Rapid BESS adoption in Australia highlights the need for robust safety, risk management, and transparency measures.
Battery energy storage systems (BESS) are becoming a cornerstone of Australia’s renewable energy transition, with all signs pointing to storage being a critical intermediary in maintaining system reliability.
According to the Australian Energy Market Operator’s (AEMO) Quarterly Energy Dynamics report for the final quarter of 2025, 3.8GW/8.6GWh of new battery capacity entered the National Electricity Market last year.
Battery discharge on the NEM nearly tripled to average 268MW over the period, with other peaking sources such as gas-fired generation posting its lowest quarterly output since 2000, averaging 741MW.
As the adoption of grid-scale BESS increases, what is less recognised is the risks that come with installing these operations. Battery installations Australia-wide are facing one key challenge: thermal runaway.
Thermal runaway is caused when a battery is subject to high temperatures, either from a high rate of current discharge or proximity to external sources.
This, as the name suggests, creates a chain reaction where heat cannot be dissipated faster than it is created, leading to self-sustaining heat creation and flammable gasses that produce fires.
Between January and August 2025, 94 lithium-ion battery fires occurred in Western Australia, compared with 49 for the whole of 2020. While most of these occurred in residential and commercial premises, large-scale BESS also run on lithium-ion technology.
As AXA XL energy transition risk consultant Belinda Luu explained, a growing BESS fleet alters its risk profile.
“We’re seeing project capacity and battery durations increasing, and battery containers getting larger, with containers increasing from 3–4 megawatt hours in capacity to at least 5 megawatt hours,” Luu told Energy.
“These containers are more energy dense, which means the risk of thermal runaway and the potential for a cascading failure is higher.”
A global BESS leader
A Rystad Energy report from October positioned Australia as the world’s third-largest market for utility-scale BESS, with China and the US first and second, respectively.
The country is awash with international developers, with local integrators such as Akaysha Energy and Stanwell Corporation accompanied by the likes of French company Neoen, Italy and Japan-backed Potentia Energy, and Singapore’s Equis, to name a few.
Luu has observed a more competitive battery market in Australia, creating less transparency.
“Rystad found that in 2025, the top two BESS integrators accounted for 40 per cent of the market share, which was around 70 per cent in prior years,” she said.
“While having a growing number of BESS developers de-risks the supply chain, it also makes it harder for insurers to maintain relationships with OEMs (original equipment manufacturers) and understand the testing they’re undertaking and what they’re developing.”
As Australia’s BESS fleet expands, developers mustn’t lose sight of the inherent safety and loss risks and deploy preventive measures to suit.
“Developers need to ensure that they not only have a robust BESS design but also a BMS (battery management system) that assists down to the cell level and can detect abnormal conditions such as spikes in voltage, high temperatures and pressure changes,” Luu said.
“Early off-gas detection is also important during thermal runaway events, along with mechanical ventilation systems which can expel excess gas from BESS containers.”
Luu said deflagration panels also play an important role.
“If there is enough pressure created from a fire or explosion, deflagration panels open and release the pressure instead of the container bursting at the seams, so to speak,” she said.
“Testing is also a critical component. The latest standards require large-scale NFPA 855 fire testing to be carried out, in addition to regular UL 9540A testing. This ensures the worst-case scenario for a fire event and how fire can propagate to other containers is considered. Previous standards didn’t mandate this.”
Local guidelines
The importance of fire testing is recognised in the Country Fire Authority’s (CFA) ‘Fire Safety Studies for Battery Energy Storage Systems’ guidelines, first released in June 2025.
Here, the CFA may request the development of a fire safety study for BESS over 1MWh in capacity based on the unique design, complexity, location and proposed operations of the system. This would accompany a standard risk management plan.
Luu called the report “one of the more comprehensive guidelines” she’s seen on BESS fire safety.
“The report from the Victorian authority makes reference to the NFPA 855 fire testing that got rolled out in September 2025, so they’re on top of it,” she said.
“It also stipulates the need for a four-hour supply of water despite acknowledging the fact that the standard approach for thermal runaway fires is to ‘let it burn’. The water may be needed to cool down adjacent assets or mitigate other issues.”
While the release of the report is encouraging for the Australian BESS sector, Luu called for more transparency.
“Often we will hear about a news report of a BESS failure, but the outcome of investigations can be difficult to find,” she said.
“For the BESS sector to clearly understand the risks at play, they require reference points, so I encourage industry to be forthcoming with findings from investigations carried out into BESS failures and fires.
“BESS technology is still new, and we’re all learning as we go.”
AXA XL has provided coverage for BESS operations for some time now. In doing so, the company supports the use of captives in insuring renewable energy risks. This includes sustainability-linked insurance and fronting services.
Clients can use captives to cover risks that may be difficult to place in the traditional insurance market and to meet sustainability goals. They can also capture valuable data, which helps them better understand and manage their threats.
Tailored insurance solutions such as captives have an important role to play in protecting BESS developers from operational risks. It doesn’t, however, take away from the importance of having sturdy fire safety and risk management plans in place.
This feature appeared in the March edition of Energy.
