Battery energy storage systems (BESS) are one of the fastest-growing energy segments in the Baltics. I recently completed the design of an insurance programme for a project of this level - and the experience confirmed it: BESS is an area where standard insurance solutions often do not fit BESS projects without specifically negotiated terms.
What BESS is and why it needs a special approach
BESS are large-scale battery parks that store electricity and feed it back to the grid when it is needed most. These projects combine a high concentration of asset value on a small site, new technology and close dependence on the power grid - and it is precisely this combination that insurers find unfamiliar.
The main risks that set BESS projects apart from ordinary commercial property:
- Thermal risks. Overheating of battery cells can trigger a fire that affects the entire system - in insurers' eyes a substantially higher risk profile than a conventional building or plant.
- Concentration of value. A significant investment sits on a compact site - a single event can affect a large share of the project's total value.
- Loss of revenue. When the system is down, the project earns nothing. Business interruption cover must reflect how a BESS project actually generates income.
- Third-party liability. An incident at a battery park can damage neighbouring property and infrastructure. Questions the policy must answer clearly: will the cover actually respond in a fire, explosion or thermal runaway scenario; how does it work when third-party property sits only a few metres from the equipment; and what is the status of leased equipment that becomes part of the installation. Standard liability policies usually don't answer these questions - that has to be achieved in negotiation.
Why standard policies don't fit
A typical commercial property policy is written for buildings, equipment and goods - not for an energy system built on lithium-ion technology. The first difference shows up in the market itself: some insurers refuse to consider BESS risks at all, especially the liability cover, so the pool of real offers is narrow from the very start.
Even where offers exist, everything is decided in the nuances. Fire and thermal risks dominate the risk price, so how the policy defines and limits them is decisive. In business interruption (BI) cover, it matters exactly which profit measure and which additional costs are insured - the wrong calculation basis can make the cover nearly useless. A machinery breakdown extension, in turn, depends on the manufacturer's warranty and the maintenance regime, and has to be structured deliberately. Finally, the difference in price between "named perils" and "all risks" cover may be limited in some offers, but it must be assessed together with exclusions, limits, deductibles and the scope of cover.
That is why, for BESS, insurance is not "buying a policy" - it is designing a programme: mapping risks together with the project team and its technical documentation, structuring the cover, obtaining and comparing offers from several insurers, and negotiating terms down to the level of wording.
My experience: a completed project with individually negotiated terms
This year I completed the insurance programme for a BESS project - from risk analysis to a policy in force. I won't disclose the details: the structure of such programmes and the negotiated terms are part of the value my client receives. But the outcome can be summed up briefly - property and liability cover was negotiated around the project's identified risks, subject to the final policy terms and special conditions.
This experience applies well beyond BESS. The same approach works for any project whose risks are so specific that off-the-shelf solutions fail - solar and wind parks, plants with unusual technology, infrastructure assets.
How I can help
As an independent broker and EURORISK partner, I work with Latvian insurers and - for non-standard risks - with international markets. If you have an energy project or another high-complexity undertaking, I will assess the risks and prepare a view on the insurance programme structure and available options.