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Q0020

What are the biggest risks that can cause a BESS project to underperform financially or technically?

Primary Category

Energy Storage

Question Type

Technical

Tags

Energy Storage; BESS; Risk

Short Answer

The greatest risks are choosing the wrong use case or size, overstating revenue, underestimating degradation, accepting weak guarantees, overlooking safety and integration requirements, and relying on a supplier that cannot support the system throughout its life. Most failures arise from interactions among commercial, technical and organisational risks rather than from the battery cells alone.

Why This Matters

A BESS can be mechanically complete and connected but still fail as an investment. Risk must be managed from feasibility through procurement, commissioning and operation because many problems cannot be economically corrected after installation.

What We Know

1. Use-case risk

The battery may be designed for the wrong problem:

Mitigation: Start with interval data, a defined service and conservative revenue rules.

2. Sizing and dispatch risk

Even a correctly rated battery can underperform if:

Mitigation: Simulate a full year, test extreme days and maintain clear service priorities.

3. Revenue risk

Projected revenue may depend on:

Mitigation: Separate contracted, tariff-based, avoided-cost and speculative revenue.

4. Degradation risk

Actual degradation may exceed the financial model because of heat, deeper cycling, high state of charge, high power rates or poor thermal control.

Mitigation: Use duty-specific degradation modelling and enforceable annual capacity guarantees.

5. Technology and manufacturing risk

Problems can arise from:

Mitigation: Use qualified equipment, independent design review, factory testing and traceable quality control.

6. Safety risk

Thermal events can cause fire, gas release, extended shutdown, reputational damage and insurance loss. Malaysia’s BESS Safety Guidelines make local safety assessment an essential project requirement. Energy Commission BESS Safety Guidelines

Mitigation: Address cell-to-system testing, propagation, detection, ventilation, separation, emergency access, shutdown and responder planning.

7. Integration risk

The BESS may not communicate or coordinate correctly with:

Mitigation: Define control responsibilities, interfaces, test cases and failure modes before procurement.

8. Grid and approval risk

The project may require unexpected studies, equipment or operating restrictions. Connection delay can postpone revenue while financing costs continue.

Mitigation: Engage the utility and regulator early and make contracts conditional on a workable connection.

9. Construction and commissioning risk

Underperformance can result from:

Mitigation: Use an independent commissioning plan with measurable acceptance criteria.

10. Warranty risk

A warranty may appear long but offer limited protection because:

Mitigation: Align warranties, operating rules, financial assumptions and security.

11. Supplier and counterparty risk

The integrator or manufacturer may:

Mitigation: Assess financial strength, parent guarantees, local capability, spare-parts strategy and interface responsibility.

12. Operational and cybersecurity risk

Poor maintenance, weak data, unauthorised remote access or unpatched software can reduce availability or create safety and system risks.

The DOE Energy Storage Handbook treats safety, cybersecurity, management systems, commissioning and performance testing as separate essential disciplines. DOE Energy Storage Handbook

13. Climate and site risk

Heat, humidity, flooding, salt exposure and inadequate drainage can affect performance, corrosion and availability.

14. End-of-life risk

The owner may face unplanned costs for removal, recycling, contaminated equipment, transport or site restoration.

Risk allocation principle

Each risk should be assigned to the party best able to control it. However, contractual transfer is not a substitute for competence: assigning an unlimited risk to a weak contractor may simply make the remedy unenforceable.

What We Don't Know

Connected Questions

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Q0011 — When does installing BESS make economic sense in Malaysia? Coming soon
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Q0015 — How can BESS create revenue or economic value beyond simply storing solar energy? Coming soon
Q0016 — What determines the payback period of a BESS project? Coming soon
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Q0018 — How should a project owner compare different battery technologies for stationary energy storage? Coming soon
Q0019 — What should a project owner ask a BESS supplier before requesting or accepting a proposal? Coming soon
Q0028 — When should a solar project include battery storage from the beginning? Coming soon
Q0029 — How should an investor evaluate a Malaysian solar project before investing? Coming soon
Q0030 — What can cause an apparently attractive solar project to fail before construction? Coming soon
Q0033 — Can BESS allow more renewable energy to connect to a constrained grid? Coming soon

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