Topics covered in this article will be discussed at Lockton’s ‘Bankable Storage Summit’ event, at Sea Containers House, London, on 12 November 2025. To find out more about this event and register your interest to attend, please click here (opens a new window).
The UK’s push toward net zero has enabled battery energy storage systems (BESS) to emerge as a crucial factor for grid flexibility, renewable integration, and energy security.
In the UK, since 2020, operational battery storage capacity has soared by 509% (opens a new window), reaching 6.8GW in 2025. However, as investment and deployment of BESS increases, managing risks pre-construction to ensure a project is bankable remains critical. In this article we examine the key areas of risk for BESS developers before construction begins.
Pre-construction risks for BESS developments
Typically, operational risks, such as thermal runaway, receive the majority of attention from project owners and the wider industry – due to its potential to cause hefty losses. However, it is crucial that risks appearing during financing, development, and construction are also considered. To help mitigate these, risk advisory services, suitable insurance coverage, and surety should all be explored by developers.
During the development stage, the most pertinent risks to BESS, include:
Permitting and grid connections
Land-use restrictions, grid connection delays, environmental impact assessments, and approvals from local authorities can impede or cancel prospective BESS projects. Furthermore, developments can also be affected by planning obstacles or opposition from community-based NIMBY groups.Pace of technological innovation
Standards for BESS installations are constantly evolving as technological innovations present themselves. It is important to keep up to date with these developments to avoid using outdated practices or components. The use of obsolete equipment could result in failure to meet advancements in compliance and regulatory requirements, before commissioning.Quality assurance and quality control of contractors
Hastily beginning construction runs the risk of relying on contractors without proven experience in the BESS space. Opting for an inadequate partner has the potential for projects to suffer cost overruns or construction defects.Securing finance
Sufficient funding is a crucial aspect in the viability of BESS installations, failure to obtain appropriate financing can jeopardise projects. To secure project financing, investors will demand strict insurance requirements.Supply chain
Building a diversified, robust supply chain can limit dependencies on specific cell or OEM manufacturers. This can help projects meet evolving industry standards and avoid any delays in construction timelines. Resilience in this area is particularly crucial in light of changes to cell chemistry or geopolitical tensions.Environmental risks
When reviewing potential sites, developers must conduct a thorough assessment of ground conditions and flood risk. Weather-related delays affecting construction timelines should also be considered, as storms, strong winds, lightning, and hailstones could all harm BESS installations.
What insurance policies should BESS project owners consider?
Before breaking ground on a BESS site, owners should secure a comprehensive suite of pre-construction insurance policies to safeguard against a wide range of risks.
Key coverages include:
Construction All Risks (CAR)
Protection against physical loss or damage to the BESS project during the construction phase.Delay in Start-Up (DSU)
Covers financial losses resulting from delays in project completion due to insured physical damage, ensuring revenue protection and continuity.Construction third-party liability
Provides coverage for bodily injury or property damage to third parties arising from construction activities.Terrorism insurance
Protects against losses caused by acts of terrorism, which may not be covered under standard property or liability policies.Marine Cargo (Wrap-Around Option)
Covers transit risks for key components such as battery modules, inverters, and, main power transformers. This can be arranged as a wrap-around to complement contractors’ existing marine policies, ensuring seamless protection across the supply chain.Marine Delay in Start-Up (MDSU)
Extends DSU coverage to delays caused by marine transit incidents, such as vessel damage or port disruptions, which impact timely delivery of critical equipment.Cyber insurance
Safeguards against cyber threats including data breaches, ransomware, and operational disruptions to digital control systems integral to BESS functionality.Environmental Impairment Liability (EIL)
Offers coverage for gradual pollution events that were not initially discovered when they occurred, or were caused by a previous occupant of the property, and only appeared when groundworks excavation began for the BESS project. EIL also further supports other policies providing coverage for sudden and accidental pollution events, including contamination of soil, groundwater, or nearby ecosystems during construction or operation.
How else can the insurance industry help BESS developers?
Insurance professionals can provide invaluable early-stage risk advisory services for BESS developers. Engaging with industry experts early enables risk engineers to assess site suitability, review design standards, and evaluate proposed contractor competence. Contract review services are also offered to help ensure that EPC and supplier contracts are optimally structured with appropriate risk allocation.
Insurance professionals can issue crucial bankability support for BESS developers. Brokers can help provide constructors with insurance due diligence reports to support engagement with financiers, lenders, and investors. If a prospective BESS project demonstrates thorough and robust risk management, that follow industry standards and best practices, it will subsequently improve bankability and boost investor confidence.
Surety: further consideration for derisking BESS projects
Surety is a well-established risk management tool within the energy construction sector, providing a guarantee that a contractor will meet its payment and performance obligations under a contract. For BESS developers, surety bonds, such as performance, retention, and advance payment bonds, are often a contractual requirement. These instruments provide security to developers in the event of contractor default or insolvency, which is typically the primary reason for their procurement.
A developer’s ability to secure a bond demonstrates financial strength and credibility. Sureties (typically insurance companies) undertake thorough due diligence on the developer’s financial position, experience, and project execution capability before issuing a bond.
The procurement of a bond effectively de-risks a BESS project, providing assurance that the project will be completed even in the event of default. This additional layer of financial protection reduces lender risk and can improve the bankability of the project. As a result, lenders may be more inclined to offer better loan terms, higher funding limits, or faster approvals.
Beyond contractual risk mitigation, surety also plays an important role in ensuring regulatory compliance. In certain jurisdictions, developers are required to provide security in favour of regulatory bodies to obtain permits or licences. This security gives regulators confidence that they can recover any damages if a developer defaults. Traditionally, such security is provided through restricted cash deposits or escrowed funds. Replacing these with surety bonds can deliver significant liquidity advantages – freeing up capital for the developer to allocate toward other project needs or growth opportunities.
For further exploration on the opportunities, challenges, and innovations shaping the future of energy storage, join us for our ‘Bankable Storage Summit’ (opens a new window) on 12 November 2025, at Sea Containers House, London.
To discuss your BESS project, contact a member of our team, or visit our Renewable Energy page (opens a new window).
