Lithium (Li)-ion cells are becoming increasingly attractive for use in grid-scale battery energy storage systems (BESSs). A key problem with BESSs is the potential for poor utilisation of mismatched cells and reliability issues resulting from the use of large series strings of cells. This paper investigates the close integration of a full-bridge modular multi-level converter and a large number of lithium-ion cells interfacing with an AC electrical grid. The cells are organised in a hierarchical structure consisting of modules, sub-banks, banks and phases. The control strategy includes five levels of balancing: balancing of cells within a module, balancing of modules within a sub-bank, sub-banks within banks, banks within phases and balancing between phases. The system is validated in simulation for a 380 kWh BESS using 2835 lithium-ion cells. Charge balancing is demonstrated for mismatched cells by varying the parameters such as ampere-hour capacity, internal resistance and initial state of charge. A ‘peak sharing’ concept is implemented so that alternative modules assume a portion of the load when certain modules are not capable of meeting the demand. This work is intended to address the challenges of eventual scaling towards a 100 MWh + BESS, which may be composed of 100 000 individual cells.