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- Published: Friday 08 July 2022 08:46
Future energy sources are one of many considerations for corporate risk managers as they seek to set and achieve ESG goals. As Dr. Lou Grizzo explains, sustainable energy is key, but it also comes with its own set of risks.
With the United Nations COP26 climate conference in November 2021 and recent reports from the Intergovernmental Panel on Climate Change (IPCC), climate change is on the radar of global and business leaders. Businesses are facing pressure to respond to this climate challenge, both in terms of addressing the risks to their businesses from climate change and reducing the environmental impact of their operations. There is also an increasing demand for companies to publicly demonstrate how they are managing the risks associated with these challenges. For example, the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) have been accepted around the world.
In this context, heightened by the ongoing war in Ukraine, many companies are actively planning to reduce their dependence on carbon-intensive energy and achieve net zero-level emissions in the coming years. To meet environmental, social, and governance (ESG) goals, many companies are adopting and using new technologies to reduce their impact on a changing climate. However, this important part of sustainability comes with risks.
For example, electrical faults associated with photovoltaics (PV) and solar panels can cause fires. Fire is also a risk associated with lithium-ion batteries. Lithium-ion batteries enable industrial-scale power with reduced carbon emissions by storing energy produced by sustainable sources such as solar panels and wind for use when needed. By realizing it is an important part of the electric revolution. A fire can be caused by an event called cascading thermal runaway. In this case, one of the battery cells overheats due to an internal fault, releasing combustible gases and heating adjacent cells. These volatile gases can easily ignite and can ignite adjacent cells, causing a cascading flame that can cause severe damage. Apart from the obvious business interruption such an event can cause, there are also environmental costs of rebuilding the structure and recovering the equipment inside if damaged by any type of fire. Any effort to manage also promotes good ESG practices.
One of the ways companies can be resilient while still driving the sustainability agenda is to actively involve risk managers as early as possible in their ESG efforts. Building a relationship with Chief Her Sustainability Officer or Her ESG Officer will enable risk management and partners to act as long-term sustainability facilitators and supporters. With early involvement of partners like FM Global, our expertise, research and data can also be used to help risk managers find the right solutions.
In the lithium-ion battery example, the risks associated with this technology are best managed through the use of compartmentalization when planning the layout of the facility. This could mean imagining a potential worst-case scenario, dividing the cells into smaller groups, and arranging the batteries to make this scenario more manageable. Introducing certain protective measures to limit potential damage is also an important step. Devices such as firebreaks and firewalls can provide protection and limit cascading thermal runaways to only a small group of cells. Dividing the cells in this way makes traditional fire protection more effective. Because fire protection measures cover a smaller area and reduce smoke and water damage.
Having a proper battery management system in place – a system that manages rechargeable batteries and ensures that they operate efficiently and safely – is also an important part of proper risk management. This system must include certain safety features to maintain resilience. Your setup should incorporate multiple tests and maintenance checks to ensure that all critical systems are working. For example, it’s important to incorporate HVAC maintenance into your plan. Cooling technology is essential to keep the entire system at the proper temperature and reduce the risk of fire. Some businesses may need to repair and replace their air filters more often than others, especially in dusty locations, so this should be taken into consideration. Other checks required for proper maintenance of the HVAC system include coolant checks, compressor/heater core checks, and duct/cable checks.
Establishing a battery replacement program is another proactive strategy for maintaining a resilient battery management system. This includes finding information about the lifespan of used batteries and establishing timelines for replacing old batteries. Advice provided to customers on this and other methods of safely utilizing electrical energy storage can be found in FM Global Property Loss Prevention Data Sheet 5-33, Electrical Energy Storage Systems (1).
This kind of insight, considered early in the planning and design stages, along with other risk mitigation measures, can help promote the resilient use of new sustainability-driven technologies and how risk management responds. , you can show that you are an integral partner in supporting them. Goals to address climate challenges and maintain resilience.
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Dr. Lou Gritzo, Vice President and Manager of Research at FM Global, said:
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- FM Global Property Loss Prevention Data Sheet 5-33, Electrical Energy Storage Systems, Interim Revision, July 2020. https://www.fmglobal.com/research-and-resources/fm-global-data-sheets ©2022, FM Global . all rights reserved. This information is the property of Factory Mutual Insurance Company (FM Global). It is provided for informational purposes only. It cannot be shared with other parties. No liability is assumed by or through the use of this information. FM Global’s liability is limited to what is contained in the policy.
