For many maritime applications Li-Ion batteries are foreseen as energy storage units that can improve the performance of the on-board power system in terms of continuity of service, fuel consumption, emissions and running hours of main engines. However, one of main limitations of battery application in on-board power systems is the aging of batteries. Applications of instantaneous power input/output such as propulsion dynamic assistance and heavy seas operation of ships, have an adverse effect on battery lifetime meaning that degradation of energy capacity over time is accelerated. Additionally, limited by their maximum current rating, batteries cannot deliver effectively high C-rates and therefore are not able to fully absorb the engine fluctuations. A typical solution for this problem is to over-size the battery system. By paralleling more batteries, the max. C-rate is lowered, and battery lifetime can be extended. On the other hand, an over-sized battery system will result in additional capital cost and weight. Therefore, it is evident that in conventional approaches there is an undesirable trade-off between battery aging and battery size. As an alternative practical approach into this problem, this thesis proposes an on-board hybrid energy storage system (HESS) that comprises of a battery and a supercapacitor component. By placing the supercapacitor in parallel to the battery and by using it for high peak currents, it is possible to reduce the stress on the battery and thus extend battery lifetime while improving the availability and the reliability of the power system. In addition, by taking advantage of the high specific power of the supercapacitor and the high specific energy of the battery it is possible to optimize sizing of the energy storage system for high power applications. In this thesis, a parametric approach of combined sizing and energy management for hybrid energy storage system is developed and integrated into a typical DC shipboard power system . Based on a case load profile, the HESS operation is simulated and benchmarked to battery-only installations. The static outputs of the sizing process and the dynamic outputs of the simulation are extracted in the form of design exploration maps and arrays that are used to correlate them to the key design variables. Finally, through this work, it is demonstrated that for high power applications with significant fluctuations, the proposed battery-supercapacitor HESS, can lead into smaller and more cost-effective installations, without compromising battery lifetime and while maintaining same levels of reliability performance.