What is Battery Energy Storage System (BESS) Insurance?
Battery Energy Storage Systems are crucial for enhancing the reliability, flexibility, and efficiency of power grids by providing backup power, balancing supply and demand, and integrating renewable energy sources.
Andrew recently joint hosted a webinar with experts from Gore Street Capital, HDI Global and ACCURE on the future of insuring Battery Energy Storage Systems (BESS). You can watch the recording here.
Battery Energy Storage System (BESS) Insurance
Battery Energy Storage Systems (BESS) are crucial for enhancing the reliability, flexibility, and efficiency of power grids by providing backup power, balancing supply and demand, and integrating renewable energy sources. BESS can be used in various applications, including residential, commercial, and utility-scale energy management.
Insuring BESS involves addressing various risks unique to these systems. As a developer, Engineering, Procurement and Construction contractors (EPC contractors) or owner operator, it’s important to work with an expert to help you understand and mitigate these risks which include:
Operational Risk - Insurance coverage for the operational risks of BESS includes mechanical and electrical breakdowns, failures, and performance issues.
Property Damage - Coverage for damage to the physical components of the BESS, including batteries, inverters, and other related equipment, due to events like fire, theft, vandalism, natural disasters, and other perils.
Business Interruption - Protection against income loss resulting from the inability to operate the BESS due to an insured event. This could include compensation for the loss of revenue from stored energy that can't be sold.
Liability Coverage - This includes third-party liability coverage for bodily injury or property damage resulting from the operation of the BESS.
Cybersecurity Risks - As BESS are often connected to the grid and managed through software, there is a risk of cyber-attacks. Cyber insurance can cover losses and damages resulting from such attacks.
Transportation and Installation Risks - Coverage for any damage that may occur during the transportation and installation of the BESS components.
Environmental Liability - Coverage for environmental damages or pollution caused by the BESS, such as leakage of hazardous materials from batteries.
Planning Phase
When planning a BESS project, there are various stages where you need to consider your risks and appropriate cover:
Planning & Design Phase - Always engage with us early on regarding your planned (BESS) project. We are very happy to provide guidance and advice sometimes many months or years even before the project construction commences - it can never be too early.
There may be legal indemnity requirements for the site like cabling rights for example and we can arrange the insurance required for legal indemnities.
Construction Phase - Often lenders, funders or investors will require that insurance is arranged for the construction phase. Even if they are not involved we recommend this approach. It is a policy arranged on behalf of the project owner and it will cover all parties involved in the project. The cover is for the ‘works’ (materials, equipment etc), advance loss of revenue (Delayed start up) and Third party Liability. There are three main benefits:
- Policy is owned by the project owner – so if a contractor leaves the project they haven’t taken the insurance away with them
- Project owner and financiers have future revenue protected should the project be delayed due to an insured loss
- All parties involved are covered for third party liability so no disputes over who was at fault and which insurer is to respond potentially delaying the project.
Operational Phase - We recommend an operational all risks cover, this is all the common ‘perils’, accidental damage and breakdown, loss of revenue and Public/Products Liability.
Arranging Insurance for a BESS Project
There is a relatively small pool of insurers that have the knowledge, experience and desire to insure BESS. They require detailed information about each project in order to underwrite the risk and provide a policy.
It is key to demonstrate good pro-active risk management to secure the best insurance terms for your BESS.
Important factors include:
- The battery cell manufacturer - what is their history / reputation / standards
- The main contractor for the project – what is their experience / standards
- Fire/gas/smoke detection systems
- Fire suppression systems
- Gas venting / explosion protection/measures
- Heating and cooling systems
- Systems monitoring
- Are there data analytics and modelling?
- Emergency response procedure
- Design of the installation – layout, spacing between battery cabinets/containers
- Security – fencing, CCTV, alarms, monitoring, cyber security
Why choose PIB Insurance Brokers?
You’ll be working with experts.
Given the evolving nature of BESS technology and the energy sector, insurers often work closely with industry experts to tailor policies that address these specific risks and ensure comprehensive coverage for BESS owners and operators.
We arranged the insurance for some of the earliest BESS in this country including a Tesla system located beneath the Emirates Stadium and a 42 MegaWatt Warehouse system, at the time, the largest in Europe when it was built.
Currently we insure major portfolios of BESS located in the UK and elsewhere globally, we are advising on a pipeline in excess of 25 GigaWatts for various owners and developers to be deployed over the next 4 years.
Data Analytics and Modelling service
Monitoring, analysing and modelling data from an operating BESS can provide very early notice of abnormal behaviour within a BESS, and so reducing the risk of a thermal runaway. PIB clients benefit from exclusive reduced pricing for the data analytics service.