Battery energy storage systems (BESS) are becoming an essential part of Asia Pacific’s energy transition. As countries across the region ramp up efforts to decarbonise power generation and integrate more renewables into their grids, BESS are proving critical for ensuring system reliability and flexibility.
Markets such as Australia, Japan, India and Southeast Asia are investing heavily in solar and wind energy, but these variable sources pose challenges in balancing supply and demand.
The International Energy Agency estimates that renewable energy investment in Asia Pacific could exceed US$286 billion between 2022 and 2030, with renewables projected to make up 30 to 50 per cent of the region’s power generation mix by the end of the decade.
While solar panels and wind turbines are the most visible signs of this transition, much more is needed to ensure long-term energy resilience.
Battery energy systems (BESS) offer a solution to the intermittency of renewables, but they also bring a distinct set of risks that must be properly understood, managed and mitigated.
NEED FOR CHANGE
Electricity demand is set to double over the next25 years, with Asia Pacific projected to account for more than half of global electricity consumption. This growth is being driven by energy-intensive sectors such as data centres, artificial intelligence, cryptocurrency mining, and the rapid uptake of electric vehicles.
According to the International Energy Agency, global grid-connected electricity generation reached approximately 29 PWh in 2022 and is forecast to exceed32 PWh in 2025, driven by electrification trends and growing contribution of renewable energy sources.
While coal and gas-fired power stations still supply a significant portion of global electricity, around 60 perent as of 2023, down from nearly 70 per cent a decade ago, their share is steadily declining as more countries transition to cleaner alternatives such as solar, wind and hydroelectric power.
Forecasts predict that variable renewable energy sources such as wind and solar PV will overtake fossil based electricity generation by 2035. By 2050, solar PV’s share of the power supply will be38 per cent.
WHY BESS?
Variable renewable energy sources alone cannot meet the demand for clean electricity. Wind needs to blow, and the sun to shine to generate electricity, producing fluctuating output and creating peaks and troughs in electricity supply.
These variations do not match the demand for electricity. For example, solar PV production peaks in the middle of the day, hours after the morning spike for electricity and long before demand ramps up again in the early evening.
This mismatch between supply and demand is commonly illustrated by the so-called “duck curve”, where net electricity demand (demand minus renewable generation) dips during the day and rises steeply in the evening.
As more solar capacity is added, the curve becomes more pronounced. The challenge is to ‘flatten the duck’ by storing excess generation and releasing it when demand rises, reducing reliance on fossil-fuel generation.
This is where BESS come into play. Storing unused energy from variable sources during their peak hours of production, enables it to be used later in the day when needed, and to provide BESS operators with a source of income.
To maximise the benefits of BESS installations, there are four key areas to optimise:
• Arbitrage – BESS can be charged during periods of low demand, when energy prices are reduced, and then discharged when the energy demand and prices are high. This maximises the use of renewable sources, rather than curtailing their output during periods of excess production. Charging batteries during periods of excess generation and discharging them while demand peaks also provide system managers with load-levelling capability.
• Capacity – System operators need sufficient generation capacity to reliably meet peak demand.In many instances, this peak demand requirement is met using higher-cost generators, such as gas plants.
In some situations, BESS can be used to ensure adequate generation capacity at peak times.
• Operating Reserve and Contingency – The ability to charge and discharge in exceptionally short timeframes means BESS can play an important part in always maintaining reliability in power systems and exactly matching electricity demand with supply.
• Defer Grid Upgrades – BESS can ease pressure on transmission networks during peak demand, helping to delay costly grid upgrades. Another plus is the mobile nature of BESS installations. When no longer needed in one location, they can be moved to another, increasing their value and shelf-life.
BESS TECHNOLOGIES AND TYPICAL ARCHITECTURE
There are four main electrochemical battery energy storage technologies available for grid-scale applications: lithium-ion, flow, lead-acid and sodium sulphur.
Among these, lithium-ion batteries currently dominate grid-scale battery storage due to their high energy density, efficiency and scalability.
A BESS is a compound system and comprises various hardware and software components. These include:
• A battery system – comprises single battery cells that convert chemical energy into electrical energy.
• A battery management system – by monitoring the condition of the battery cells, it gives warnings if there are developing safety concerns.
• An inverter or power conversion system – this enables the conversion of the direct current produced by batteries into an alternating current for supply to the grid. Bi-directional inverters enable BESS to charge and discharge.
• An energy management system – this oversees and manages the energy flow within a BESS.
To ensure safe operation, BESS installations are equipped with a range of safety systems. These include fire control, smoke detection, temperature regulation, as well as cooling, heating, ventilation and air conditioning.
Each system is supported by its own monitoring and control unit to maintain optimal operating conditions to reduce the risk of system failures or safety incidents.
COMMON LOSS SCENARIOS AND MITIGATION MEASURES
Fire is the predominant hazard for BESS, especially in their construction phase and initial years of operation. Insurer data shows that 15 per cent of losses occur during construction, while 63 per cent take place within the first two years of operation.
Thermal runaway is one of the most common root causes. Damage, dampness and temperature changes can cause batteries to short-circuit and over heat, triggering a self-sustaining reaction that may release toxic gases, and result in fires and explosions.
Other loss scenarios include lightning strike on inverters, and leaks of transformer oil coolant in the medium- or high-voltage transformers.
To control internal temperatures, BESS have either air-cooled or liquid cooled systems.
Air-cooled systems require high airflow to be effective but can be compromised if fans are blocked or if condensation forms. Liquid cooled systems, which are pressurised, can be prone to leaks and must undergo regular pressure testing to optimise performance.
Additional mitigation measures include gas detection systems capable of detecting trace amounts of hydrogen, enabling operators to identify and prevent potential thermal runaway scenarios from developing.
Venting systems help disperse explosive gases if required, and in-built fire extinguishing systems help prevent deflagration events. Spacing is also an important aspect of loss mitigation and can help isolate fires and prevent catastrophic loss scenarios.
The global battery energy storage market is forecast to grow from US$10.9 billion in 2022 to US$31.2 billion in 2029, driven by increasing investments in grid infrastructure and renewable integration.
As BESS becomes a more prominent feature of energy systems worldwide, the sector is attracting greater interest not only from developers and technology providers, but also from insurers, brokers and claims professionals seeking to better understand the associated risk landscape.
