Australia’s pipeline of battery energy storage system (BESS) projects is growing fast.
Contractors across the country are commencing work on some of the largest and most complex construction sites in the renewable energy sector. The pace is real, the opportunity is real — and so is a risk that most construction businesses haven’t fully confronted yet.
If something goes wrong on a BESS project (a fire, an incident during commissioning, a delay in getting the system online) is your insurance actually going to respond? For many builders, the honest answer is: probably not in full, and possibly not at all.
This isn’t a criticism of how construction businesses operate. It’s a reflection of a market that hasn’t kept pace with the work. Standard insurance policies were designed for conventional construction risks. BESS projects are a different animal entirely.
The gap in your standard CAR policy
Most construction businesses carry a Contractor’s All Risk (CAR) policy and reasonably assume it covers them for work on site. On a BESS project, that assumption needs to be tested carefully.
The challenge with battery storage is that fires behave differently to anything the construction industry has traditionally dealt with. A battery fire can sustain itself for many hours — sometimes days — and standard firefighting methods often cannot extinguish it quickly. The cost of just managing a fire response on a utility-scale BESS site can run into the millions before you even consider the damage to the project itself.
Standard CAR policies frequently have not caught up with this reality. Common issues include:
- Sub-limits or outright exclusions for battery modules
- Exclusions for testing and commissioning — which is exactly the phase when incidents most commonly occur
- Fire suppression cost limits that bear no relation to the actual cost of a BESS fire response
- Policy language written for conventional construction materials that simply doesn’t contemplate lithium-ion battery risks
The practical consequence: a contractor can be on site, fully insured on paper, and still face a situation where a significant portion of a major claim isn’t covered.
A delay costs more than you think
The financial exposure on a BESS project doesn’t stop at physical damage. Many grid-scale BESS projects are structured with revenue arrangements that begin once the system is energised and commercially operational. If an incident pushes back that date, the losses compound quickly.
Replacing major battery components isn’t straightforward. Lead times for specialist equipment can stretch to six months or more. The longer the project stays offline, the greater the financial exposure — not just for the project owner, but potentially for the contractor depending on how contracts are structured.
Delay in Start-Up (DSU) insurance is designed to protect against exactly this scenario, but it needs to be structured correctly for BESS. The indemnity period must reflect realistic replacement and recommissioning timelines — not generic estimates borrowed from a different type of project. Getting this wrong at the placement stage leaves a significant financial gap that only becomes apparent at the worst possible time.
The other gaps: public liability, PI and environmental
CAR is the most obvious gap, but BESS projects create exposures across other lines of cover that deserve equal attention.
Public Liability: Most construction businesses carry public liability insurance, but standard policies typically exclude pollution and contamination. A fire on a BESS site can produce smoke, gases and firefighting water discharge that affect nearby properties or third parties — creating a genuine liability exposure that a standard policy may not address.
Professional Indemnity: BESS projects increasingly involve contractors taking on design responsibility — for battery management systems, grid integration or system architecture. If your scope includes any design component, Professional Indemnity insurance needs to be in place and written to cover that specific work. A PI policy set up for a conventional construction business may not respond to a BESS-related design claim.
Environmental Liability: This is the coverage class most often overlooked at tender stage. A battery fire incident can trigger regulatory obligations, soil and water testing, stakeholder consultation and remediation work — regardless of the ultimate contamination outcome. Those costs are real, and standard public liability policies do not cover them.
These three coverage classes need to work together. A gap in any one of them can leave a business significantly exposed, even if the others look solid.
What the insurance market expects from you
Insurers have learned hard lessons from major BESS incidents internationally. Underwriting scrutiny has increased substantially. Documentation requirements are more demanding. Some insurers have reduced or withdrawn capacity from the sector entirely.
For construction businesses, this means approaching a BESS insurance placement without specialist guidance will likely result in inadequate cover, inflated premiums, or both. Some BESS risks require access to specialist underwriting capacity that isn’t available through standard commercial insurance channels. Presenting a BESS risk compellingly is itself a specialist skill — it requires understanding both the construction risk and the insurance market’s specific concerns.
Three practical steps for construction businesses
- Review your existing cover honestly. Don’t assume your CAR policy covers BESS work because it covered your last project. Check for battery sub-limits or exclusions and verify how it treats commissioning. What you think is covered and what is actually covered are often very different things.
- Start the insurance conversation early. Major BESS contracts carry more demanding insurance requirements than standard commercial projects, and structuring the right program takes time. Leaving it to the final weeks before mobilisation is a mistake that can’t always be corrected.
- Work with a business insurance broker who understands BESS. This is not a situation where a generalist insurance approach will deliver what you need. The construction businesses that invest in getting this right early are better positioned when something goes wrong — and better positioned to win work in a sector that requires them to demonstrate real capability.
How crucial insurance can help
Crucial Insurance and Risk Advisors specialises in complex and hard-to-place construction risks, including battery energy storage systems, renewable energy infrastructure and large-scale commercial projects. Our team works with construction businesses to identify gaps in existing coverage, structure programs that reflect the actual risk profile of BESS work, and access specialist underwriting capacity where needed.
Australia’s energy transition is accelerating. The construction businesses building the infrastructure behind it deserve insurance that keeps pace with the work.
If you’re working on BESS projects or expect to be, contact us for an assessment of your current coverage: info@crucialinsurance.com.au | www.crucialinsurance.com.au
About the Author: This article was written by Tony Venning, Managing Director at Crucial Insurance and Risk Advisors. For further information or comment, please email info@crucialinsurance.com.au.
Editorial note: This article and its content were produced by a sponsor.
