According to the Clean Energy Council about 40% of Australia’s energy now comes from renewable sources. However, that number needs to double if the country is to meet the government’s target of 82% renewables by 2030. Big batteries or grid-scale batteries are key to these efforts and insurance brokers are playing an important role in their deployment.
So far, according to Renew Economy, 21 Big Battery projects are in operation around the country and more than 40 are at various stages of construction.
Batteries and storage capability are a critical part of renewable energy infrastructure because unlike fossil fuels, renewable energy sources are generally not dispatchable. Weather dependent solar and wind power cannot necessarily be supplied on demand which is a challenge for the stability of electricity grids.
Big batteries help solve this major issue.
“In Australia, we're seeing a lot more batteries come into the market because of their grid firming abilities,” said John Rae (pictured above), head of renewable energy Australasia at WTW, the global risk management and insurance brokerage. “We have seen, anecdotally, a marked increase in battery installations and battery development - so getting closer to that period where they are going to construct.”
One interesting challenge for brokers like Rae is that unlike the established technology that supports the fossil fuel industry, renewables tech is rapidly changing.
“Renewables isn't a static environment, it's constantly growing, constantly evolving,” said the Melbourne based broker. “We always advise our clients to look to the future because what is acceptable now may not be acceptable in two or three years’ time.”
Rae sees this as a broker opportunity.
“In any of these situations there are opportunities to do it better, to de-risk yourself and to look at ways that you can be at the forefront of that as a developer,” he said.
Fire risk is one of the main challenges.
“Thermal runaway is essentially where the battery gets hotter and hotter and is unable to cool down and this leads to a fire,” said Rae.
He said in these situations, lithium-ion batteries, which are the dominant technology, don’t go out.
“The fire brigade will just leave it to burn, which is essentially what’s happened in situations around in Australia,” said Rae.
The added concern for project owners and insurers, he said, is the risk of fire escaping from its starting point and spreading in a chain-like process into neighbouring battery units.
“[So far] we haven't actually seen it go much further than a few units around it – like Victoria’s Big Battery fire,” said Rae.
At the time of its construction in 2021, the Victorian Big Battery was one of the biggest in the world. According to an independent report, a fire broke out in one of its megapack battery units and spread to a neighbouring unit, burning for six hours.
“…the most likely root cause of the fire was a leak within the liquid cooling system of MP-1 causing arcing in the power electronics of the Megapack’s battery modules,” said the report. “This resulted in heating of the battery module’s lithium-ion cells that led to a propagating thermal runaway event and the fire.”
Dealing with this type of battery risk, said Rae, is a minimum requirement of insurance coverages.
“For instance, in the battery area, spacing between the battery units is incredibly important,” he said.
Rae said brokers should encourage their clients to deal with this during the project’s design phase.
“If you try and move these things after they're in situ and have all their equipment attached on, it's incredibly difficult to redesign,” he said. “For example, in a project that I'm working on at the moment, they're looking at different ways that they can build a battery unit, whether the inverter is external or internal to the battery unit and the implications of that.”
He said having a smaller, inbuilt inverter in the battery housing makes the battery housing longer but de-risks it.
“If there are issues with an inverter it only affects a single battery unit and not multiple,” said Rae.
Another major renewables risk is defects in the battery tech.
“This can be new technology or sometimes it's existing technology that's been used in a different way, or it's in a different format,” said Rae.
He said the technology is moving so fast that insurers tend to see the defect risk of new technology as an R&D cost rather than something they’ll offer covers for during the construction or operational period of a renewables project.
The underlying broker challenge in these projects, said Rae, is that while the technology can rapidly change, renewables projects like battery storage are decades long.
He suggested that getting the project’s stakeholders to approach risk and insurance issues from a long term perspective can be difficult.
“We've really got to push this long-term strategy,” said Rae. “You cannot look at a strategy of the next 12 to 18 months in isolation, you've got to look at that long term because some of these projects that we're working on have a life of anywhere between 20 to 30 years.”
Which means brokers involved with renewables projects, he said, are there for the long haul.
“As brokers, we go all the way through the spectrum, right from pre-construction all the way to decommissioning,” said Rae.
Are you a specialist broker in the renewable energy space? What’s your biggest challenge? Please tell us below.
