I found on my installation using a Morningstar MPPT controller, the built in temp sensor reads high due to self heating, it reads lower than the heatsink temperature but higher than true ambient. A PWM controller will have the same issue, I have logs from the Morningstar that show the tracking of its ambient sensor with heatsink temperature. The heatsink temperature rises with current delivered as is expected. a smaller panel will have less of an affect than my 235W panel, but placing it closer to the batteries is not going to make it work any better, the best location will be one that minimizes total wire runs, with good air circulation around the controller.
Yes they absolutely do need good air flow and can be bumped by their own internal temps (Blue Sky are some of the worst). Wire runs must also be properly sized for voltage drop. I am not a huge fan of controller ambient temp sensing and wish it could be turned off on many of them, in many installations. Some controllers ship with ambient and no way to turn it off or add an external sensor..
Problem is that I see lots of controllers placed in areas on the boat that get hot, and the batteries are in the cold bilge, and the controller drops voltage due to it thinking the batteries are hot but they are 60F and a long way from the 90F - 120F the controller is seeing due to its installed location. One of these was in an engine room of a boat that could hoover at over 90-100F for many hours after the engine was shut off. Another one was right next to the fridge compressor and was constantly getting blasted with warm air.. One was mounted to a dark green hull that could exceed 120F in mid day sun...
If the external sensor is used I find significantly better performance in relation to the batteries actual temps.. If the internal ambient sensor is used you will want it in a location that gets it as close to battery ambient as possible.
I have also seen it go the other way. I had a boat last summer with a dark blue hull. Battery was in a compartment that would get to 100F by mid day when the sun hit the hull (horrible location regardless of charge voltage, but I digress).
The controller was placed down near the battery switches in the foot area of the nav desk. This was technically below the waterline which kept it cool, batteries were above waterline in a pretty sealed compartment with minimal ventilation that backed up to the flag blue hull.. The area the controller was mounted rarely if ever exceeded 60F, until late August when it might see 68F. In the spring it could be mid 50's. The controller, thinking the batteries were the same temp, was boosting voltage to batteries that were physically in the 90's due to the flag blue topsides. That one was an easy fix as the controller had a port for an external sensor....
Are internal controller temp sensors perfect, not in many installations on boats.. The best you can do is mount it somewhere where the ambient temp will closely mimic the battery compartment temps...
With FLA batteries this is not as critical but for owners with AGM or GEL internal temp compensation sensed at the controller can cause weird non-accurate charge voltages on boats if careful placement of the controller is not well thought out ahead of time or an external sensor is not used...
