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Report: Over 50% of BESS Failures Occur Within 2 Years of Operation, but Insurers Ready to Back the Sector

Feb. 21, 2024
Despite the emerging trends, the report emphasises underwriters' increasing recognition of the sector's importance to the energy transition and their willingness to support its critical scaling up.

Despite a track record of concerning failure events in the global battery energy storage systems (BESS) market, underwriters remain optimistic about the sector's potential, provided key risks are managed. This is the outlook of a new market insights report, titled Batteries Not Excluded: Getting the insurance market on board with BESS, produced by GCube, an underwriter of renewable energy projects. 
 
Key findings from the report, which utilizes 12 years of publicly available data and leverages insights from its global underwriting teams, include:

  • More than 50% of BESS failures occur within the initial two years of operation
  • Failures in BESS have seen a tenfold increase since 2016
  • 5-50 MWh BESS account for over half of total failure events globally
  • 48% of failures have been linked to solar-plus-storage projects

While these statistics broadly align with industry growth, there is concern that these failure trends may persist as the market deploys larger 100MW+ utility-scale assets, leading to increased financial losses for owners, developers, and insurers. This concern arises from a recurring pattern in rapidly expanding market segments, where new technologies often face challenges related to quality control – a dynamic recently observed in the offshore wind market.
 
“The BESS sector is experiencing rapid growth," said Fraser McLachlan, founder & CEO, GCube. "However, we don’t want to repeat the mistakes of the past of allowing growth in deployment and technological scale to take priority over quality control, and the large-scale losses and market destabilisation that result from that.”
 
Thermal runaways, in particular, which can result from insufficient spacing between batteries, potential liabilities related to risks to public safety, and challenges in transit and cargo safety, due to the absence of established shipping and packaging standards, are key risks facing BESS assets, as identified in the report.
 
Despite the emerging trends, the report emphasises underwriters' increasing recognition of the sector's importance to the energy transition and their willingness to support its critical scaling up. As BESS assets' share in global renewable energy portfolios rises, GCube anticipates these technologies comprising up to 30% of its insured portfolio by asset value by the end of 2024.
 
Addressing emerging risks requires enhanced data and insights on the operation, performance, and failures of BESS. The report underscores the importance of learning from past failures in both the BESS sector and the broader renewables market. By prioritising data-driven insights, the market can advance sustainably, safely, and reliably.
 
Batteries Not Excluded outlines crucial measures for developers and owners to secure sustainable and competitively priced insurance coverage for their assets and implement long-term strategies for the broader market. These include:
 
•    Ensuring sufficient spacing between battery modules
•    Conducting a comprehensive root cause analysis
•    Carefully selecting the right type of battery for BESS
•    Establishing a liability framework within the market
•    Creating spacing standards for BESS units
•    Involving OEMs throughout the entire BESS project lifecycle
 
McLachlan added, "The increasing demand for BESS in the global renewable energy markets is evident. While insurers are making strides in understanding associated risks, their comfort in supporting coverage availability remains uncertain. The aim of our latest BESS report is to increase that certainty." 
 

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