Insurers are receiving more and more requests from financiers and developers of battery energy storage units to conduct audits of these projects at the design stage so that they can be assured that they are safe, insurable or even bankable, said George Dragne, Energy Industry Leader | Risk & Broking WTW Romania.
“We are quite often lately receiving requests from financiers or investors to audit these projects at the design stage, to be able to say whether they are safe, insurable or bankable. Robust risk management and a robust insurance programme can mean not only the survival of the company developing these projects, but also easier access to finance and an easier sale when the decision is made to do so,” Dragne said at the conference “Stepping stones for the BESS technologies development”, organised by Energynomics.
WTW Romania, part of Willis Towers Watson, is an insurance broker and risk consultant with nearly 200 years of experience. The company has a presence in 120 countries and around 40,000 employees. The firm currently supports projects totalling 310 GW, with approximately 230 experts (risk engineers, insurance brokers and risk placement specialists for renewable energy projects).
Major risks associated with BESS projects
A key issue for BESS (Battery Energy Storage Systems) projects is the management of thermal runaway risks. This is when batteries overheat, which can lead to a total loss. Causes include excessive overcharging or discharging, physical damage to the unit, exposure to high temperatures, manufacturing defects and ventilation system problems.
To mitigate risks, insurers analyse the probability of maximum loss (PML), which refers to total losses of containers or the entire battery fleet. Recommendations include keeping a minimum distance of 3 metres between containers, locating transformer and export equipment outside the battery bank and using protective barriers.
“A transformer placed in the middle of the battery park is not at all favourably viewed by the insurance market and the insurer. It is preferable to have all the transformer equipment outside the park and the storage containers grouped together,” Dragne explained.
Insurers’ preferences for battery types and certifications
Battery technologies influence insurers’ appetite. Those based on Nickel-Magnesium-Cobalt (NMC) or Nickel-Cobalt-Aluminium (NCA) are less favoured, while Lithium-Iron-Phosphate (LFP) batteries are considered safer due to a higher resistance to thermal runaway. The UL 9540a standard is also essential for assessing the safety of batteries as it tests their behaviour under critical conditions.
The fire safety plan should include clear measures such as well established access routes, available water sources and correct signposting of containers. A dramatic example of the failure of this type of plan was the case of the Carnegie Road BESS in Liverpool, where firefighters mistook storage units for refrigeration equipment, opening them and triggering an explosion. At the same time, the lack of adequate water supplies hampered the response, resulting in significant damage.
The Romanian market is still in the process of developing dedicated BESS products. At the moment, insurers prefer to cover the whole fleet, including storage systems, rather than just storage systems. However, international markets offer more mature solutions. For example, Willis Towers Watson has developed a special battery facility, which includes BESS-specific clauses and offers quick quotes.
WTW co-operates with eight international insurers and more than five local insurers in Romania, offering hybrid solutions for risk coverage. Work is also underway to integrate policies to cover liability for accidental pollution and third party damage.
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According to a case study presented by WTW, a 50 MW BESS project with batteries from a Tier 1 manufacturer, a 3 metre distance between containers and 8 metres between containers and transformer had a total insurance premium of around 135,000 pounds. In contrast, a similar project with batteries from a Tier 2 manufacturer, only 2 metres between containers and exposure to natural catastrophic risks, had an insurance premium of around 230,000 euros.
Developers and financiers are urged to consider insurers’ requirements at the design stage to increase the safety and bankability of energy storage projects. A solid risk management plan can have a decisive influence on both the insurance costs and the investment attractiveness of these projects.
Conferința “Puncte de sprijin pentru sistemele de stocare a energiei în baterii” a fost organizată de Energynomics, cu sprijinul partenerilor noștri: AJ Brand, Alive Capital, BCR, Big Store, Elektra Renewable Support, EnergoBit, Enery, Enevo Group, Enexus. EVOLVE Energy Management Solutions, Huawei, Nofar Energy, Photomate, Prime Batteries Technology, Pixii AS, Renomia Gallagher, smartPulse, SolarToday, SolaX Power, Think Blu Solution, Wiren, WTW Romania, YEO.