Insurers ready to support battery energy storage systems despite risks

Underwriters remain optimistic about the potential of the global battery energy storage systems (BESS) market provided key risks are managed, despite a track record of concerning failure events, according to leading Lloyd’s-based underwriter of renewable energy projects GCube, part of the Tokyo Marine HCC group.

In a report, Batteries Not Excluded: Getting the insurance market on board with BESS, GCube notes that failures in BESS have seen a tenfold increase since 2016, and over 50% of BESS failures occur within two years of operation. The report also states that 5-50 MWh BESS account for more than half of total failure events globally, and 48% of failures have been linked to solar-plus-storage projects.

However, GCube says insurers are ready to back the sector:  “Underwriters increasingly support the BESS sector but need confidence around management of thermal runaway risks, public safety liabilities, and transit and cargo challenges.”

Fraser McLachlan, founder & CEO, 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.”

According to the report, thermal runaways that result from insufficient spacing between batteries, potential liabilities related to risks to public safety, and challenges in transit and cargo safety due to the absence of established shipping and packaging standards, are key risks facing BESS assets.

But despite the risks, the report emphasises underwriters’ increasing recognition of the sector’s importance to the energy transition and their willingness to support its critical scaling up.

GCube says that addressing emerging risks requires enhanced data and insights on the operation, performance, and failures of BESS. The report highlights the importance of learning from past failures in both the BESS sector and the broader renewables market, and says that by prioritising data-driven insights, the market can advance sustainably, safely, and reliably.

McLachlan added: “The increasing demand for BESS in the global renewable energy markets is evident. While insurers are making strides in understanding associated risks, their comfort in supporting coverage availability remains uncertain. The aim of our latest BESS report is to increase that certainty. GCube is a pioneer in the BESS field, and has learnt the hard way, having handled some of the largest losses in the market to date. By consistently providing transparent information to insureds and brokers regarding underwriters’ perspectives, we aim to foster sustainable, safe, and reliable growth in the sector.”