The following text field filters the results that follow as you type.
Battery energy storage systems (BESS)
The fourth and final article in Risk Control Engineer, Jan Pagán’s series on renewable energy technologies looks at battery energy storage, taking an insurer’s perspective on the inherent challenges and prospects for the industry.
Jan examines this niche sector with a range of global players, from small asset managers to global Petrochem giants, including looking at the prospects for its growth and a long-term view of any potential pitfalls in the underlying technology.
BESS summary
We place the BESS sector frequency at: Unstable with an upward trend
- A crowded supplier market
- Sector moving towards standardisation
- Highly adaptable to natural events
- New, inexperienced developers flooding the market
- Supply chain delays from trade competition
- Sector needs a full system certification process
Battery technology is in the midst of an accelerated innovation phase that will see the battery energy storage systems (BESS) sector undergo a similar trend to offshore wind, where the batteries used for current projects will be different from the ones used two or three years from now.
The next generation of batteries will, at the very least, have higher energy densities and faster charging rates. These innovations will have both positive and negative effects on the risks associated with BESS and this is something insurers will need to pay close attention to.
Currently, the market-leading chemistries used are lithium iron phosphate (LFP) and lithium nickel manganese cobalt oxide (NMC).
However, there are talks of ‘solid-state’ batteries emerging, where the electrolyte is a solid compound instead of liquid and are non-flammable; lithium sulphur batteries which can achieve energy densities up to four times greater than traditional lithium ion; and sodium batteries which are cheaper to build and safer to operate.
Looking at the system level (better known as integrators), there are currently dozens of options available to choose from and it seems like every month another supplier enters the market. This has created a pool of un-standardised systems that use their own proprietary technology, tied to third-party technology, to provide a finished product.
There is a lack of information available on how many of these systems work and it seems like many of the risk assessments are only based on faith.
Furthermore, emphasis is placed on tests that induce thermal runaway to see how it is contained, instead of focusing on preventing thermal runaway from happening in the first place.
These are only a few of the topics that need to be addressed in the BESS sector, but show why this sector is still considered to be in its infancy.
In light of recent events, we must also address outdoor versus warehouse BESS projects.
The overconcentration of high-energy storage devices in a single, unprotected (from each other) environment is viewed as an unnecessarily high risk by Markel. This will remain the case until non-flammable batteries are made available.
Global rollout of BESS installations has continued to increase in recent years, up 53% in 2024 versus 2023, with a total of 205GWh installed globally, and a further 51% in 2025, topping 300GWh.
This trend appears set to continue, driven in part by the need for flexibility and to integrate renewable energy sources, as well as to balance the supply and demand of electrical grids.
Changing industry operators
Since the installation of renewable energy sources is projected to continue growing, BESS installations are expected to grow as well.
However, this sector has seen a new type of developer/operator enter the market which does not have experience in building solar or wind projects.
This is possible given that BESS projects resemble a ‘plug & play’ setup as they come fully assembled and ready to be installed. By no means are we implying that anyone can build a BESS project, but in comparison to solar or wind projects, BESS construction is considerably less complex.
Knowledge gaps
This, tied to the concerns mentioned in the technology section, raises the risk of the successful operation of BESS projects considerably, due to the knowledge gap this combination represents.
In terms of the battery supply chain, China accounts for approximately 80% and we do not see a significant shift in market dominance over the next 5 years. Chinese BESS installations in December 2025 surpassed the entire year’s total in the US.
Material supply
As is the case across many industries, China benefits from lower manufacturing costs and cheaper materials when developing BESS sites.
While we have not seen disruption or increased lead times for batteries, we are aware that China is actively seeking to secure new lithium resources in order to maintain its market dominance.
Additionally, lead times for enclosures have been steadily increasing, with some suppliers taking 12 months or more to fulfil orders.
Any shift in political stance of the countries currently supplying lithium to China could quickly change things – as has happened previously in Canada.
Out of all the technologies discussed in this series, BESS is the most resilient when it comes to climate change.
It doesn’t need to convert energy from the sun or wind to operate and therefore can be fully isolated from external events. It can also adapt to a changing environment more easily and cheaply than wind or solar.
This is a significant advantage for developers and/or operators of standalone BESS, as it represents one less aspect to consider, providing that the equipment they choose is well designed.
To do this, BESS enclosures will need to employ adequate IP ratings that will enable them to be properly isolated from the local environment. At the same time, they will require very good standalone cooling and dehumidifying systems capable of compensating for increasing outdoor temperatures and rapidly shifting regional climates.
These have been key lessons learned in the past couple of years as BESS projects expand across the world with different atmospheric conditions.
We have insured projects that have been in areas affected by earthquakes and windstorms, and these have not suffered any physical damage as a result. This shows that this technology can be deployed almost anywhere in the world as long as prudent developers/operators are behind the project.
However, we must remember that BESS is not a renewable energy source and instead it is considered a renewable energy enabler. It can help in the implementation of renewable energy, but it cannot substitute it. This is why its deployment is usually tied to a solar or wind energy farm. Therefore, its operation could be affected if the renewable energy source it is coupled with does suffer any damage.
BESS is another technology that has benefited from the huge market share competition that is taking place.
Pricing
According to BloombergNEF, battery prices have been on a downward trajectory since 2017.
Between 2023 and 2024, a price drop of 40% was achieved. This has naturally made BESS more attractive to investors as it has also significantly lowered the payback period in just 4 years.
Couple these attractive numbers with government-funded financial incentives and we get the explosive growth we have seen in just one year. At this stage, demand is fuelling an expansion in the supply chain that allows new manufacturers to enter the BESS market.
Chinese dominance
Since China dominates the supply chain with an 80% market share, as previously mentioned, this would mean that prices would keep going down as low-cost Chinese manufacturers continue to compete against themselves.
However, recent trade volatility between China, the US and the EU will slow down or even increase prices for BESS in these regions. The consequences of this volatility have started to boil to the surface, affecting a well-known and established suppliers.
EU expansion
In an effort to circumvent EU tariffs, CATL and BYD (the two largest Chinese battery manufacturers) have announced that they will be building several battery manufacturing plants within the EU.
However, this move is unlikely to translate into lower prices, since the manufacturing costs will be higher than in China.
It is clear that the battery storage sector is undergoing a particularly volatile phase in the second (US) and third (Europe) largest markets for this technology, which will shape the way these projects are deployed and financed within these regions in the future.
Summary
To conclude, while falling battery prices and supportive government incentives have driven rapid growth in the industry, the ongoing supply chain volatility and shifting trade policies, particularly between China, the US, and the EU, are introducing new uncertainties.
From an insurer’s perspective, this landscape brings new opportunities and new risks, highlighting the importance of prudent underwriting and risk assessment for BESS projects moving forward.
Last updated: February 2026
Further reading
-
Solar
The third article in Jan's series investigates the current and future risks within the global solar power industry.
-
Offshore wind
For the second instalment in our series, Jan provides an informed analysis of the offshore wind sector.
-
Onshore wind
In the first instalment of our series, Jan Pagan analyses the perceived risks within the onshore wind energy sector.