward the development of the BESS (e.g., through government subsidies or the
retail tariff).

Figure: Implementation Arrangement of the Ballarat System

Use of Service
Agreement AEMO
GENCO
Energy and FCAS Markets
(EnergyAustralia)

Battery Storage EnergyAustralia

Services Agreement - Owns the right to operate the BESS in the NEM.
- Registered as a market generator and market customer.
- Holds licenses to sell electricity on the wholesale market.

TRANSCO
BESS Investor (AusNet)
(with government
subsidy) - AusNet owns the BESS.

AEMO = Australian Energy Market Operator, BESS = battery energy storage system, FCAS = Frequency Control Ancillary
Services, GENCO = generation company, NEM = National Electricity Market, TRANSCO = transmission company.
Source: AusNet Services.

MW = megawatt, MWh = megawatt-hour.

Source: The Consortium represented by AusNet Services Group. 2021. Knowledge Sharing Report: Ballarat Battery
Energy Storage System; Network Revenue Opportunities for Ballarat Battery Energy Storage. Southbank.

In Mongolia, because the BESS is expected to maintain power supply reliability against the growing
number of VRE connections to the grid, it was agreed that the state-owned transmission company, the
National Power Transmission Grid, owns and operates this first grid-connected BESS. As the BESS is a
transmission asset, its costs are recovered via the transmission tariff. In any case, the cost to ratepayers
is marginal, estimated to increase the retail tariff by less than 2%.
 Designing a Grid-Connected Battery Energy Storage System 15

Similar arrangements for energy storage services are found in other countries, such as Italy and the
People’s Republic of China. In Italy, Terna S.p.A., an independent transmission system operator
responsible for the national electricity transmission system, operates a 35 MW sodium-sulfur
(NaS)-based BESS to address transmission congestion, mainly caused by renewable energy plants.
Further comprehensive ownership analysis can be found in various studies.16

Mongolia’s BESS project could consider earning financial revenues, as is done in Australia. However,
this is not currently feasible, as Mongolia does not offer similar market conditions and mechanisms. Its
energy sector uses a single-buyer model in which the NDC is the single off-taker. In contrast to developed
countries such as those in Europe and the US, an ancillary service market is not in place in Mongolia.

Points for developing countries to consider. The ownership of BESS, with its financial recovery
model, should consider factors such as the maturity of the domestic energy market. If the energy
market has matured enough to provide revenue opportunities (e.g., via the energy or Frequency
Control Ancillary Services markets), the arrangement in Australia would be worth exploring.

C. Procurement

The third challenge is the design of the procurement document, which features two key items: technical
specifications and the treatment of used battery modules.

1. Technical Specifications

Policy question: What battery technology should be specified in the procurement document?

Recommendation: The procurement document should include performance requirements rather than
technological specifications. This will prevent overlooking the best technology option at the time of bid
evaluation, which could happen if the technology landscape changes rapidly.

The selection of the right battery technology or chemical material needs careful attention because
various battery technologies (and chemicals) are on the market, and they all have their own advantages
and disadvantages.17 What makes the selection complicated is the fact that the technologies have been
making fast progress, causing a rapid change in the advantages they offer. Depending on the expected
benefits, such as load shifting and grid stabilization, the right battery technology can be selected. Some
battery technologies are well suited to load shifting, for instance, because they can store a large amount of
electricity, while other battery technologies are a good fit for grid stabilization because they can produce
high power instantaneously. Due to emerging competition and advances in battery development, the
current competitive landscape will keep changing quickly over time. In the current market, lithium-ion
(Li-ion) batteries are the dominant technology for utility-scale grid storage, while other technologies,
such as NaS batteries and redox flow batteries, also have proven track records in the market.

Li-ion batteries are considered the most beneficial choice in terms of both technology and economy
for utility-scale grid energy storage. They are often selected for grid stabilization purposes because
they provide ancillary services. The characteristics of the Li-ion technology have made it well-suited

16
World Bank. 2020. Deploying Storage for Power Systems in Developing Countries: Policy and Regulatory Considerations.
Washington, DC.
17
ADB. 2018a. Handbook on Battery Energy Storage System. Manila.
16 ADB East Asia Working Paper Series No. 62

for fast-response applications like frequency regulation. Li-ion technologies also vary in their chemical
components. These components include lithium nickel manganese cobalt oxide (LiNiMnCoO2 or NMC),
lithium iron phosphate (LiFePO4), and lithium titanate (Li4Ti5O12 or LTO). Lithium nickel manganese
cobalt oxide is one of the most used chemicals in grid-scale energy systems. Lithium iron phosphate,
on the other hand, can be purchased at a low cost for a high-power density, but is typically applicable
to a more limited set of applications due to its low energy capacity and elevated self-discharge levels.
Lithium titanate has a high-power density and one of the highest cycle lifetimes, thanks to a stable Li-ion
component. However, it has a much lower energy density and much higher average cost.

NaS batteries are characterized by the longest durations on the market, long cycle lives, fast response
times, and a high energy density. NaS batteries, a type of molten-salt battery, are a mature technology,
and the system cost has generally leveled off.

Vanadium redox batteries (VRBs), or vanadium flow batteries, are based on the redox reaction between
the two electrolytes in the system (“redox” is a portmanteau of reduction-oxidation). VRBs use a
liquid electrolyte for charge-discharge reactions. Because the liquid electrolyte is placed externally and
pumped through the cell, an inexpensive boost in the battery’s energy capacity can be achieved. The
large liquid-solution containers do, however, limit the VRB to stationary storage applications. These
systems are relatively new to the battery industry but are solidifying their place in the market. The zinc
bromine (ZnBr) battery utilizes a flow battery technology that is similar to the one used by VRBs.

Although the response time of VRBs may not be rapid enough for fast-response applications like
regulation reserve, further research and development may reduce this limitation. As shown in Tables 5
and 6, some battery technologies are good at frequency regulation, while others are good at long-term
storage; these differences result in varying cost structures.

Table 5: Battery Storage Performance Comparison

Parameter/Technology NMC LTO NaS VRB

Power capability SOC upper limit 90% 98% 90% 95%
SOC lower limit 10% 10% 10% 5%
Recharge rates 1C 3C–1C 1C–0.5C 1C–0.25C
Round trip efficiency 77%–85% 77%–85% 77%–83% 65%–78%
Availability Uptime 97% 96% 95% 95%
Carve outs 72 hr/yr 72 hr/yr 72 hr/yr 1 wk/yr
Energy capacity Energy applications 30%–40% 15%–25% 15%–30% 5%–10%
degradation Power applications 10%–20% 5%–15% 5%–15% 5%–10%
Expected life Years 10 10 15 10
Cycles 3,500 15,000 4,500 5,000

C = C-rate, hr = hour, LTO = lithium titanate, NaS = sodium-sulfur, NMC = lithium nickel manganese cobalt oxide, SOC = state of
charge, VRB = vanadium redox battery, wk = week, yr = year.
Notes:
1. The data in this table are from 2017.
2. Regarding “C-rate” recharge rates, charging at a rate of 1C means that a battery starting at 0% power is 100% charged in one hour.
Source: ADB. 2020. Mongolia: Energy Storage Option for Accelerating Renewable Energy Penetration. Consultant’s report. Manila
(TA 9569-MON).
 Designing a Grid-Connected Battery Energy Storage System 17

Table 6: Installation and Commercialization Data

System Attributes NMC LTO NaS VRB

Typical project size (kW) 6,500 2,000 6,000 4,000
Typical project size (kWh) 15,000 1,300 40,000 14,000
Largest project size installed (kW) 30,000 40,000 50,000 15,000
Largest project size installed (kWh) 60,000 40,000 300,000 60,000

kW = kilowatt, kWh = kilowatt-hour, LTO = lithium titanate, NaS = sodium-sulfur, NMC = lithium nickel
manganese cobalt oxide, VRB = vanadium redox battery.
Note: The data in this table are from 2017.
Source: ADB. 2020. Mongolia: Energy Storage Option for Accelerating Renewable Energy Penetration.
Consultant’s report. Manila (TA 9569-MON).

As noted, these technologies are evolving. The data in these tables are based on information that was
publicly available in 2017. While NaS was the best for large-scale storage in 2017 (50 MW), the largest
installed BESS in operation in 2020 was at the Li-ion based Hornsdale plant in Australia (100 MW).18
As also already noted, the borderline between battery technologies is changing. The latest data on BESS
plants in operation can be found in the storage database maintained by the US Department of Energy.19

For these reasons, if the battery technology is specified at the tendering stage, there will be a risk of
disqualifying a potentially better battery technology during the bid evaluation process. To avoid this,
the tender document should list the performance requirements (e.g., charge and discharge capacity,
round-trip efficiency), instead of technology specifications (e.g., battery chemistry). This would enable a
BESS project to efficiently achieve the expected benefit without overlooking better battery-technology
options.

Points for developing countries to consider. After determining the values and functions
expected for a BESS, identify the right battery technology option. Check if the technology
landscape is stable or is changing rapidly. If changing rapidly, it may be better to indicate the
performance requirements instead of the technology specifications in the tender document.

2. Treatment of Used Battery Modules

Policy question: How should used battery cells be treated?

Recommendation: The procurement document can stipulate that battery suppliers are responsible for
the disposal of damaged and used battery cells.

Another major challenge in BESS procurement is the disposal and recycling of used battery modules.
Spent battery cells from a BESS need to be recycled or properly treated and disposed of. The US federal
government classifies Li-ion batteries as nonhazardous waste, according to the US National Recycling
Council. They are regarded as safe for disposal in the normal municipal waste stream.20 The metals used
for Li-ion batteries include cobalt, copper, nickel, and iron, which are considered safe for landfills and

18
Aurecon. 2018. Hornsdale Power Reserve: Year 1 Technical and Market Impact Case Study. Melbourne.
19
Government of the United States, Department of Energy (DOE). DOE Global Energy Storage Database (accessed
27 October 2021).
20
The US Environmental Protection Agency (EPA) does not regulate the disposal of batteries in small quantities. However,
large quantities are regulated under the Universal Rules of Hazardous Waste Regulations (40 CFR PART 273).
18 ADB East Asia Working Paper Series No. 62

incinerators. But the preferred option for used Li-ion batteries is recycling or disposal. In Mongolia, Li-
ion batteries are classified as hazardous.

As appropriate recycling facilities are not available in many developing countries, battery suppliers
tend to be responsible for the recycling or disposal of battery cells. Mainly due to the complexity of
the battery recycling process, the popular practice is for BESS suppliers to replace the used battery
cells with new ones.

This practice would be also suitable for Mongolia because the country does not have any known Li-ion
(or other chemical-based) battery recycling facilities. Faulty or used Li-ion batteries could thus be
recovered, transported to, and recycled in an appropriate facility in the region by the BESS suppliers.
The export of the Li-ion battery cells would require the permission from the government authority, the
Special Commission for Hazardous Waste Management, under the Ministry of Nature, Environment and
Tourism. The project bidding documents can stipulate that the battery supplier is responsible for the
disposal of damaged and used battery cells.

As no suppliers are free from bankruptcy risk before the battery cell life ends, a separate tender on the
replacement of used battery modules may be considered at the end of the battery lifetime. Mongolia
is expected to establish domestic recycling facilities as a permanent solution. Similarly, environmental
regulations on spent battery cells need to be enhanced in order to promote the development of BESS
solutions in future.

Points for developing countries to consider. If no battery recycling facilities are available in the
country, the procurement document can stipulate that the battery suppliers are responsible for
the disposal of faulty or used batteries. Another option would be to issue a separate tender to
replace a battery at the end of its lifetime.

D. Operational Sustainability

Policy question: How can the operational risks of a BESS be mitigated and its benefits made sustainable?

Recommendation: BESS operation and maintenance (O&M) regulations need to be developed (i) to
avoid overcharging and overdischarging during the operation of the BESS and (ii) to set aside funding for
future battery replacement and overhaul.

Ensuring BESS operational sustainability is another big challenge. Because the project BESS would be
the first in Mongolia, no operational guidelines for the BESS are available. The BESS project will therefore
have to develop the relevant regulations and guidelines to minimize risks during BESS operation,
especially the fire and financial risks involved in overhauling battery modules. The regulations should aim
to (i) prevent the shortening of battery life by overcharging and overdischarging, which are also major
causes of fires and explosions and (ii) secure the necessary funds to overhaul battery packs or replace
after 13 to 15 years of operation.

1. Fire Risk

Given that batteries carry the risk of fire and explosions in cases of overcharging, overdischarging, excess
current, or short circuits, adequate fire-protection systems need to be carefully designed during the
planning stage. To mitigate risk, safety must be an important aspect of design, not only at the cell level,
 Designing a Grid-Connected Battery Energy Storage System 19

but also at the module, pack, and final product levels. Neglecting safety at any level will potentially result
in more severe accidents, though no consistent standards or parameters for assessing battery safety are
currently available. A battery-protection system is an important way to improve safety and to minimize
the severity of accidents if they do occur.

Developing regulations for the design stage will not be enough to mitigate the risk of fire, because
fires can occur at the BESS operation stage, too. As noted above, fires or explosions can be triggered
by overcharging and overdischarging battery modules. Both overcharging and overdischarging can be
caused by the pursuit of profits from energy arbitrage trading in markets, so BESS O&M regulations need
to be developed and obeyed by BESS operators to mitigate the risk of fire.

2. Financial Risk of Overhauling Battery Modules

Due to the shorter lifetimes of battery modules compared with those of traditional power facilities, such
as transformers, their replacement needs to be planned well in advance, including financing. Power
converters and battery cells generally have to be replaced after 13 to 15 years of operation, so O&M
regulations should require that a fund for the purpose be established by the BESS owner.

A point for developing countries to consider. If existing laws do not include the necessary
regulations for O&M of a BESS, the government should develop such regulations and require
BESS operators to comply with them.

3. Lack of BESS Operation Experience

Policy question: How should the lack of BESS operation experience be addressed?

Recommendation: This challenge can be addressed by providing intensive capacity building to frontline
engineers or by outsourcing the O&M contract to experienced third parties.

A lack of experience with BESS operations

is another major challenge when it comes to
making BESS benefits sustainable. While some
international BESS development projects in
developed countries outsource their O&M
to overseas contractors, it is preferable for
developing countries to have their domestic
utility staff master O&M skills over the long term.

Mongolia’s BESS project envisages the

engagement of a BESS development
contractor to provide O&M support services
and technology transfer during the BESS
startup period, which will comprise the
construction of the BESS and the first 2 years
of operation. During this time, the contractor Workshop for utility personnel (photo by ADB).
will provide skilled staff to run the BESS, as
well as classroom and on-the-job training to
the frontline NDC and National Power Transmission Grid personnel, to prepare them to take over the
operation of the BESS at the end of the startup period.
20 ADB East Asia Working Paper Series No. 62

Points for developing countries to consider. The government will have to decide whether
to prioritize the training of domestic BESS operators or the minimizing of operational risks. If
priority is given to minimizing risks, outsourcing the operation via a long-term O&M contract
would be an option. If priority is given to training domestic operators, relevant regulations and
training schemes need to be in place.

E. For a Viable Commercial Operation

Policy question: How can a BESS service be made commercially viable?

Recommendation: Possible solutions include the creation of a financially viable environment for a
BESS, for instance, by establishing an energy market and an ancillary service market, and by developing
an ancillary service-pricing policy and guidelines. Once the market is established and matured, the more
renewable energy is connected to the power grid, the more revenue can be expected for the BESS.

It is hoped that Mongolia’s BESS will become commercially viable in future. As one of the measures to
accomplish this, Mongolia’s BESS project plans include the development of an ancillary-service pricing
policy and guidelines. The policy and guidelines will not only help the BESS to become financially viable,
but it will also remove barriers against private sector investment in future BESS projects. Combined with
the establishment of energy and Frequency Control Ancillary Services (FCAS) markets, the policy and
guidelines would enable Mongolia to adopt financial revenue models like those used in Australia.

Given that many developing countries do not operate sophisticated balancing markets like the FCAS,
ancillary services in those countries are generally provided by independent power producers (IPPs). IPPs
typically enter into a take-or-pay contract with an offtaker—usually a transmission system operator or
a state-owned power utility. Under this type of contract, the operator or utility has the right to dispatch
the IPP’s regulation reserve for ancillary service purposes. This arrangement however tends to be more
costly than the provision of ancillary services through a balancing market, since the contract payment is
likely to cover the potential regulation reserve, which may not be fully utilized. This is due to the difficulty
in precisely forecasting the utilization rate of the regulation reserve. Developing countries may consider
take-or-pay contracts to be a transitional practice that will encourage private sector investment in a
BESS in the short or medium terms, but it would make more economic sense to introduce a balancing
market for private sector participation in the long term.

Points for developing countries to consider. Governments should review their legal and
regulatory guidelines on energy markets, consider establishing FCAS markets, and develop
relevant guidelines on the creation of financial opportunities for private BESS investors. These
measures would lower the barrier for private investors seeking to enter the BESS market by
eliminating lengthy negotiations on discharging tariff levels with the energy regulator.
 Designing a Grid-Connected Battery Energy Storage System 21

III. SUMMARY

In summary, the major points to consider when using the BESS design approach include the following:

(i) Storing only renewable energy can be achieved by setting the energy storage capacity
at the same level as the amount of renewable energy that would have otherwise been
curtailed.
(ii) A transmission company is likely the optimal BESS owner at this time, mainly because
energy-storage services are not yet commercially viable, though they could eventually
benefit the public by improving the supply reliability of grids with VRE.
(iii) It may be more effective to specify the performance requirements rather than the technical
specifications in the BESS tender document, to reduce the risk of overlooking the right
battery-technology option during procurement.
(iv) Management of faulty or used battery cells can be the battery suppliers’ responsibility,
but a more sustainable long-term solution would be to develop recycling facilities in BESS
project countries.
(v) Battery operational risks, such as the risk of fire or of shortened battery life, need to be
mitigated during the BESS design stage and during the operational stage.
(vi) Well-trained domestic BESS operators and a well-organized O&M strategy are key to
sustainable BESS operations in developing countries.
(vii) 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.

Box 2 contains a summary of policy recommendations.

22 ADB East Asia Working Paper Series No. 62

Box 2: Summary of Policy Recommendations

Policy question: Would the battery energy storage system (BESS) store only renewable energy?

Recommendation: Set the BESS capacity at a level that would include the amount of renewable
energy that would have otherwise been curtailed.

Policy question: Where would the BESS generate the greatest benefits?

Recommendation: As BESS applications for variable renewable energy curtailment reduction

and load shifting are location specific, the optimal BESS locations are close to variable renewable
energy stations and to the largest demand centers.

Policy question: Who will provide the energy storage service?

Recommendation: Existing regulations in many countries allow provision by a transmission

company or public utility. Energy storage services are not yet commercially viable.

Policy question: What battery technology should be specified in the procurement document?

Recommendation: The procurement document should include performance requirements

rather than technological specifications. This will prevent overlooking the best technology option
at the time of bid evaluation, which could happen if the technology landscape changes rapidly.

Policy question: How should used battery cells be treated?

Recommendation: The procurement document can stipulate that battery suppliers are
responsible for the disposal of damaged and used battery cells.

Policy question: How can the operational risks of a BESS be mitigated, and its benefits made
sustainable?

Recommendation: BESS operation and maintenance regulations need to be developed (i) to

avoid overcharging and overdischarging during the operation of the BESS and (ii) to set aside
funding for future battery replacement and overhaul.

Policy question: How should a lack of BESS operation experience be addressed?

Recommendation: The challenge can be addressed by providing intensive capacity building to

frontline engineers or by outsourcing the operation and maintenance contract to experienced
third parties.

Policy question: How can a BESS service be made commercially viable?

Recommendation: Possible solutions include the creation of a financially viable environment

for a BESS, for instance, by establishing an energy market and an ancillary service market, and by
developing an ancillary service pricing policy and guidelines. Once the market is established and
matured, the more renewable energy is connected to the power grid, the more revenue can be
expected for the BESS.
 References 23

REFERENCES

Asian Development Bank (ADB). 2017. Energy Storage in Grids with High Penetration of Variable Generation.
Manila.

———. 2018a. Handbook on Battery Energy Storage System. Manila.

———. 2018b. Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based
Loan to Mongolia for the Ulaanbaatar Air Quality Improvement Program. Manila.

———. 2018c. Technical Assistance to Mongolia for the Energy Storage Option for Accelerating Renewable
Energy Penetration. Manila.

———. 2020a. Mongolia: Energy Storage Option for Accelerating Renewable Energy Penetration. Consultant’s
report. Manila.

———. 2020b. Report and Recommendation of the President to the Board of Directors. Proposed Loan and
Administration of Grant. Mongolia: First Utility-Scale Energy Storage Project. Manila.

Aurecon. 2018. Hornsdale Power Reserve: Year 1 Technical and Market Impact Case Study. Melbourne.

Energy Regulatory Commission of Mongolia. 2022. Statistics on Energy Performance 2021. Ulaanbaatar.

Government of Mongolia. 2017. National Program for Reducing Air and Environment Pollution, 2017–2025.
Ulaanbaatar.

Government of Mongolia. 2020. Vision-2050 long-term development policy of Mongolia. Ulaanbaatar.

The Consortium represented by AusNet Services Group. 2021. Knowledge Sharing Report: Ballarat Battery
Energy Storage System; Network Revenue Opportunities for Ballarat Battery Energy Storage. Southbank.

United Nations Framework Convention on Climate Change (UNFCCC). 2015. Intended Nationally
Determined Contribution (INDC) Submission by Mongolia to the Ad-Hoc Working Group on the Durban
Platform for Enhanced Action (ADP). Bonn.

United States Department of Energy (DOE). DOE Global Energy Storage Database.

World Bank. 2020. Deploying Storage for Power Systems in Developing Countries: Policy and Regulatory
Considerations. Washington, DC.
Designing a Grid-Connected Battery Energy Storage System
Case Study of Mongolia

This paper highlights lessons from Mongolia (the battery capacity of 80MW/200MWh) on how to design
a grid-connected battery energy storage system (BESS) to help accommodate variable renewable energy
outputs. It suggests how developing countries can address technical design challenges, such as determining
storage-capacity size, and regulatory issues to do with ownership, safety, sustainability, and commercial
viability. Regulations may need to be adapted to cover a BESS, which does not fall into the traditional
power facility category as it both produces and consumes electricity. The paper aims to help governments
accelerate BESS solutions and expedite progress toward carbon-neutral societies.

About the Asian Development Bank

ADB 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.

ASIAN DEVELOPMENT BANK

6 ADB Avenue, Mandaluyong City
1550 Metro Manila, Philippines
www.adb.org