Batteries (And Insurance) Included

Oregon’s ESS, Inc. signs novel 10-year agreement with Munich Re

A German insurer became the first company to offer long-term insurance on large-scale battery and energy storage, it announced last week. Munich Re, an insurance group based in the German city of the same name, signed a 10-year contract with U.S. battery manufacturer ESS Inc., per a company press release March 7.

The news could pave the way for more investments in the rapidly growing renewable energy sector. Peter Röder, member of the board of management at Munich Re, stated “the ability to insure battery performance is a key piece of the puzzle in decarbonizing our energy sector. For the first time, battery manufacturers can insure against the risk of their products not delivering as promised. With this new coverage, Munich Re has again demonstrated its pioneering role in the insurance of climate-friendly technology.”

Munich Re becomes the world’s first insurer to offer a product that covers battery performance. Its insurance program could allow manufacturers in the booming battery market to offer long-term performance guarantees – whose value is backed by the insurance coverage.

ESS battery storage

An ESS battery storage array in South Korea.—ESS photo

The new coverage allows battery manufacturers to insure their customer warranties. For example, if the repair or replacement costs of defective or weak battery modules exceed a predetermined amount, the insurance then covers the rest. Manufacturers can thus unburden their balance sheets. It could also facilitate project financing, because the maximum costs for any warranties are often capped by the insurance cover. “This constitutes a distinguishing feature for investors,” Munich contends, because its product “makes it significantly easier for manufacturers to ramp up deployment of battery capacities, thus making renewable energy more dependable and widely available.”

The first customer for the new insurance product is Wilsonville, Oregon manufacturer ESS Inc., whose redox flow batteries will now be sold with Munich Re’s performance warranty cover. ESS, based just outside of Portland, produces stationary battery modules that allow energy from solar parks and network operators to be stored over long periods. The company acronym stands for Energy Storage Systems. It is one of the promising companies in a market that nearly doubled in 2018 in the U.S. According to the U.S. Energy Storage Monitor 2018 Year-in-Review, released this week by Wood Mackenzie, the nation installed 350.5 MW, 777 MWh — over 80% more than was deployed in 2017 in terms of megawatt-hours, and is estimated to double that figure in 2019, deploying 1,681 MWh. By 2024, the report expected annual deployments to exceed 4.4 GW.

Munich’s battery storage coverage can be “optionally expanded” to protect selected investment projects directly, so that the insurance will pay even if the manufacturer who issued the warranty files for insolvency within the warranty period.

The company says its insurance cover is primarily aimed at major projects, such as those to ensure grid stability or to cover peak demand periods. In a second phase, the product will be introduced onto the mobility market, for example to insure performance of batteries in electric vehicles. The German company has continued initiatives to develop new insurance solutions for climate-friendly technologies. In addition to its new battery performance insurance, Munich Re has been offering performance coverage in other areas of the renewable energy sector for several years, for example for solar and wind parks and fuel cells.

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