The growing share of renewable energy technology is continuously transforming the energy sector. Using storage capacities becomes crucial to sustainably guarantee stable energy supply. In particular battery storage systems (BSS) are expected to successfully compete with alternative options for energy storage in the near future. Major issues with state-of-the-art BSS include comparatively high costs, limited efficiency as well as reliability, and a low fault tolerance. A leap in power electronics technology might meet these challenges, as the aforementioned characteristics are predominantly determined by existing power converter and BSS architectures.This paper presents the so-called AC Battery – a novel modular multilevel parallel converter based split battery system for AC applications, enabling dynamic switching of battery cells in parallel and in series. Each individual battery cell may be interconnected to its neighbors according to operational needs, e.g. to provide optimum source resistance, lowest state-of-charge (SOC) cycling, and balanced aging, rendering separate battery management systems (BMS) unnecessary. Applying the proposed technology in grid scale BSS may fundamentally change existing system architectures, as it merges battery storage system and power converter. This forms the basis for a highly integrated power electronics unit that includes bidirectional grid connection capability, energy storage, and BMS.