The insurance implications of brownfield sites used for renewable energy projects
Here, we look at the key risks associated with brownfield sites used for renewable energy projects
It’s not uncommon for a renewable energy site to be built on land not suitable for commercial development. This generally occurs because the site has had an industrial past and is classed as ‘brownfield’ or was landfill.
These sites have the potential to cause harm to the environment because of previous operations. This could then be exacerbated if the site is re-utilised for renewable energy projects, such as Battery Energy Storage Systems (BESS), which carry a fire risk and the potential for further environmental damage.
Here, we look at the key risks associated with brownfield sites used for renewable energy projects and how insurance can be used to manage the associated liabilities.
Is ‘renewable’ clean?
Renewable may appear to be a clean source of energy, but there are environmental liabilities and pollution risks attached to properties containing Battery Energy Storage Systems (BESS). With fire an accepted risk, the fall-out, in terms of gaseous releases and pollutants, could cause significant environmental damage.
Thermal runway
A source of a BESS fire is thermal runway, which occurs when the temperature inside the battery cell rises uncontrollably, resulting in overheating and ultimately, combustion. This can be triggered by such factors as overcharging, internal short circuits and manufacturing defects. The electrolytes break down, releasing flammable gases, which then ignite, releasing gaseous and particulate pollutants.
Putting out fire
Water is one of the most efficient fire-extinguishing agents for tackling such incidents, but large amounts are necessary, requiring many thousand gallons of water. Given the potentially harmful components and fume emissions produced, pollutants can easily disperse or dissolve into the run-off water, causing environmental contamination, and this needs to be carefully assessed.
Types of contamination can include:
- Heavy metals, such as cobalt, nickel, manganese, aluminium and copper
- Electrolytes and organic solvents that can decompose into fluorine compounds
- Combustion by-products and toxic gases, including hydrofluoric, hydrochloric and phosphoric acids
- By-products of burning plastic, such as polycyclic aromatic hydrocarbons, phosphates, phosphorus compounds, dioxins and furans that can enter the environment.
Mitigating water run-off damage
To reduce environmental and health impacts, operators in brownfield sites need to install:
- Containment systems, such as barriers or drainage systems to prevent contaminated water from entering local water bodies (a lined retention pond would need to be large to be effective)
- Fire suppression techniques, such as foam, best suited to battery fires and can reduce run-off contamination
- Emergency response protocols, whereby first responders are trained in the specific fire risks and potential hazards from run-off water, to help minimise environmental harm.
Liability
In the event of an incident, responsibility for clean-up rests with any Class A appropriate persons. If no Class A persons can be found, the innocent Class B owner or occupier will be liable, and this can include lenders in possession of the property or landlords. It's important to note that a seller retains Class A liability after the sale, unless the legal liability is transferred.
Water pollution legislation
The Environment Agency (EA) has greater powers under water pollution legislation. It is an offence under the Environmental Permitting Regulations 2010 to ‘cause or knowingly permit a water discharge activity or groundwater activity’. The EA can also threaten to serve a Works Notice under the Water Resources Act 1991 to prevent or remediate surface water or groundwater pollution. Liability will fall on persons who ‘caused’ or ‘knowingly permitted’ the pollutants to enter or to be present in controlled waters.
There is a legal duty under the Environmental Damage Regulations 2009 to immediately notify regulators and take remedial action if there is ‘environmental damage’ to land, water or protected nature sites. The regulator (the EA, Natural England or local authority) can serve a Prevention Notice if there is an “imminent threat” of environmental damage.
Civil Liability
Potentially, the greatest liability risks for contaminated land can result from common law claims. Civil liability may arise where contamination has caused harm to persons or property, for example, if contamination has migrated off-site to neighbouring properties (for example a house or drinking water well).
Transfer of liability
Liability can transfer to the owner of a renewable energy project if they purchase the land or lease the land, particularly for long periods of time, even if they are not the polluter - by virtue of them being a ‘knowing permitter’. Owners of the project can protect themselves, and a common strategy would be to receive an indemnity from the vendor / landlord, although such a strategy is only as strong as the giver of the indemnity. In many cases, especially for solar farms built on landfills, the indemnity giver may be a family.
Insurance solutions
The issues associated with environmental damage on brownfield sites are complex, particularly where the land has been re-utilised for renewable energy projects, and may not be covered by standard insurance products providing cover against pollution risk, with many insurance brokers unaware of the situation. Environmental liability is often overlooked in transactions around renewable energy, with the assumption the operator is not liable if they are not the polluter. This is not the case, and great care needs to be taken to understand the potential risks and their impact.
Talk to PIB
PIB has both knowledge of and expertise within brownfield sites and renewable energy projects, and, in particular, the issues associated with Battery Energy Storage Systems, and can advise on specific environmental impairment liability policies designed to provide cover for harm to the environment.
Our policies have the advantage of clarity (providing cover for harm to the environment and third parties), flexibility (including historical pollution liability) and separate limits from standard insurance policies, covering the potentially significant costs associated with such impacts, thereby preventing underinsurance. We can also extend cover to include Loss of Profit, in the event the site needs to close for remediation.
To find out more about Environmental Impairment cover and ensure your exposure to such liabilities is covered by appropriate insurance, please contact PIB. Call us on 0330 058 9863 or contact us using the button below.
Sources:
Article: Assessment of Run-Off Waters Resulting from Lithium-Ion Battery Fire-Fighting Operations, published by MDPI (https://www.mdpi.com/2313-0105/10/4/118)
BESS Paper: The Environmental Impact of Battery Energy Storage Systems
Article: Historical document: Liability for Predecessor Impact of Renewable Energy Facilities