Blog

Oct 14, 2024

Boosting battery storage reliability: Lithium-Ion risks & insights - WTW

When Battery Energy Storage Systems (BESS) risks are not properly addressed, BESS developers and operators will likely face not only higher insurance costs but might struggle to garner interest from

When Battery Energy Storage Systems (BESS) risks are not properly addressed, BESS developers and operators will likely face not only higher insurance costs but might struggle to garner interest from the insurance marketplace. High profile BESS fires and explosions have created an often-sensational view of risks from the underwriting community that necessitates a proactive narrative and engineering detail around risk mitigation. The first comments that follow those events quickly place blame on the batteries going into thermal runaway (TR), often before the fire department shows up. WTW helps developers and operators identify and recognize common risk factors from historical loss events in order to affirmatively design assets in a fashion to minimize these factors. This approach is critical in order to obtain the most efficient and efficacious risk transfer solution from insurers.

Thermal runaway is an uncontrolled exothermic chemical reaction that increases cell temperature, can propagate to adjacent cells, leading to off-gassing, ignition then fire or explosion.

Thermal runaway is an uncontrolled exothermic chemical reaction that increases cell temperature, can propagate to adjacent cells, leading to off-gassing, ignition then fire or explosion.

The facts on BESS featuring the most common lithium-ion batteries are that the electrolyte is flammable, and TR fires have occurred. But BESS is so much more than batteries. There are other components or equipment that comprise the BESS that make up the “balance of plant” or BOP. These may include transformers, inverters or power conversion system, battery management system (BMS), HVAC, cables, busbars, sensors, protective devices, and fire suppression systems. They might be located with the batteries or in separate enclosures, the failure of these can also lead to a BESS failure, or a front-page worthy fire that may or may not involve the batteries. Only after a root cause analysis can the cause be determined.

The ease with which perception can be formed, as opposed to relying on facts, can distort the true risk of a BESS project. The first news coverage, videos, and early assumptions are not a correct picture of all BESS project risks and paint an unfavorable risk perception to BESS. One insurer in the renewables space has gone as far as to claim there has been ten-fold increase in BESS failures during a 6.25-year period. However, they did not adjust their findings to account for a rapidly increasing BESS population during the review period. I think most understand that if in one year, one failure across ten BESS projects occurs and in the second year two failures across twenty projects occurs, one might say BESS events increased 100%, but that does not indicate risk has increased. The failure rate was the same for those periods. 1 in 10 equals 2 in 20, and both show a 10% failure rate. Not an increase in failure rate.

This graph from the Electric Power Research Institute Report (EPRI) in their BESS Failure Incident Database shows how BESS is a continually improving risk over time. In that EPRI Report (link in footnote), you will see in the graph titled “Global Gris-Scale BESS Deployment and Failure Statistics,” that the number of failures per deployed GW has sharply decreased from a high of just over 9/GW in 2018 to less than 1/GW in 2023. A significant improvement.

Citation: Insights from EPRI’s Battery Energy Storage Systems (BESS) Failure Incident Database: Analysis of Failure Root Cause. EPRI. Palo Alto, CA. 2024.Energy Delivery and Customer SolutionsSources: (1) EPRI Failure Incident Database, (2) Wood Mackenzie. Data as of 12/31/23.

In a summary article in Utility Dive[1] it repeats my point, that the perception that “failures are almost all attributable to battery modules”, is inaccurate” and found “integration, assembly and construction was the most common root cause of BESS failures”, all are human factors, which points where to direct risk assessment mitigation efforts for BESS. While many components can lead to the loss of the batteries, correcting human factors will have significant influence on BESS risk.

Fire and explosion risk

Insurers expect a Hazard Mitigation Study done to define the risks to mitigate that includes fire and explosion risks. Passive mitigation via separation of BESS enclosures defined by full scale testing should limit a fire loss to a container and reduce the risk of a cascading failure involving the entire site. Insurers suggest separation ranging from one foot to twenty-five foot to prevent a cascading type of failure, depending on OEM recommendations and/or determined by full scale testing of recommended separation. Standards to follow include NFPA 855, Standard for the Installation of Stationary Energy Storage Systems, UL9540, insurance carrier guidelines as well as any applicable by local regulation. For example, New York State and the Fire Department of New York City have guidelines or regulations in various stages of implementation.

Indoor BESS projects installed in buildings or repurposed former power generation sites can present outsized risks, where suppression is difficult and resulted in significant loss.

Indoor BESS projects installed in buildings or repurposed former power generation sites can present outsized risks, where suppression is difficult and resulted in significant loss.

Is water suppression a risk or a risk mitigation?

While NFPA 855 and local authorities having legal control will influence fire detection and suppression requirements, at least one insurer suggests water suppression may not be effective under all conditions. From loss lessons shared from past BESS fires, especially one in Thermal Runaway (TR), one prevailing thought seems to be that it is best to let the involved unit burn out while protect surrounding units by cooling. One characteristic of TR events is that they can reignite hours to days later, no matter how much water is applied. Water can start a TR event for an otherwise properly functioning system, and malfunctioning BESS cooling water and water suppression systems have caused some BESS fire events. As noted in this video link[2] about the recent May of 2024 BESS fire in California, (you’ll hear it is attributed to TR without any root cause completed) the BESS fire flared up and reignited for a sixth day and in the video link, where you can hear at 00:45 seconds, the fire captain explain how they are using water in this event. The footnoted article stated up to 350 gallons per minute flowed from the BESS building sprinkler system, and it still burns. There is also a concern water runoff from an involved battery container can introduce an environmental risk. Good lessons for all.

Design and equipment selection factors that affect the projects risk

In summary, assess BESS risk with facts, focus on human factors, limit the number of entities involved, chose proven equipment and contractors, install with proper separation, and expect that should a TR fire occur, it might last until it burns itself out.

Engage your broker’s and insurer’s risk experts with the project development group before the project design and equipment choices are made. WTW colleagues have worked with BESS clients for years and have global experience on what influences a successful BESS project along with improving the risk transfer costs/insurance costs during the short construction period, and the longer running life. This can ensure risk mitigation learnings from past incidents and best practices are features of the project rather than expected risks. Designing for reliability helps to keep a project in service, generating revenue at a much lower cost than making post construction improvements. Finally, with an improved risk profile, lower risk transfer costs, such as property insurance, over the life of the project.

Finally, keep a record of risk mitigation and reliability design features of the project. Then, collaborating with your broker, develop a presentation for the insurers considering covering the BESS project risks that explains all the risk engineering mitigation features included in the project.

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).