Demand for grid stability, improving battery technology, and significantly decreasing prices, has facilitated rapid growth in the battery energy storage system (BESS) market across the world. Investors and developers are attracted by BESS’ ability to both increase integration of renewable energy into the grid, and store energy to assuage periods of peak electricity demand. The global BESS market is projected to be bolstered by an annual growth rate of 21% to reach 442GWh by 2030, according to forecasts from BloombergNEF (opens a new window).
However, while BESS projects are also growing in size and capacity, new projects are not without risk and demanding financing requirements. Having appropriate risk mitigation measures in place is critical not only to ensure resilience, but also to secure attractive insurance terms for battery projects.
Specific risks for BESS projects
The risk of thermal runaway/fire causes particular concern to insurers — due to it’s potential to cause hefty losses. Carriers will require robust risk mitigation of this threat in the plans of any BESS project they underwrite.
Several recent incidents have stoked the concern of insurers. The most high-profile recent loss occurred at Moss Landing Power Plant in January 2025. A fire erupted and ultimately burned for five days — destroying 80% of batteries (opens a new window) within the facility.
However, the unique profile of the Moss Landing facility significantly contributed to the spread of fire. Insurance professionals recognize that the specific (opens a new window) technology and design selected for the indoor portion of the BESS facility that caught fire is very different to what it is recommended to deploy today.
It is critical that developers absorb learnings from this incident to avoid catastrophes in future BESS facilities. Improvements in designs and maintenance enable such incidents to be mitigated in the development phase of projects. Building insurability into BESS assets from inception also makes it easier for brokers to take projects to market.
Other risks to BESS developments, include:
Extreme weather conditions
Sites may be vulnerable to freezing or flooding which could damage batteries, as well as, excessive summer temperatures that could overwhelm battery cooling systems and cause thermal runaway. Additionally, during storms, strong winds, lightning, and hailstones could harm BESS installations.Cyberattacks
Malicious actors can target the control systems, communication networks, or physical infrastructure of BESS sites to cause operational disruptions, safety hazards, and financial losses.Theft and/or damage
BESS sites are often located in remote, rural settings. Consequently, projects are vulnerable to the risk of thieves, vandals, and local wildlife.Inadequate site maintenance and monitoring
Proficient technicians should have access to real-time data to ensure optimal performance and safety by monitoring information on voltage, current, and temperature, for example.
Important issues for derisking BESS projects
Below is a list of specific considerations for developers and financiers to engage with in the planning phase of their BESS project. For robust risk mitigation and optimized performance, it is crucial each issue is carefully assessed.
Analysis of land characteristics
Before selecting land, developers must conduct a thorough assessment of potential sites. This will include a comprehensive review of the terrain type, proximity to other properties, flood risk, and ease of grid connectivity.Technical advancements and future compatibility
Evolution within battery technology is rapid and developers must balance the benefits of new technological advancements with the risks posed by equipment with limited/no track record in a commercial setting. Insurers will seek assurances from the original equipment manufacturer (OEM) that the new equipment can withstand the demands of commercial performance.Evolving industry codes/standards
The BESS standards environment is fluid — requiring proactive management to successfully navigate changing standards from industry bodies such as UL, NFPA, CE, and other standards agencies. Developers must be mindful that rules and standards (or lack thereof) that applied in earlier phases of BESS deployment, may no longer be acceptable for new build projects.Site designs
Site designs require sufficient separation between critical infrastructure, such as battery enclosure, inverters, and transformers. This ensures if thermal runaway does occur, losses and damages are minimized and contained.Mitigating supply chain risks
Before commencing construction, it is essential supply chains are as robust and secure as possible — a difficult feat in times of increased geopolitical tension. Additionally, there are ethical sourcing concerns associated with the procurement of cobalt, nickel, and lithium — metals vital for BESS projects.Surveillance and security
Appropriate systems should be implemented to monitor site security from trespassers and effects of adverse weather. Furthermore, developers must implement robust cyber security measures to ensure sites reduce their vulnerability to hackers.Decommissioning and disposing materials management
Developers should formulate plans and protocols on how they intend to eventually dispose of materials from their site in accordance with environmental regulations.
How insurance professionals can help
Developers and financiers should look to engage with insurance professionals as early as possible. Consequently, carriers and brokers can share their unique perspectives on projects, and flag potential issues that developers or financiers may have previously failed to consider.
Typically, developers will be hoping to operate BESS assets for at least 10 to 15 years. Depending on the degradation curve of the specific batteries, insurance will need to be sourced or renewed every year. Establishing prevention and risk mitigation at the outset of development can help protect against risk in the future, and help reduce potential losses or substandard performance.
Typical questions posed by insurers
When bringing a new BESS project to the insurance market, insurers will seek responses to a variety of questions related to the project design and management.
For example, carriers will review design plans to determine if:
Spacing is adequate between cells and surrounding installations
Cell manufacturers have conducted the appropriate cell tests, such as UL9540a assessment
Soil and ground conditions have been adequately studied and documented in hydrology and geotechnical reports
Find out more by contacting a member of our team, or visit our Renewable Energy page (opens a new window).
