Optimizing CAPEX in BESS Projects – Lessons from the Field

Recently, I was asked how to optimize CAPEX in BESS projects. The question focused on the German market, but I believe many of the insights apply across other regions as well.

Let’s go through the project phase by phase. But before that, let’s agree on one thing: value engineering means maximizing value per unit of money . More value for proportionally more money—or better value for the same money—is always a win. Value Engineering is not Cost Cut.

1. For Investors: Understand What “RtB” Really Means

When investors acquire a project labeled RtB (ready to build), they must be cautious about what that actually entails. In BESS, we still lack clear, standardized definitions—and especially in Germany, aligning the design with all relevant authorities ( Träger öffentlicher Belange – TöB ) can be challenging.

While construction and battery systems are rarely overlooked, in my experience, fire safety, noise emissions, and other environmental hazards often pose significant risks.

2. For Developers: Get the Siting and Sizing Right

Sizing : Ensure that the engineering solution is technically sound, peer-reviewed, and double-checked. Don’t cut costs in the design phase—it is significantly cheaper and more professional to solve issues on paper than on-site. Poor design leads to rework, and rework leads to exponential cost overruns.

On the other hand, the market is full of people who will claim they can support you with everything—often just to secure a piece of your budget.

A crucial consideration is battery augmentation . While augmenting battery capacity over time helps maintain energy throughput, it comes with trade-offs: you don’t just lose capacity —you also degrade performance parameters such as C-rate, ramp rate, and internal impedance. This can critically impact the ability to deliver fast-response services.

In other words: a system designed today for FCR might, after a few years of degradation and sub-optimal augmentation, no longer meet the activation time or hold requirements for those services.

Although Germany currently does not offer EFR (Enhanced Frequency Response) like the UK, I expect this to change. The recent blackout in Spain (April 2025) , which escalated through a cascade failure in two stages (1.5 and 3 seconds), revealed the lack of ultra-fast frequency containment as a critical system vulnerability. German TSOs will likely follow with new service products demanding sub-second activation times—services that only well-sized and well-maintained BESS assets will be able to fulfill.

So: design for flexibility, not just capacity . Model degradation trajectories carefully. Know when augmentation helps—and when it silently disqualifies you from high-value services.

Siting : Often overlooked, site selection is critical—not only for revenue stacking but also for minimizing your Baukostenzuschuss (BKZ) , i.e., the grid connection fee.

Although Germany operates as a single price zone, your BESS could inadvertently worsen local grid conditions if connected to a congested line. Moreover, the site’s location affects your ability to offer reactive power. If you provide grid support near critical nodes (i.e., act as a virtual grid booster), TSOs and DSOs may be much more willing to offer favorable BKZ conditions.

3. Procurement: Buy Smart, Not Just Big

It’s often said: you make your money when you buy, not when you sell . That rings especially true in BESS.

Battery systems are by far the most valuable component. I would argue that second-tier Chinese manufacturers can offer good performance and significantly better cost-efficiency than top-tier brands like BYD, EVE, or CATL. However, this is not without risk and requires deep technical expertise to evaluate production quality and define robust FAT (Factory Acceptance Testing) protocols.

And yes— fly to China and attend the FAT yourself . Don’t rely solely on third-party inspectors. They may be competent, but accountability is limited. These are your batteries, after all.

Also be aware that small things also matter and will cause time if they are missed from your BOM.

PCS (Power Conversion System) : Choose inverters that are future-proof . Ensure they support grid-forming capabilities , and consider adding black start functionality to your station. The market is clearly moving in that direction.

4. Construction: Experience Matters

Spend your construction budget wisely. Hiring an experienced EPC is far more cost-effective than dealing with delays and rework from cheaper but underqualified contractors.

Especially in Germany, EPCs are fully booked —so ensure that your project fits their strategic direction . If the EPC sees your project as an entry point to the BESS market or part of a broader business development plan, they will be more committed. Money can be made on other projects—but if yours aligns with their ambitions, you’ll gain more than just a contractor.

Also, in construction, personal relationships matter more than you think —especially when navigating complex issues on-site.

For me, optimizing CAPEX is mostly about avoiding double work . Every mistake you prevent in the design, procurement, or construction phase will save you exponentially more money than you expect.

But beyond tools, templates, and technicalities, remember: projects are delivered by people—not machines . The right team —with the right competencies , a solid engineering mindset, and genuine passion for energy storage —is the most decisive success factor in BESS deployment. You can have the best technology and the most elegant financial model, but without capable, motivated people behind it, the project won’t deliver its full potential.

Ein schönes Wochenende wünsche ich euch! 😊

Originally published on LinkedIn Pulse. Open the original →