The renewable energy market is experiencing explosive growth, with global capacity rapidly increasing from 12 gigawatts (GW) in 2021 to more than 48 GW in 2023. The ability to store energy from sources such as wind and solar and deliver it when needed makes BESS essential. Components of modern energy systems.
As a result, the need for BESS grid stabilization services is rapidly increasing as the integration of renewable energy and the associated demand for energy resilience continues to grow. According to a Lloyds article on the 2024 Solar Risk Assessment, BESS installations are expected to expand 13 times over the next few years, with a further 181GW of capacity planned or under construction.
While an important step forward in the energy transition, the explosive growth of BESS also brings unique challenges that can impact the ability to insure assets, particularly in safety and risk management.
Insurance is a necessary form of capital for the continued growth and deployment of renewable energy, but a lack of data on rapidly evolving new technologies and a history of high-profile loss incidents are making insurers We are becoming more cautious in our approach to insurance. Covers BESS. Owners of battery assets will increasingly look to insurance brokers to help them navigate complex insurance situations.
Helping asset owners better position their BESS projects in the eyes of underwriters as transportation companies begin to look beyond simply adhering to safety practices and seek evidence of a comprehensive, proactive approach to risk management. , there are several important ways a broker can help.
Reduces risk of thermal runaway
Widely considered to be the most significant safety challenge for this asset class, thermal runaway occurs when battery cells enter an uncontrollable self-heating condition that rapidly spreads from one cell to an adjacent cell. .
Any electrical or mechanical abuse or internal failure can cause a thermal runaway event. If risks are not properly managed, thermal runaway can lead to fire, explosion, release of toxic gases, and complete system failure. In large BESS facilities, thermal runaway events can lead to catastrophic consequences, including extensive property damage, extended system downtime, and potential harm to first responders.
The first line of defense to mitigating thermal runaway is the use of a robust battery monitoring system (BMS). Asset owners can remotely monitor overcharging, overheating, and other conditions that can lead to thermal runaway, as well as receive early warning of potential anomalies and autonomously correct them before they get worse. A BMS must be used to perform the action. Demonstrating real-time monitoring and rapid intervention capabilities to insurers is a must.
Fire suppression technology has evolved, but should be considered as a back-up line of defense to the BMS in the event of thermal runaway. That’s why the industry is taking a thorough, multi-layered approach to fire protection, combining fire suppression systems with advanced monitoring and control technology.
Demonstrating comprehensive thermal runaway risk mitigation to insurance companies requires thoughtful design, sophisticated monitoring systems, compliance with evolving standards and safety regulations, and thorough documentation of all precautions in place. is. Proving this level of proactive precautions and preparation to your insurance company is paramount to receiving coverage at favorable rates.
Designed with safety in mind
The design and layout of the BESS facility plays an important role in risk assessment. Insurance companies pay particular attention to the spacing between enclosures. A minimum separation of 8 feet is generally used as a guideline, which is more conservative than the National Fire Protection Association standard of 6 feet, but property owners should be prepared to justify configurations based on detailed risk assessments. There is.
Both gas and water-based suppression systems have inherent limitations, given that thermal runaway is caused by internal chemical reactions. Therefore, firefighting strategies must be multi-layered and customized to specific installations. Asset owners should be able to explain the reasoning behind their chosen suppression system and how it is optimized for their setup and environment.
Insurers look favorably on projects that involve experienced operations and management teams that work closely with local resources. For example, safety efforts should extend to collaboration and coordination with local fire departments to provide specialized training on BESS installation.
Comply with evolving standards
Compliance with continually evolving fire codes, building codes, and fire protection standards establishes a level of fundamental safety and resiliency. Regular updates are essential to reduce risk and meet regulatory requirements of insurance companies.
document! document! document!
Clear and thorough documentation of risk mitigation procedures is essential, as insurers expect to see detailed information across several key areas. This includes a complete site plan, detailed BMS specifications, and comprehensive details of the fire suppression system. Additionally, it is important to provide relevant test certifications, maintenance procedures, and staff training programs.
All of this information should be presented in a way that emphasizes what role each component plays in the broader risk mitigation strategy. By contextualizing these factors, asset owners can better demonstrate the overall safety and reliability of their installations.
Given the important role that BESS will play in the future of energy, we need to ensure the safe and reliable deployment of clean energy, secure favorable insurance terms and, in turn, enable the financing of energy needs. , a focus on understanding risks and adopting mitigation strategies and best practices is essential. new project.
Jason Kaminsky
Jason Kaminsky is the co-founder and CEO of kWh Analytics, an MGA that provides specialty insurance products for renewable energy assets, including property and casualty insurance. He has helped grow the company into a leader in climate insurance and is passionate about activating insurance capital into climate action opportunities.
