Battery systems for renewable energy – the risks and how to manage them

• Renewable energy production is becoming an increasing area of focus for many businesses
• While lithium battery storage systems for solar-generated power come with many upsides, they also bring with them some insurance and risk management considerations
• Lithium battery systems contain flammable materials, so it’s important they’re monitored and maintained correctly.

As renewable energy production becomes an increasing area of focus for many businesses, solar panels and wind energy systems have become prominent features on properties across the nation.

And while renewable energy brings many clear benefits, its power production is solely dependent on weather conditions. This can be a significant challenge if a business wants to rely on renewable power.

Using lithium battery power to complement renewable energy offers a solution, and these power storage systems are a popular choice for many property owners as the world transitions to a clean energy future.

But as with all energy systems, it’s important brokers and businesses understand the insurance considerations that come alongside battery power systems including how to manage the specific risks they can bring, explains QBE’s Chris Deugarde, Risk Engineer and Bob Algie, National Product Specialist, Property.

Lithium battery storage systems

Lithium batteries are the most common type of battery system used alongside solar and other renewable energy systems to power properties, says Deugarde.

Lithium battery storage systems use a chemical process to store electrical energy which can then be used later.

“They’re the lightest and most energy-dense battery on the market, rechargeable and, if they’re used correctly, last a long time.”

In domestic and small business settings, these systems are a popular choice and complement countless renewable energy installations across the globe, says Deugarde.

“Because they’re mass-produced, a lot of research has gone into optimising their production costs, safety and energy capacity - this means they’ve been able to pull ahead of other battery types.”

With a capacity of between 5-20k Wh, they’re capable of powering a typical residential household between sunrise and sunset. For medium-large commercial sites, however, modular containerised battery units are usually used, says Deugarde.

“They can be used for off-grid supply, backup power and grid stabilisation.”

And while using lithium battery energy alongside renewable energy production has significant benefits, there are commercial considerations.

Notably, adding batteries extends the payback period of the overall system.

“There’s the upfront cost and payback period for the investment of these battery systems along with the solar systems themselves. For a domestic property this is typically around 10 years, while for commercial premises, it could be longer.”

Related article: Solar power system risk management

Thermal runway and lithium battery storage risks

All energy storage systems can be exposed to unexpected environmental conditions or faults which could create an accidental or uncontrolled energy release. Lithium battery systems that support renewable energy sources are no different, says Deugarde.

With these systems there’s potential for a condition known as ‘thermal runaway’, causing fire or explosion. Thermal runaway results from internal shorts inside a battery cell.

This can be caused by short circuits, overcharging or by operating or charging outside the safe temperature range.

The potential impact of thermal runaway is significant, so taking steps to mitigate this risk is important, says Deugarde.

“Lithium battery cells need to operate and charge within a safe temperature range to maintain stability.

“This safe range can differ depending on the manufacturer.

“Outside of this, a chain reaction can be triggered.

“This produces a flammable gas followed by temperatures of several hundred degrees, which can cause the battery to melt or explode and release toxic gases.”

Managing and mitigating the risks

Importantly, a thermal runaway incident is a rare occurrence when batteries are used alongside a quality battery management system (BMS), are free from physical damage and are operated within manufacturer specifications, says Deugarde.

“To minimise the risk of thermal runaway, lithium batteries supporting renewable energy systems should have an effective battery management system.”

A battery management system can monitor cell voltage, currents and temperature and works to balance the charge between cells. This enables each cell in the battery bank to be individually monitored when charging and discharging.

“A BMS will also implement shut-down fail-safes if needed, " says Algie.

More advanced systems can include data logging and analysis, internal gas detection and control connected systems.

Ensuring battery systems are installed and maintained to manufacturer specifications and Australian standards is key, says Algie.

Algie recommends using professionals and suppliers certified by the Clean Energy Council.

“The Clean Energy Council maintains a list of approved products, suppliers and installers that meet Australian Standards for use in the design and installation of solar and battery storage systems.”

Ensuring battery systems are installed in an optimal location is also key to managing risk, says Algie. “It’s important the battery is installed and stored in an area free from garbage and combustible material and out of direct sunlight with good ventilation.”

“If a battery malfunctions it can explode, so they should have a large separation area and ideally should be stored in a cage - at the very least be surrounded by bollards to minimise exposure to impact damage.”

Additional mitigation strategies to help reduce thermal runaway risk include:

• Operating and storing batteries at a safe temperature and in line with manufacturer recommendations. The ideal operating temperature is anywhere between 5C to 45C. Keeping the temperature in line with this and ensuring the area has good ventilation helps to minimise risk and prolong battery life.
• Ensuring a regular maintenance program is in place. This helps ensure all devices are in working order and that battery systems are monitored for signs of overheating or malfunction.
• Replacing batteries that show any sign of swelling or damage.

Underinsurance

Ensuring businesses have the right insurance cover is key, says Algie.

Sums insured should be reviewed regularly and incorporate current costs of solar system replacement.

“While the price of solar technology itself has reduced as uptake has increased, rising labour costs are a significant factor in total replacement costs.”

Supply shortages can also mean replacing panels with like-for-like may be challenging.

If an insured event damages a system, the amount a customer paid for it may not be enough to replace it with an equivalent system today.

Additionally, some council regulations require property rebuilds or repairs to include minimum solar power inclusions, so this should also be a factor when determining sums insureds.

Property and solar system damage can compromise business operations, so customers should also consider business interruption insurance, Algie adds.

Talk about battery risks

Battery storage is an emerging risk and is only likely to become more common over the coming years.

By considering risk management strategies in line with battery usage and future plans, customers, brokers and insurers can work together to embrace renewable energy systems and protect their assets.

Read more on solar system risk management and visit Q Risk Insights for more resources.