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Reducing risks around renewable energy projects

December 29, 2022

Avoid financing obstacles on battery energy storage systems (BESS) and renewables projects by harnessing specialists earlier in the planning process.
Risk Management Consulting

As more corporates and private equity funds look at BESS and renewable energy projects, this insight considers how to manage a range of risks more effectively. It also examines how to present risk management more persuasively to insurers.

With many renewable energy projects needing finance, and most lenders requiring insurance, incorporating risk considerations into early planning may prove vital to the viability and long-term profitability of enterprises.

The view from insurers on renewable energy and BESS risk

While the insurance market for most clean energy risks is developed and has solid appetites, there are challenges in certain sectors meaning insurers remain, to a degree, wary.

The key insurer concern associated with BESS, for example, is fire leading to thermal runaway, when the heat generated within a battery exceeds the amount it is possible to dissipate into its surroundings. In these instances, the fire burns until the stored energy is consumed. Typically, this results in fire brigades pouring water on the system to reduce the temperature and control the fire.

This factor is one element driving insurer caution, particularly in light of incidents such as the 2020 blaze at Carnegie Road, a U.K. 20MW BESS in Liverpool. This served to demonstrate even sites considered to be using proven technology with a competent owner can face significant damage.1 Despite being close to fire hydrants and the scene being attended by several fire brigade engines, the fire went on for several hours with brigades applying water to control the temperature and prevent reignition for around 24 hours.

In addition, providing insurance solutions for the renewable energy sector is developing against a backdrop of evolving technology. Recognised industry standards and regulatory requirements sometimes lag behind development. Restricted access to manufacturers’ test and performance data can leave insurers struggling to gain the confidence they seek. Together, these factors can restrict the availability of insurance or render insuring some risks unaffordable.

Some insurers will have their own minimum standards expectations and guidelines on spacing, layout and fire suppression around a BESS. While guidance such as NFPA 855 on installation of stationary energy storage systems provides a good start, there is no overall accepted industry standard for fire protection.2

This is where insurance engineering resource can be used to identify the risks and the appropriate controls before a project gets underway. Such specialists can recommend, for example, advice on spacing and fire control. Specialist investigation at an early stage can help produce the information needed that when shared with insurers could boost the chances of securing cover at commercially acceptable terms.

Managing technology risk in the planning process

When a fund or a corporate decides to build a BESS, at the earliest stages the lead considerations may be focused on bankability and making the finances work. This could mean by the time risk management is introduced into the project, it may lead to the unwinding of earlier decisions that appeared optimal from an initial costs point of view, but could potentially increase risk and the cost of insurance.

An obvious example would be where plans for a BESS site indicate gaps to separate units have been reduced to a minimum. From an insurer’s point of view this is likely to increase fire risk and, therefore, the cost at which it would be willing to insure.

Looking more broadly at renewables, while many elements of renewable energy are well-established, certain innovations can change insurers’ degree of confidence around what may at first appear well-understood risks.

For example, while wind turbines have been in use since as early as the 1950s, the size of wind turbines and their energy generation capabilities have grown significantly in recent years. As the technology evolves insurers will need performance and test data to enable them to agree that new units are not deemed prototypical.

Innovations around elements such as turbine blades can create further complexities and uncertainties for insurers. The introduction of blade furniture, particularly on older models of turbine, may increase efficiency significantly. However, insurers will want to know what impact these innovations are having on load bearing. Insurers may ideally want to see production data, and also understand what implications such changes have on the life of the asset.

Securing answers to these questions can be problematic, with access to manufacturers’ data not always being available. Ensuring your contractors have an obligation to provide the required data is key. This potentially obvious step is an area sometimes overlooked, leading to problems and delays in arranging insurance cover often at a sensitive time in the development process.

From the insurer’s point of view, the lack of such data opens up concerns around potential serial losses across multiple assets.

Demonstrating risk management to the insurance market

Presenting insurers with the right data in a format they recognise and understand can have a major impact on the cost and availability of cover. Working with a specialist insurance broker is likely to help your project keep pace with what is a dynamic risk and insurance landscape.

Facilitating the right people to talk to the right experts at the right time in the process is key to managing the risks around renewable energy projects.

Generally speaking, it is simpler and more cost-efficient to build in risk mitigation measures from the start than it is to retro fit them. Integrating risk considerations at an early stage can help develop a project more likely to succeed. This is why engaging specialists early in the planning process is strongly recommended.

For expert support on mitigating the risk of your renewables or BESS project, get in touch.


1 Fire at 20MW UK battery storage plant in Liverpool

2 NFPA 855, Standard for the Installation of Stationary Energy Storage Systems


Robert Gardner
Renewable Energy & Power Leader – GB Retail

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