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Combining BESS with Renewable Energy Projects: Key Risk Management Considerations

Energy storage and rechargeable batteries are the key to unlocking the potential of renewable energy. We explore the issue of battery fires and the mitigation strategies available.

In the first blog in this series, we looked at the reasons behind the rise in demand for Battery Energy Storage Systems (BESS). One of these is that in recent years there has been huge growth in renewable energy projects such as solar and wind farms around the world. Without BESS, these projects can only supply energy to the grid when the sun is shining or the wind is blowing, which may not be when the power is needed most. Combining solar and wind projects with BESS on-site controls fluctuations in power output, meaning that energy can be stored and released to the grid when demand is highest, maximizing output revenues. Additionally, many government grants are also available to further incentivize attaching BESS to renewable energy projects. Not only is there a financial incentive for power providers, but the unstable nature of the current supplied to the grid by traditional renewable energy sources causes distortion in the load voltage and current to the grid. The attachment of battery systems to these projects helps to stabilise the supply of power to the grid, minimizing the voltage distortion.

It is clear to see why combining BESS with renewable energy projects is beneficial, but what are the risk management considerations? As discussed in our previous blog, thermal runaway and fires are the largest exposures, and this feature is not different when combining BESS with a solar or wind project. Once again, separation is the key solution here. When designing a site, you must ensure that there is sufficient separation — not only within the battery components themselves, but also between the BESS structure and the critical linkings, such as the main project site transformers and substations. This ensures that should an incident occur, other key components are not damaged and losses are minimized.

Following the recent rapid advances in battery technologies, many site owners and operators are also considering retrofitting a BESS to an existing solar or wind farm. Renewable energy sites are often fairly open with plenty of available space, which means that the construction exposure for adding a battery system is relatively low. Furthermore, the risks associated with putting in foundations and cabling to the rest of the site are minimal. The largest risk here is connecting the BESS to the control centre; however, these risks are well-understood by both developers and the insurance market and hence easily managed.

Once a site is operational, there are additional risks that cannot be ignored. The main consideration here is the interface between the battery and the renewable energy technology, and whether a loss incident in one will cause a loss in the other. As mentioned, separation will minimize the impact of losses on both sides. It is also important to ensure that the output from the renewables project is not routed directly through the BESS. Otherwise, in the instance of any battery outage, the whole site is unable to produce revenue. Routing the output to the grid separately to the BESS minimizes business interruption losses and ensures that the whole project’s operation and ability to generate profit is not entirely dependent on the battery.

There are plenty of positives that can be drawn, so long as the risk management considerations outlined are made. Combining BESS with a renewable energy project is becoming more and more commonplace and as a result, insurers are becoming increasingly comfortable with these risks. We would also suggest working with the same panel of insurers across both the BESS and solar or wind site. Having a consistent insurer covering the BESS and renewable energy element can aid in simplifying the claims process as any linked losses between elements do not need to be agreed between the different parties. If you are considering combining a battery storage system with a renewable energy project and need further guidance regarding risk management, get in touch with one of our team of experts.

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