Last month’s fire incident involving a Tesla battery project in Victoria is likely to lead to increased scrutiny by insurers over the way renewable energy storage assets are constructed and managed, according to broker BMS.

The broker says developers and operators of battery energy storage systems (BESS) face a stark choice in the wake of the incident: increased premiums or improved risk management from the sector.

“As a proportion of installed generating capacity, the renewables sector will grow substantially in the next decade, and BESS will play a big part in the transition to a cleaner future, providing flexibility and stability to the energy market,” Head of Energy Australia Richard Nunny said.

The project near Geelong, expected to be the largest of its kind in the southern hemisphere upon completion, caught fire during testing of a 13-tonne lithium-ion battery.

It consists of 210 Tesla Megapacks rechargeable lithium-ion battery storage products and is part of Victorian Big Battery, a 300 megawatt grid-scale battery storage initiative designed to store enough energy in reserve to power more than one million Victorian homes for half an hour.

Development of utility scale BESS such as the Victorian Big Battery continues to play an important role in creating a flexible and reliable energy market, BMS says.

But the speed of technological change and the pressure to reduce costs will drive insurers’ underwriting focus to ensure best practice in the development, construction and operation of these projects.

“The way to look at it is whether insurers believe they’re getting adequate premium for the risk,” Mr Nunny told insuranceNEWS.com.au.

“Insurers will be more thorough with the information [from clients], risk management and they’ll make sure that the premiums are adequate for the risks.”

A BESS report in March by BMS outlines the state of the market in Australia including insurance considerations as well as operations and maintenance challenges.

The report says the huge growth opportunities will generate a lot of interest from renewable energy insurers locally and internationally.

However, following the negative claim performance of the renewable energy sector in Australia over the past five years, insurers will inevitably take a more cautious approach to underwriting and pricing.

Click here for the report.