Author: Carl Gurney
A new report from the International Energy Agency (IEA) highlights the urgent need for a six-fold increase in global energy storage capacity, with battery storage accounting for 90% of this growth, in order to meet the global 2030 climate targets*. This report has significant implications for the insurance industry.
The report, titled "Batteries and Secure Energy Transitions," reveals that battery deployment in the power sector more than doubled in 2023, driven by falling costs and supportive policies. This surge in battery deployment added 42 gigawatts (GW) to global electricity systems, underscoring the indispensable role that batteries have in enabling the transition to clean energy and achieving climate objectives.
From an insurance perspective, the rapid expansion of battery storage capacity presents both opportunities and challenges. As the battery market is forecasted to expand to a total value of $330bn by 2030, insurers have the opportunity to provide coverage for the growing number of batteries and related infrastructure. This includes coverage for battery manufacturing facilities, storage facilities, and the transportation of batteries.
However, the insurance industry must also consider the risks associated with battery storage. As batteries become more prevalent in the power sector and in electric vehicles (EVs), there is an increased risk of battery fires, explosions, and other incidents. Insurers will need to assess and manage these risks to ensure that they can provide adequate coverage and protect their clients.
Furthermore, the report emphasises the need for greater diversity in the global battery supply chain to ensure energy security. This diversification presents an opportunity for insurers to provide coverage for the transportation and storage of critical minerals essential for battery production. Insurers can also play a role in supporting the shift towards advanced economies such as the US and the EU, which are expected to account for 40% of announced plans for new battery manufacturing.
Gallagher, one of the leading insurance provider, recognises the importance of the rapid expansion of battery storage capacity. The company is committed to supporting the transition to clean energy and helping clients manage the risks associated with battery storage.
In conclusion, the report highlights the urgent need for rapid battery expansion to meet global climate and energy security goals. From an insurance perspective, this expansion presents both opportunities and challenges. Insurers must be prepared to provide coverage for the growing number of batteries and related infrastructure while managing the risks associated with battery storage. By supporting the transition to clean energy and helping clients manage these risks, insurers can play a crucial role in achieving global climate objectives.
