More than half of the failures in battery energy storage systems (BESS) globally occur within the first two years of their operation, according to a new report from GCube.
The report, titled “Batteries Not Excluded: Getting the insurance market on board with BESS,” highlights the challenges and opportunities facing the BESS market, as well as sharing some potential remedies to reduce the risk of failure.
Key findings from the report, based on 12 years of public BESS failure data and insights from GCube’s global underwriting team, show a significant rise in BESS failures, with a tenfold increase since 2016. Systems ranging from 5-50 MWh are responsible for more than half of these incidents, and nearly half of the failures are connected to solar-plus-storage projects.
The report raises concerns that the trend of failures might continue, particularly as the industry moves towards deploying larger utility-scale assets over 100MW. This scenario echoes challenges observed in the offshore wind market, where rapid growth and scaling sometimes overshadowed quality control, leading to significant financial and operational setbacks.
Fraser McLachlan, Founder & CEO of GCube, highlighted the need for balance in the sector’s growth, stating, “The BESS sector is experiencing rapid growth. 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.”
The report identifies thermal runaway, public safety risks, and transit and cargo challenges as key risks for BESS assets, largely due to the lack of established standards and sufficient safety measures.
Despite these challenges, the insurance sector’s increasing support for BESS reflects its critical role in the energy transition. GCube anticipates BESS assets will make up to 30% of its underwritten renewables portfolio by the end of 2024, highlighting the sector’s importance and potential for growth.
To mitigate risks and secure sustainable insurance coverage, the report recommends several measures for BESS developers and owners, including ensuring adequate spacing between battery modules, conducting thorough root cause analyses, and involving original equipment manufacturers (OEMs) throughout the project lifecycle.
McLachlan further commented on the sector’s outlook, “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.”
