Battery storage insurance, or BESS Insurance how we like to call it, protects energy storage systems against risks including fire, equipment failure, performance degradation, and cyber threats. This specialised coverage addresses the unique challenges of lithium-ion battery installations, from thermal runaway events to business interruption losses. Understanding the coverage types, costs, and claims patterns helps businesses make informed decisions about protecting their energy storage investments.

What is battery storage insurance and why do you need it?

Battery storage insurance is specialised coverage designed to protect Battery Energy Storage Systems (BESS) against the unique risks associated with energy storage technology. This insurance covers both the physical equipment and the financial losses that can result from system failures, accidents, or performance issues.

The coverage scope for energy storage systems extends beyond traditional property insurance to address the specific challenges of battery technology. Modern BESS installations, whether small commercial systems or large-scale battery farms with hundreds of megawatt-hours capacity, face distinct operational risks that require specialised protection.

Several factors make insurance essential for battery installations:

• Thermal runaway events represent one of the most significant risks, particularly with lithium-ion systems, where battery cells can overheat beyond a critical threshold, which is typically for some chemistries (like NMC) but often higher than for thermally stable chemistries (like LFP), and potentially cause fires that spread rapidly through connected modules.
• Equipment failure risks include inverter malfunctions, Battery Management System (BMS) failures, and Power Conversion System (PCS) breakdowns that can render entire installations inoperable.
• Performance degradation poses another critical risk, as battery capacity naturally decreases over time, but unexpected degradation can significantly impact project economics.
• Weather-related damage from storms, flooding, or extreme temperatures can affect both outdoor and indoor installations.
• Theft and vandalism remain concerns for valuable battery equipment, particularly in remote locations.

What types of coverage does battery storage insurance include?

Battery storage insurance typically includes five main coverage types, each addressing specific operational risks:

• Property damage coverage protects the physical equipment including battery modules, inverters, control systems, and housing structures against fire, theft, vandalism, and weather damage.
• Business interruption coverage compensates for lost revenue when systems cannot operate due to covered events. For commercial installations providing grid services, frequency regulation, or energy arbitrage, downtime directly impacts income streams, making this coverage particularly valuable.
• Liability protection covers third-party claims arising from battery system operations. This includes bodily injury or property damage caused by fires, explosions, or other events originating from the storage facility. Given the potential severity of lithium-ion battery events, adequate liability limits are crucial.
• Performance guarantees protect against underperformance relative to manufacturer specifications or contractual obligations. Note that this is often a specialized, supplemental coverage, as primary performance risk is usually addressed by the manufacturer’s warranty (Capacity Retention Warranty) or the EPC contractor. This coverage addresses situations where batteries fail to deliver expected capacity, efficiency, or cycle life, helping maintain project economics when equipment doesn’t meet performance targets.
• Cyber security coverage has become increasingly important as modern BESS installations rely on sophisticated Energy Management Systems (EMS) and remote monitoring capabilities. This coverage is typically obtained through a separate, specialized Cyber Insurance policy, as standard property policies often contain specific cyber risk exclusions. This coverage protects against cyber attacks that could disable systems, compromise data, or cause physical damage through malicious control system manipulation.

How much does battery storage insurance cost and what affects pricing?

Battery storage insurance costs vary significantly based on multiple risk factors that insurers evaluate when determining premiums.

Battery technology type plays a a crucial role, with LFP (Lithium Iron Phosphate) systems often receiving more favourable rates than NMC (Nickel Manganese Cobalt) and other lithium-ion chemistries due to their enhanced thermal stability and lower fire risk.

Installation size affects pricing through economies of scale and risk concentration. Larger installations may benefit from lower per-kWh rates but face higher absolute premiums and potential concentration risk penalties.

Location risks including natural disaster exposure, crime rates, and proximity to emergency services significantly influence pricing.

Safety certifications and compliance with recognised standards can reduce premiums substantially. Systems meeting IEC standards, UL certifications, and local electrical codes demonstrate lower risk profiles to insurers. The quality of fire suppression systems, thermal management, and emergency response procedures also impacts pricing.

Maintenance protocols and operational procedures affect long-term risk assessment. Regular inspections, predictive maintenance programmes, and qualified operational staff can lead to premium reductions. Insurers increasingly recognise that proper Battery Management System (BMS) monitoring and preventive maintenance significantly reduce claim likelihood.

Market conditions and insurer appetite for energy storage risks also influence pricing. As the technology matures and claims data becomes more comprehensive, pricing models will on the long term continue to evolve, though recent loss experience related to thermal runaway has led to increased costs and reduced capacity in some segments of the market.

What are the most common battery storage insurance claims?

Thermal runaway events represent the most significant category of battery storage insurance claims in terms of severity and loss amount. These events occur when lithium-ion cells overheat beyond a critical threshold, which is typically for some chemistries but often higher for others like LFP, potentially triggering a chain reaction through connected modules and releasing toxic gases including hydrogen fluoride (HF) and carbon monoxide (CO). Proper thermal management systems, quality BMS monitoring, and fire suppression systems are essential prevention strategies. Water-based suppression can worsen battery fires due to electrical conductivity and spreading electrolytes.

Weather-related damage claims include storm damage to outdoor installations, flooding of below-grade equipment rooms, and extreme temperature impacts on battery performance and housing structures. Adequate weatherproofing, drainage systems, and climate control help minimise these risks.

Equipment malfunction claims frequently involve inverter failures, BMS malfunctions, and cooling system breakdowns. These events can cause both direct equipment damage and consequential business interruption losses. Regular maintenance, quality component selection, and redundant system design reduce malfunction risks.

Performance underdelivery claims arise when batteries fail to meet capacity, efficiency, or cycle life expectations. These claims often involve complex technical assessments to determine whether performance issues result from manufacturing defects, improper installation, or operational factors.

Cyber attack claims, whilst less common, are increasing as energy storage systems become more connected and digitally controlled. Prevention strategies include robust cybersecurity protocols, regular software updates, network segmentation, and employee training on security best practices.

How do you choose the right battery storage insurance provider?

Selecting the right battery storage insurance provider requires evaluating several critical factors.

Renewable energy expertise stands as the most important criterion, as energy storage risks differ significantly from traditional property risks. Look for insurers with dedicated renewable energy teams and proven experience with battery storage claims.

Coverage options should comprehensively address your specific risks and operational model. Evaluate whether policies include adequate business interruption coverage, appropriate liability limits, and performance guarantees aligned with your project requirements. Ensure coverage extends to all revenue streams including energy arbitrage, grid services, and capacity payments.

Policy terms and conditions require careful review, particularly exclusions, deductibles, and claims procedures. Understanding coverage triggers, notification requirements, and claims settlement processes helps avoid disputes during stressful claim situations.

Claims handling reputation provides insight into how insurers perform when coverage is needed most. Research the insurer’s track record with energy storage claims, average settlement times, and customer satisfaction ratings. Quick, fair claims resolution is crucial for maintaining project cash flows.

Working with specialised brokers who understand energy storage risks and requirements can significantly improve your insurance programme. These professionals can access markets, negotiate terms, and provide ongoing risk management support.

Who needs battery storage insurance?

Battery storage insurance serves multiple stakeholders across the energy storage value chain:

• Developers require coverage during construction and commissioning phases to protect against installation risks and early operational issues.
• Owners and operators need comprehensive coverage for ongoing operational risks, performance guarantees, and business interruption protection.
• Investors and lenders typically require adequate insurance coverage as a condition of financing to protect their investment.
• EPC contractors need liability coverage for construction and installation activities, plus potential performance warranty obligations.

How does environmental liability coverage work for BESS?

Environmental risks from BESS operations require specialised coverage beyond standard property insurance. Thermal runaway events can cause soil and groundwater contamination through chemical leakage, while firefighting runoff can spread contaminated water across wider areas.

General liability policies typically exclude pollution events, creating coverage gaps that environmental liability insurance fills. This coverage operates on a claims-made basis, unlike occurrence-based general liability policies, and addresses:

• Cleanup and remediation costs for contaminated soil and groundwater
• Regulatory compliance costs and penalties
• Defense costs for environmental claims
• Third-party environmental damage claims

Conclusion

Battery storage insurance provides essential protection for the complex risks associated with energy storage technology. From thermal runaway events and equipment failures to cyber threats and environmental contamination, comprehensive coverage helps protect both physical assets and financial performance.

As BESS technology continues evolving and deployment scales increase, proper insurance coverage becomes increasingly critical for project success. Understanding coverage options, risk factors, and claims patterns enables informed decisions about protecting energy storage investments and maintaining operational continuity.

Secure Your Energy Storage Investment Today

Don’t leave your battery storage system exposed to costly risks. Contact our specialist energy storage insurance experts today to discuss your specific requirements and develop a comprehensive protection strategy tailored to your project. Our team will assess your unique risk profile and provide competitive quotes from leading insurers in the renewable energy sector. Get your free consultation now and ensure your energy storage investment is properly protected from day one.

📧 Email: support@solarif.com
☎️ Phone: +31 (0)26 711 5050