Insurance underwriters are optimistic about the battery energy storage sector, but key risks must be managed, according to a new report.
Renewable energy project underwriter GCube, of Houston, Texas, has issued a report which draws on 12 years’ data and insights from its underwriters around the world.
Key findings:
- more than 50% of BESS failures occur within the first two years of operation
- failures in BESS have increased ten-fold since 2016
- 5–50MWh BESS account for over half of total failures
- 48% of failures have been linked to solar-plus-storage projects.
It said this data aligns with industry growth, but added there is concern failure trends may persist as the market deploys larger 100MW+ utility-scale assets. That would lead to increased financial losses for owners, developers and insurers.
The report stated there is a recurring pattern in rapidly expanding market segments, where new technologies often face challenges related to quality control. This has been observed recently in the offshore wind market.
Fraser McLachlan, founder & CEO of GCube, said: “The BESS sector is experiencing rapid growth. However, we don’t want to repeat the mistakes of the past of allowing growth in deployment and technological scale to take priority over quality control, and the large-scale losses and market destabilisation that result from that.”
The report identifies key risks as:
- thermal runaways, especially from insufficient spacing between batteries
- potential liabilities related to public safety
- transit and cargo safety, and the absence of established shipping and packaging standards.
Addressing increased risks needs enhanced data and insight on BESS operation, performance and failure. The report sets out “crucial measures” for developers and owners to secure sustainable and competitive insurance terms:
- ensuring sufficient spacing between battery modules and creating spacing standards
- conducting comprehensive root cause analysis
- carefully selecting the right type of battery for BESS
- establishing market liability framework
- involving OEMs throughout the project.
The report noted that in an evolving market, underwriters need to be adaptable to technological changes and update their policies accordingly. They need to keep track of the latest developments in battery technology and research, it stated.
