The Claims Journal believes that the lithium-ion battery insurance industry has reached adolescence. This is quite a time-gap from the product life cycle, which by all accounts is topping out. We haven’t written much about lithium-ion battery insurance previously, but decided this was sufficient reason to make amends.
Early Challenges with Lithium-Ion Battery Insurance
Adolescence in living creatures is the phase between early innocence and mature adulthood. We guess most relationships transition through these stages too. Certainly, insurers lacked the maturity to deal with lithium-ion battery fires when they literally burst on the scene.
Tom Harries, from the insurance underwriting industry describes how insurers grappled with the topic from the beginning. Batteries were previously a component of the larger assets they insured, but now they were a topic all on their own.
Batteries were equipment, they reasoned, but they did not contain moving parts or rotating pieces. Instead, they contained a chemistry they were not familiar with, and this made it difficult to assess in the absence of actuarial track records.
Learning to assess these risks was not easy for his industry in the beginning, Tom Harries admits. Not all providers were willing to involve themselves in the problem, and they stayed away from battery insurance.
The Main Issue With Batteries Continues to Be Thermal Runaway
The main insurance risk with batteries continues to be cascading thermal runaway in faulty lithium-ion battery cells, that spreads to adjacent ones. However, there has been a reduction in the frequency and severity of incidents, Harries concedes.
“Whichever way you slice and dice publicly available data on the number of global thermal runaway events, you see a huge reduction in the frequency of these compared to the early days,” he says.
“The best way of avoiding a statistically possible incident,” he continues, “is to space individual storage batteries in cabinets ten feet apart”. Battery energy storage systems are transitioning from risky, emerging technology, to a vital, more secure component of renewable energy.
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Preview Image: Process of Thermal Runaway
