Energy storage has a key role to play in the transition towards a carbon neutral economy by balancing electrical power grids and storing and feeding surplus energy into private wire and electrical grid infrastructure. The EU has stated its ambitious target of having over half of European power from renewable energy by 2030 and reducing carbon emissions by 2050.
To meet this ambitious plan the EU would need 30 GW of battery energy storage systems (BESS) by 2030, which could be challenging, especially if we take into consideration that the most recent European recovery and resilience plans (RRPs) do not define energy storage targets. It is estimated that EUR100bn - EUR300bn are needed to finance new energy storage systems in the EU up to 2050.
Renewable energy generation fluctuates significantly both day-to-day and across daily conditions (eg. solar does not generate at night), which causes grid infrastructure significant issues of power supply in terms of both the infrastructure dealing with the fluctuations and also coping with periods of low renewable energy generation. BESS systems are designed to provide grid balancing to cope with these fluctuations and provide flexibility to grid infrastructure.
Energy storage technologies
Lithium‑ion batteries are only one option for energy storage technology; other batteries exist, as well as further options through potential/mechanical energy (e.g. use of lowering/raising of weights), chemical storage (e.g. liquid air), hydro storage and thermal storage (e.g. silica sand storage), amongst others. However, the majority of large battery storage facilities currently use lithium batteries.
BESS insurance challenges
Lithium‑ion batteries are highly reactive and if fire becomes established and temperature thresholds are reached, the units become exothermic resulting in significant difficulty to extinguish once thermal runaway has occurred.
Losses
South Korea: between 2017 and 2019 there were 23 major battery storage fires, with total damages upwards of USD32m
US: · a fire in 2019 claimed the lives of two firefighters at a 20 MW facility that had been in operation since 2018. Two ~ USD90m losses have occurred at facilities housed in existing buildings.
Europe: two big lithium‑ion fires - one near Brussels in Belgium in 2017, and another in Liverpool, UK, in 2020, which took 48 hours to extinguish.
Australia: Victoria: in August 2021, a lithium‑ion battery module caught fire during a test at one of the world’s largest storage facilities - with a capacity of 300 MW/450 MWh. It took 150 firefighters and 30 vehicles to fight the fire, which took three days to extinguish.
How Miller can help
Consequent to the above losses, BESS risks are difficult to insure; however, there is significant demand for BESS systems, and so insurance solutions are needed. Miller has a pipeline of new BESS developments and has been successful in placing BESS assets when provided with the right risk information. We also have significant experience working with brokers and insurers to ensure risks are well managed. Our team can help you to advise your clients on locational, technical, design standards and site layout sensitivities of insurers to ensure capacity is available for these risks, as well as finding London market capacity to place BESS risks.
