Early in site acquisition, there may be a need to purchase a long-term financial indemnity to benefit landowners, neighbours, regulators, or local authorities arising from historic covenants, brown land contamination, or newer counterparty or legal requirements.

Simultaneously, SPVs may be established in need of specially drafted Director’s Liability clauses (D&O) to reflect the roles of Directors and their relationships with connected parties.

It’s essential to cover both the construction and the first year of operation from the outset of the project, so that investors have confidence the facility is insurable on an ongoing basis. To arrange optimum cover, insurers will need to be engaged early in the process. Fire engineering issues such as spacing, racking, suppression and signalling can be agreed with insurers, thus avoiding any costly retrofit.

A standard Construction Insurance policy will not cover any element being shipped from outside the country of construction, and to address this, specialist Marine Insurance is required for the transit, and any loss of revenue as a result of delay in start-up (DSU) caused by damage during, or insurable delays to, the transit. With most batteries travelling East to West with the attendant geopolitical and weather risks, this is a major risk to insure.

Fire and storm damage to construction sites are common and can delay the start of revenue generation, destroying the investment case.

Once operational this risk of an interruption in income is only slightly less acute in view of the regularity of BESS fires, and the increase in storm damage across Europe. Income Protection cover will be required on an ongoing basis and needs to recognise the evolving supply chain complications and time delays post incident.

Grid Deposit and Decommissioning Bonds are increasingly required in the UK and across Europe and can be complex given the relative infancy of the (B)ESS market and projects, being pre-revenue.

The financing of (B)ESS projects follow the tried and tested legal and insurance principles for large energy and infrastructure projects, with the lender requiring their interest or name included and non-recourse and non-vitiation clauses. Lenders will also require their own expert to audit the insurance programme. The legal work in negotiating this with insurers is highly specialised.

Any access to grid infrastructure or critical dependent systems is seen as an extremely elevated risk for cyber-attack, and a failure of security by the developer/operator might lead to both liability and considerable damage to machinery and downtime. Battery management systems and optimisation create a potential professional negligence exposure to claims for lost revenue or property damage.

Very few insurers worldwide specialise in (B)ESS, and it’s therefore vital to work with an insurance broker who is active in the insurance market and knows which insurers are open for business, which insurers are already over committed to one location or technology, and which insurers are seen by their peers as a suitable leader when the size of the project requires more than one insurer. 

With larger projects, it’s conceivable that the support of the majority of the insurers who are currently active in the ESS market may be required, so a carefully considered navigation of insurer relationships is essential.