Twaice & Nardac: Better insurance conditions for storage through battery analytics
The Munich-based specialist for battery analytics software Twaice, and NARDAC, a specialist in energy and infrastructure insurance and MGA, have formed a partnership to enable improved insurance conditions for owners, investors, and lenders of battery energy storage systems (BESS). By combining proactive real-time analytics with existing passive risk mitigation strategies, such as spatial distances between the storage units, insurers will find it easier to identify best practices in the development and operation of BESS projects and thus offer improved insurance conditions. The energy storage industry has had difficulties obtaining insurance coverage, as some cases of thermal runaway have prompted insurers to reduce their available capital, the provider outlines the background.
Reduction of incidents through battery analytics
However, the study by Twaice in cooperation with the Electric Power Research Institute (EPRI) and the Pacific Northwest National Laboratory (PNNL) on the causes of energy storage failures shows that the likelihood of failures has decreased by 97% since 2018. Yet, although the frequency of thermal runaway events has declined, the consequences, when a corresponding incident occurs, are still very severe. For insurers, this specifically means that claims in the millions range can be expected. To reduce incidents with thermal runaway as the cause, the focus has so far been solely on passive risk mitigation – for example, by increasing the distances between batteries, the provider further explains. With battery analytics software, continuous monitoring and analysis of battery behavior can identify future safety issues before they get out of control. The software provides early warnings of risks, giving time to proactively prevent potential incidents. By using battery analytics, project risks are reduced, which allows underwriters to offer improved conditions.
“Through the partnership, we can offer significant financial advantages to the entire energy storage market,” said Stephan Rohr, CEO of Twaice. “Battery analytics significantly reduce the risk of a safety incident. Thanks to our autonomous monitoring and analytics, issues are detected before they escalate into a full-blown damage case."
The global project volume for energy storage is crucial for the successful implementation of renewable energies. But if underwriters do not see a way to better manage risks like thermal runaway, insurance capacity will be reduced, premiums will increase, financing will become more difficult, and battery costs will remain high, emphasizes Tom Harries, partner at NARDAC.
Without storage, no energy transition: Tom Harries, Partner at NARDAC, sees the risk management of storage systems as a central factor for the ramp-up. | Photo: NARDAC
"It is also important to bear in mind that insurance is not just a relationship between cost and outsourced risk. During the operational phase of BESS projects, prudent asset managers can use insurance as a competitive advantage. Those who operate facilities with minimal oversight will pay insurance premiums that constitute a disproportionately high share of operating costs. But by supplementing existing hardware and site strategies with advanced battery analytics, the risk of thermal runaway events is reduced," Harries continued.
Ultimately, as an industry, we must leverage new technologies, partnerships, and insights from artificial intelligence to our advantage to build insurers' trust in providing insurance services and to improve insurance terms for the buyer.
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