Energy Storage Boom Outpaces Insurance and Safety Standards

The energy storage industry is expanding at an unprecedented pace, but rapid growth is creating challenges for insurers and developers. New battery technologies and larger systems are outstripping traditional risk assessment models, leaving gaps in coverage and safety. Meanwhile, supply chain risks and installation errors continue to threaten major projects.

Since 2019, battery storage capacity has surged by nearly 500%. Tesla's first Megapack offered 3 MWh, while newer units like BYD's HaoHan now reach 14.5 MWh. This rapid scaling has left insurers struggling to keep up, as actuarial data—normally built over years—can't match the speed of innovation. Michael Carrington, an underwriter at Tokio Marine GX, highlighted the issue: the industry is evolving faster than historical models can adapt.

Insurers are turning to large-scale fire tests to assess risks in high-capacity systems. Yet their focus has shifted toward contractors and the broader balance of plant. Minor mistakes during installation, such as poor sealing of battery containers, can lead to severe consequences—like compromised IP ratings or accidental activation of fire suppression aerosols. Engineering, Procurement, and Construction (EPC) firms rarely install the same system twice, increasing the likelihood of errors and insurance claims.

Geopolitical risks in lithium-ion supply chains remain a key concern for Battery Energy Storage System (BESS) developers. Sodium-ion batteries have gained traction as a complementary solution, reducing reliance on volatile lithium markets. Since 2023, commercial deployments have grown, including Northvolt's 100 MWh project in Sweden (2024) and Acculon's 50 MW/100 MWh facility in Finland (2025). In the US, CATL is scaling production to 5 GWh by 2025, driven by cost and material advantages. Major projects, such as Pacific Green's 100 MW/200 MWh storage in the UK and Fluence's 200 MWh hybrid system in California, signal strong market adoption.

Underwriters are also scrutinising 'single points of failure' in balance-of-plant components. High-voltage transformers, with long lead times, pose a significant risk if they fail. The combination of new chemistries, larger capacities, and supply chain pressures means developers must navigate both technical and financial uncertainties.

The energy storage sector is moving quickly, but the speed of change brings operational and insurance hurdles. Larger systems, alternative battery chemistries, and supply chain vulnerabilities require closer attention to installation and risk management. Without better data and standardised practices, developers and insurers will continue facing avoidable losses and delays.