One reason why demand for battery energy storage systems (BESS) has taken off in recent years is the huge growth in solar and wind farms and other renewable energy projects 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 can control fluctuations in power output, meaning that energy can be stored and released to the grid when demand is highest, maximising output revenues. Government grants are also available to further incentivise attaching BESS to renewable energy projects.
Beyond the financial incentive for power providers, the unstable nature of the current supplied to the grid by traditional renewable energy sources can cause 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 and minimise the voltage distortion.
Design-stage risks
The benefits of combining BESS with renewable energy projects are clear. But what are the risk management considerations?
Like standalone BESS projects, thermal runaway and fires are the largest exposures for BESS combined with solar or wind projects. When designing such sites, it’s important to ensure there is sufficient separation — not only within the battery components themselves, but also between BESS structures and critical linkages, 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 minimised.
Amid 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 so easily managed.
Operational exposures
Once a site is operational, additional risks 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.
Separation can minimise 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 event of a battery outage, the whole site will be unable to produce revenue. Routing the output to the grid separately to the BESS minimises business interruption losses and ensures that the whole project’s operation and ability to generate profit is not entirely dependent on the battery.
As BESS/renewable combinations become more commonplace, insurers are becoming increasingly comfortable with their associated risks. Working with the same panel of insurers across both BESS and solar or wind sites can ensure consistent coverage and help to simplify the claims process as any linked losses between elements will not need to be agreed between multiple parties.
Here to help
Combining BESS with a renewable energy project can be a worthwhile endeavour, as long as the inherent risks are properly addressed. Taking a thoughtful approach to risk management and working with the right risk advisor can help to safeguard operations and ensure productivity profitability. For more help, get in touch with our renewable energy experts.
