Energy storage systems have a wide spectrum of functions. They must provide power quality, shaving of load change, matching in distributed power systems, bulk energy storage, and end-user reliability, e.g., uninterrupted power supply. Storage devices based on high-capacity batteries have a number of advantages: i) modular design and relatively compact size; ii) functional flexibility; iii) easy control and maintenance; iv) simple integration into Smart Grids. It is also well known that batteries have a number of unsolved problems, e.g.: i) high specific cost of stored energy; ii) insufficient cycle life (500 – 3 000 charge/discharge cycles); iii) significant decrease of cycle life at high charge/discharge current; iv) problem of depth discharge. To solve the above mentioned problems, we propose the Hybrid Energy Storage system (HESS) incorporating supercapacitors in addition to batteries. Cost analysis of electrochemical storage systems based on batteries of different types, supercapacitors and their combination has also been carried out. To verify the main principles of the proposal, we have designed and developed a HESS prototype. The main functional characteristics of the developed HESS were studied experimentally. The prototype bases on Li-ion batteries and supercapacitors. Such energy storage system includes three main components: Li-ion batteries, supercapacitors, and grid interconnection consisting of two invertors and control and monitoring system. Energy storage capacity of developed HESS prototype is 100 kWh, nominal power—100 kW, peak power—200 kW. HESS was created and tested within the experimental facility including 1.5 MW gas turbine power plant, 200 kW controllable active and reactive loads, and a control and measurement system. Experimental results showed that HESS successfully provides the following functions: (i) suppression of voltage, current, and frequency disturbances in the grid; (ii) compensation of reactive power in the circuit; (iii) uninterrupted power supply. In comparison with battery storage system without supercapacitors, HESS shows lower cost, and higher peak power. In hybrid energy storage system the presence of supercapacitors allows to shave peaks of power at the charge and discharge mode of the battery. We believe that this feature of HESS will prolong the life time of batteries and thus increase the life time and reliability of the entire system.