The renewable energy sector is experiencing a profound transformation, with insurance playing a central role in ensuring financial stability and risk management. As the industry matures, insurers are evolving their approach, making coverage more sophisticated and tailored to the unique challenges of battery energy storage systems (BESS). Duncan Gordon, Head of Renewable Energy at Gallagher, emphasized that insurance is now a critical enabler of growth and resilience in the sector.
“The insurance market is cyclical. The frequency of claims is decreasing, coverage is expanding, and premiums are stabilizing. It’s a win-win situation for the BESS sector, and we expect continued progress in the years ahead,” Gordon stated during his intervention at the conference “Stepping stones for the BESS technologies development”, organised by Energynomics.
Initially, insurers treated battery storage assets similarly to solar projects, applying uniform risk assessments. However, as claims data accumulated, a more nuanced understanding of risk profiles emerged. The lessons learned from early incidents, including significant fire events in South Korea, have led to refined insurance policies that address the specific challenges of BESS.
“We like to get involved as early as possible during project development. We review specific site layouts, assess separation distances between BESS units, and provide long-term assessments of premium ratings,” Gordon explained.
Insurance plays a pivotal role in project finance as well, ensuring that renewable energy assets meet both international and domestic lender requirements. Insurers are now integrating their global expertise with local market dynamics to provide coverage that aligns with regulatory shifts and economic fluctuations.
Managing risks: Fire remains the dominant concern
Fire remains the most significant risk factor impacting insurance premiums in the BESS sector. Despite technological advancements, human error remains a major contributor to incidents. “Mistakes during manufacturing, installation, or operations can impact the safety and reliability of these assets,” Gordon noted.
However, advances in battery chemistry are enabling insurers to refine their risk assessments further. The differentiation between lithium iron phosphate (LFP) and nickel manganese cobalt (NMC) batteries is particularly important, as LFP batteries have a higher threshold for thermal runaway, reducing fire risks.
“The technology is more robust now than in the early days, but human error still plays a huge role, whether during the manufacturing process or in operational phases. That’s exactly where insurance steps in—to cover unforeseen risks and ensure business continuity,” Gordon added.
Expanding coverage: Cyber insurance and financial hedging
Insurance providers are not just reacting to past incidents but are also proactively introducing innovative solutions. One key development is the integration of financial hedging products that guarantee electricity pricing.
“Insurers are now tracking historical electricity market prices and providing floor pricing guarantees to ensure revenue stability for asset owners,” Gordon explained. This approach helps mitigate market volatility and secures long-term financial viability for BESS projects.
Additionally, the growing reliance on sophisticated battery management systems (BMS) has increased the importance of cybersecurity in renewable energy projects. “Software providers and operators are actively working on cybersecurity solutions, and insurers now offer dedicated products to cover cyber risks,” Gordon highlighted.
Over the past five years, insurance trends for BESS have improved, with reduced premiums and a broader understanding of risk management strategies. “The insurance sector is becoming more flexible, recognizing that businesses evolve, regulations change, and market dynamics vary from country to country,” Gordon observed.
As insurers refine their offerings, the renewable energy industry stands to benefit from more tailored coverage, enhanced risk mitigation strategies, and greater financial predictability. Insurance is no longer just a safeguard against potential losses—it is an essential pillar supporting the long-term stability and growth of the sector.
The conference “Stepping stones for the BESS technologies development” was organised by Energynomics with the support of our partners: 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.