The cost of an energy storage system is affected primarily by four drivers: (a) the initial cost of the storage subsystem, (b) the cost of the power converter, (c) the cost of the balance of system, and (d) the need to design, engineer, procure, and construct one-of-a-kind systems. The capacity of the plant as well as the discharging profile impact both capita l and O&M costs. At present, flooded lead-acid batteries are the dominant choice for many utility applications. Flooded lead-acid batteries have been in widespread production and use for so long that further reductions in costs are unlikely . Industry and government have been working to develop improved VRLA batteries and advanced batteries tha t offer potentially lower costs and longer cycle lives.
The 1997 cost estimates for the system are based on a turnkey price of $65,800 for the baseline/PV battery system i n limited production (based on the manufacturer’s estimate). Sandia National Laboratories calculated the componen t costs based on experience in the field and products already under development [18,19,21]. Estimates done for thi s study for the 2005-2030 time frame are best-judgement engineering estimates based on expected increases i n production; potential reductions in the costs of batteries, PCS, and balance of plant; and greatly reduced engineerin g costs for modular, factory-integrated systems.
An annual production volume of 160 system units (compared to production of 5 in 1997) has been identified by on e battery manufacturer as necessary for costs to decline by 50%. Since the lead-acid battery is a mature technology, automating production and assembly is assumed to result in cost reductions of at least 10-15% over the next five years . It is anticipated that this device will have a stable niche market of about 200 units a year in 2005 and beyond.
The battery portion of the system will be available for $350/kW, with great potential for volume production savings. Sized for commercial use at 30 kW P V/30 kWh storage, the batteries account for less than 20% of the total cost of these systems. The introduction of VRLA technology in 2005  will be about $300/kW. As advanced batteries enter the market in 2020, battery costs are estimated at $300/kW, with further reductions as production capability increases.
The PCS costs approximately $650/kW (based on the estimate of $65,800 for the entire system) and includes th e converters, controls, AC/DC switchgear, filters, etc. According to a 1997 survey of manufacturers, PCS costs are expected to decrease by only 10% by 2000 since IGBT semiconductors are already in the design . Subsequen t reductions in PCS costs are substantial, bottoming out at $300/kW in 2030. This reduction is expected to be due to further integration of the functions of the max power tracker and PCS, new advances in switch components, replacement of magnetics with less expensive materials, and high volume production.
Several organizations are also investigating ways to reduce power converter costs by encouraging more productive and efficient manufacturing processes and the utilization of the latest advances in power conversion technology. Manufacturers and system integrators are working to reduce or eliminate the need for one-of-a-kind engineering i n all aspects of PV and storage system implementation. Failures of inverters are the number one cause of PV syste m problems. Cooperative R&D contracts support the development of quieter, more reliable inverters that can be mass – produced for the PV industry.
The max power tracker is an expensive customized component in this system ($700/kW). One manufacturer sell s 31 kW power trackers for $22,000 . Improvement in the max power tracker depends on advances in the PV power electronics industry and in increased production volumes. Max power tracker costs are projected to decrease to $500/kW by 2030.
Balance of plant includes the facility to house the equipment, HVAC, the interface between the system and the utility, and the provision of services such as data gathering, project management, transportation, permitting, and financing. Balance of plant costs are low for this PV/storage system because compact design enables the entire system to b e housed in a container. The balance of plant costs are reduced during the forecast period from $350/kW to $200/k W as lightweight, modular, factory-assembled systems become the norm [18,19,21].