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Battery energy storage insurance solutions

Battery energy storage systems fire risks explained

Battery energy storage systems (BESS) have been in the news after being affected by a series of high-profile fires. For instance, there were 23 BESS fires in South Korea between 2017 and 2019, resulting in losses valued at $32 million – with the resulting investigation attributing the main causes to system design, faulty installations and inadequate maintenance.1

Meanwhile, a fire and subsequent explosion at a BESS facility in Arizona has highlighted some of the uncertainties around BESS fire risk, with investigators still assessing the cause of the incident six months on.2

As a result, the BESS insurance market believe these systems represent a significant emerging risk3, so what can BESS owners, EPC contractors, and O&M providers do to mitigate these risks as part of an energy storage insurance programme?

To answer that question, it is important to first understand BESS technologies – what they are, how the market is changing, and how they are used.

What is battery energy storage?

A battery energy storage system is a technology designed to store electrical charge for use at a later date, using specially designed batteries – usually lithium-ion batteries.4 These batteries are able to store huge amount of energy – for instance, world’s largest lithium-ion battery in San Diego, California is able to store 250 megawatt hours (MWh) of electricity.5

As the BESS market matures, with new technologies emerging and costs falling2, the scale of BESS installations is growing. In the UK, applications for BESS systems have grown from 2MW in 2012, to more than 6.8 gigawatts (GW) in 20184 and, in November 2020, work was completed on a 75MW BESS in Thurcroft, South Yorkshire.

Demonstrating the pace of change, the Thurcroft installation will be dwarfed by a planned BESS facility on the Thames estuary which, with a capacity of 1.3GW, will be amongst the world’s largest.7

Why are battery energy storage systems being used?

There are a number of applications for BESS, many of which are driven by the shift to renewable energy sources as economies transition away from fossil fuels.

They include:

  • BESS and energy supply security: Stepping in to maintain power supply in the event of wider power generation outages.2
  • BESS and load balancing: Ensuring a consistent supply of energy via national grids by storing energy at times of excess and topping up supply when required.2
  • BESS and renewable energy sources: Managing peaks and troughs in renewable energy generation – for instance storing excess energy from wind generation when optimum conditions for power generation do not coincide with peaks in demand.

What is the main risk associated with battery energy storage?

As the BESS market matures, the size and complexity of installations increases, operators and insurers are still learning about the risks.2

However, one issue that is relatively well known is the risk of fire, which is common to a wide range of battery uses – from aircraft to smartphones – and can also affect BESS installations, where fires can be particularly hard to control2, as demonstrated by incidents in South Korea1 and Arizona.2

In the UK in 2020, a 20MW BESS installation in Liverpool, UK caught fire at around 1am and almost 11 hours later, continued to burn.9

The main causes of fire incidents are BESS installations are:

  • BESS and thermal runaway: Often caused by lithium-ion battery defects or damage, excess heat in the BESS keeps creating more heat – eventually leading to fire or explosion.
  • Failure of BESS control systems: If one or more control component fails, for instance a battery management system, it can lead to overheating and fire.3
  • BESS and hydrogen evolution: In lead-acid batteries, excess hydrogen can create a risk of explosion unless proper ventilation methods are in place.2

Battery energy storage fire risk mitigation and insurance

High profile fire incidents in the BESS sector10 have started to affect insurers’ appetite to provide energy storage insurance cover.11 The insurance market for BESS has seen a reduced capacity as a consequence of some key insurers exiting the insurance market or having a very narrow underwriting footprint. This has ultimately led to increased premiums, higher policy excesses and sometimes difficulties with obtaining 100% cover for larger projects.

Despite these issues within the insurance market there are key insurers in the market who still have an appetite to underwrite BESS projects.

Ahmad Raja, Regional Lead Underwriter for Renewable Energy at Aviva commented ‘At Aviva we are committed to supporting the UK’s transition towards a more sustainable energy market. We believe BESS supports this goal and we are excited to be working alongside knowledgeable broking partners to provide our clients with a tailored Insurance solution for their battery energy storage facilities. We are aligning specialist Risk consultants with clients early on the pre-construction phase to allow for a seamless transition between the installation (EAR) and operational (OAR) phases’.

Liam McEneaney, Renewable Energy Underwriter at AXIS also supports this view ‘The continued development of risk mitigation standards for BESS projects supports the worldwide transition to more sustainable sources of energy. As a lead underwriter in both London and New York of battery energy storage risks we have a strong appetite for BESS and it is an important part of our renewable energy insurance portfolio. We offer considerable lead lines for Construction, Operation and Third Party Liability cover for project owners and developers that strive to build and operate battery energy storage systems to the highest standards’. 

As a result, fire risk mitigation has become a crucial consideration for BESS owners, contractors and operators.11

Those efforts to minimise and mitigate fire risk tend to break down across four main areas:

  • BESS planning & design: Considerations here include overall design of the site and specifically the separation of battery containers and other major equipment i.e transformers, inverters and sub stations. In the last 6-12 months we have seen improved clearance distances between each battery container and therefore reducing the potential of a series of containers being destroyed or thermal runaway occurring.

    Fire walls have also been introduced into the design of BESS projects. These are generally constructed of concrete or composite materials and positioned between containers. This is deemed as a big plus point for insurers allowing them to lower the estimated maximum loss for projects and subsequently allowing them to offer higher capacity levels and more competitive premium rates.
  • BESS construction: The key issue here is in respect of the experience and familiarity of the EPC contractor with BESS technology.11 As noted above, some of the points cited as causes for BESS fires in South Korea flowed from poor workmanship and the EPC contractor’s lack of experience in the sector.1

    Other important construction factors include the use of non-combustible materials within the insulation of the battery containers and the chosen ventilation and suppression systems for the site.
  • BESS fire protection systems: BESS operators should ensure an adequate water supply is available for firefighters and that the local fire brigade have visited the site to familiarise themselves with the site. The fire brigade will ideally have a plan devised to prevent any reignition scenarios and thermal runaway. Remote and continuous online monitoring, early detection sensors, appropriate venting to avoid the build-up of gas and automatic fire suppression systems to NFPA 855 standard should also be in place.2

Liam McEneaney, Renewable Energy Underwriter at AXIS stresses the importance of good fire protection for BESS projects ‘At AXIS, we look for best in class fire protection and testing for battery energy storage systems. We believe projects should be built according to established fire standards such as NFPA855 and/or IFC 2018/20, which address issues such as fire protection, spacing and ventilation; using battery technology tested to UL9540a (Large Scale Fire testing). This combination of international design standards and testing certification demonstrates risk awareness, analysis and mitigation that will ensure insurability in the long term’.

  • BESS maintenance: Every BESS site should have a dedicated maintenance schedule including monthly preventive checks, thermographic testing and spare parts should be readily available to minimise business interruption losses.12

This is just a flavour of the detailed planning, maintenance and fire prevention steps that are crucial to managing fire risk, but provides a good insight it to the initial things to think about when it comes to BESS installations.


2 https://www.greentechmedia.com/articles/read/arizona-battery-explosion-conventional-wisdom-safety
3 https://www.aig.co.uk/content/dam/aig/emea/united-kingdom/documents/Insights/battery-storage-systems-energy.pdf
4 https://pdiwan.medium.com/battery-energy-storage-system-eb0e9a57d546
5 https://www.pv-magazine.com/2020/08/20/worlds-largest-battery-storage-system-now-operational/
6 https://www.swissre.com/dam/jcr:81c873ea-85e2-40f1-9c94-3256c063cadf/battery_energy_storage_systems.pdf
7 https://www.edie.net/news/8/UK-s-largest-battery-storage-project-receives-planning-consent-in-Essex/
8 https://www.marshcommercial.co.uk/articles/battery-storage-is-it-an-option-for-your-plant/
9 https://www.energy-storage.news/news/fire-at-20mw-uk-battery-storage-plant-in-liverpool
10 https://spectrum.ieee.org/energywise/energy/batteries-storage/dispute-erupts-over-what-sparked-an-explosive-liion-energy-storage-accident
11 https://www.marshcommercial.co.uk/articles/battery-and-anaerobic-digestion-risk-management-issues/
12 https://www.ajg.com/us/news-and-insights/2020/mar/risk-considerations-for-battery-energy-storage-systems/

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