The Role of the Insurance Industry in Enforcing Safety Standards for Battery Energy Storage Systems

How the Insurance Industry Enforces BESS Safety Standards
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Lockton Associates from the Energy & Power team recently had the opportunity to brief John Milne MP ahead of a parliamentary debate in the House of Commons on June 5, 2025. The discussions centered around safety regulations for battery energy storage systems (BESS) and the insurance industry’s role in enforcing these standards. This article explores the various issues addressed during the House of Commons debate.

In 2024, over 30 GWh of BESS site capacity was submitted for planning applications in the UK, adding to the existing 8 GWh already operational. However, planning approval requirements and safety standards can vary significantly by jurisdiction, both domestically and internationally. This inconsistency may lead to differences across projects, potentially increasing risk.

To mitigate these discrepancies, the insurance industry leverages its experience with BESS projects to ensure alignment with internationally recognized safety standards.

### How Do Underwriters Assess Risks?

When underwriting a BESS project, insurers typically pose several key questions to developers:

– What is the chemistry of the battery cells?
– Is there sufficient spacing between containers to prevent fire spread in the event of thermal runaway?
– Is the quality of workmanship in the manufacturing and installation adequate?
– Have the cell manufacturers conducted the necessary tests?
– Have soil and ground conditions been thoroughly studied and documented in hydrology and geotechnical reports?

### Current Preferred Safety Standards

Globally, insurers have largely adopted the following safety standards from Underwriters Laboratories (UL), the International Electrotechnical Commission (IEC), and the National Fire Protection Association (NFPA) as minimum requirements for BESS:

– NFPA 855
– UL 1973
– UL 9540
– UL 9540A
– IEC 62933
– IEC 62619

Safety standards are continually evolving as new technological innovations emerge. UL actively participates in and conducts numerous standards panels and working groups to ensure that testing, certification, and standards keep pace with developments in this sector.

In the UK, while there are currently no specific regulations governing BESS, the Department for Energy Security and Net Zero provides guidance to developers. However, authorization for new BESS sites often depends on planning approval—a process that can vary significantly across devolved nations. Typically, the responsibility for granting planning permissions falls on individual local authorities, which may lack experience or training in assessing BESS developments. This can lead to inconsistencies among BESS sites across different regions, potentially inviting risk.

It is essential to recognize that safety standards are primarily the responsibility of original equipment manufacturers (OEMs), rather than the project developers. Insurers are uniquely positioned to enforce consistency and best practices related to safety standards, thanks to their specialization and experience in assessing risks for such projects globally.

### Continuous Evolution in Technology and Best Practices

The standards for BESS construction are continually updated to reflect technological advancements and the latest knowledge. It is crucial that any future regulations do not enforce outdated practices that could hinder industry development.

For instance, nickel magnesium cobalt (NMC) was once the preferred chemistry for utility-scale BESS, but it is now rarely used in new projects. Most insurers now assess NMC batteries as a higher risk compared to lithium ferro phosphate (LFP), which is favored for its superior chemical and thermal stability, longer lifespan, and lower cost. Consequently, around 80% of utility-scale BESS now utilize LFP.

Moreover, the insurance industry recognizes that projects built in the past two years are considerably less risky than those constructed ten years ago, as the latter were developed under outdated safety standards. Older BESS sites often have unique profiles that can significantly increase fire risk, as the technology and design from a decade ago differ markedly from today’s recommendations. Adhering to evolving standards may also necessitate augmentations or retrofits of existing sites as insurers reevaluate risks based on the latest best practices.

### The Role of the Insurance Industry in Enforcing Safety Standards

Insurers require adherence to the safety standards of UL, IEC, and NFPA, making these standards fundamental to insurability. BESS projects that meet these standards are generally perceived as more insurable and less risky assets.

The insurance industry has played a crucial role in establishing the standards for BESS sites and remains committed to proactively shaping these standards in the future. If BESS developers cannot meet the required safety criteria, they will likely face challenges in securing insurance for their projects. Without insurance, obtaining financing becomes difficult, impeding project progress.

### Recommendations for BESS Developers

Best practices for BESS development are expected to undergo frequent updates. While developers may be focused on other tasks such as financial reporting, client interactions, and business development, it is vital for them to stay informed about compliance changes, technological advancements, and safety standards. Insurers will apply the latest safety standards when assessing BESS project risks, and non-compliance may lead to higher premiums or difficulty in finding coverage.

To ensure their current or future BESS sites remain compliant and insurable, developers should take the following steps:

– Involve insurance professionals from the very beginning of the project
– Adhere to international safety standards
– Integrate compliance into company-wide processes
– Stay informed about developments in BESS technology

For more information, please contact a member of our team or visit our Renewable Energy page.

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*By Michael Bogdan, Partner, Lockton Global Energy & Power, London, UK, michael.bogdan@lockton.com*

*For more info:*
– Ben Taylor, Business Development Manager, +44 771 777 4276, ben.taylor@lockton.com
– Rosie Donald, Account Executive, Global Energy & Power, rosie.donald@lockton.com