Deep dive: Energy storage safety & thermal management — the fastest-moving subsegments to watch

Battery energy storage systems (BESS) deployed worldwide exceeded 120 GWh of cumulative installed capacity by the end of 2025, yet the safety infrastructure underpinning these installations has struggled to keep pace. Between 2017 and 2025, more than 70 documented BESS fire incidents occurred globally, including the catastrophic 2024 Moss Landing facility fire in California that destroyed 300 MWh of lithium-ion capacity and forced evacuations across a three-mile radius. These events have accelerated regulatory reform, reshaped procurement requirements, and created a rapidly expanding market for advanced safety and thermal management technologies. For procurement teams evaluating storage assets, understanding which subsegments are moving fastest is no longer optional. It is a prerequisite for responsible capital deployment.

Why It Matters

The global BESS market is projected to reach $45 billion in annual deployments by 2028, according to BloombergNEF, with Europe accounting for approximately 25% of new capacity. European installations grew 94% year-over-year in 2025, driven by grid balancing needs, renewable integration targets, and the EU's REPowerEU plan requiring 600 GW of solar by 2030, all of which demand substantial co-located storage. Yet every major fire incident triggers regulatory reviews that can delay permitting by 6 to 18 months across entire jurisdictions. The Victorian Big Battery fire in Australia in 2021 led to a nationwide review of BESS safety standards. The Beijing Dahongmen incident in 2021 prompted China to impose mandatory safety testing protocols that added 4 to 8 months to project timelines.

Insurance costs for BESS installations have risen 40 to 60% since 2022, with some underwriters withdrawing from the market entirely. FM Global, one of the largest industrial property insurers, updated its BESS loss prevention data sheet in 2024, mandating specific thermal management, fire detection, and suppression requirements as conditions of coverage. Projects that cannot demonstrate compliance with evolving safety standards face either uninsurable risk or premium surcharges that can erode project economics by 15 to 25 basis points on the cost of capital.

The regulatory landscape is shifting in parallel. The EU Battery Regulation, effective February 2027, establishes mandatory safety and sustainability requirements for all batteries placed on the European market, including stationary storage. UL 9540A testing for thermal runaway propagation has become a de facto global standard, while the updated NFPA 855 (2025 edition) imposes stricter separation distances, ventilation requirements, and fire suppression mandates for installations exceeding 20 kWh.

Key Concepts

Thermal Runaway Propagation is the chain reaction in which heat generated by a failing battery cell triggers failure in adjacent cells, potentially engulfing entire modules, racks, and enclosures. In lithium-ion chemistries, thermal runaway typically initiates between 130 and 250 degrees Celsius, depending on cathode composition. LFP (lithium iron phosphate) cells generally exhibit higher onset temperatures (around 270 degrees Celsius) than NMC (nickel manganese cobalt) cells (around 200 degrees Celsius), which partially explains the industry's shift toward LFP for stationary storage applications. Preventing propagation from cell to module to rack remains the central engineering challenge, and the subsegments addressing this challenge are moving fastest.

Battery Management Systems (BMS) monitor voltage, current, temperature, and state of charge at the cell, module, and pack levels. Advanced BMS platforms now incorporate machine learning algorithms that detect anomalous patterns indicative of internal short circuits, dendrite growth, or electrolyte degradation days or weeks before thermal events manifest. The BMS serves as the first line of defense, and its sophistication increasingly determines whether a safety incident remains a single-cell event or escalates to a system-level failure.

Active Thermal Management encompasses liquid cooling, immersion cooling, and advanced phase-change material systems that maintain cells within optimal operating temperatures (typically 15 to 35 degrees Celsius). Passive air cooling, which dominated early BESS designs, is being displaced by liquid cooling in virtually all utility-scale installations above 50 MWh, driven by both safety requirements and performance considerations. Cells operating at elevated temperatures degrade 30 to 50% faster than those maintained within optimal ranges.

Fire Detection and Suppression systems for BESS have evolved from repurposed commercial fire protection (sprinklers and clean agents) to purpose-built solutions addressing the unique challenges of battery fires, including re-ignition risk, toxic off-gas generation, and the inability of conventional extinguishing agents to address internal cell chemistry reactions.

The Fastest-Moving Subsegments

Early Warning Gas Detection

The subsegment experiencing the most rapid innovation and capital inflow is early warning gas detection. Lithium-ion cells emit characteristic gases, primarily hydrogen, carbon monoxide, and volatile organic compounds, during the early stages of thermal abuse, often minutes to hours before thermal runaway occurs. Companies including Honeywell, Nexceris, and Li-ion Tamer (acquired by Honeywell in 2021) have developed sensors that detect these off-gases at parts-per-million concentrations, providing actionable warning time that traditional smoke or heat detectors cannot match.

The market for BESS gas detection systems grew approximately 85% in 2025 according to Interact Analysis, driven by insurance mandates and updated building codes. UL 9540A testing now explicitly evaluates off-gas composition and ventilation adequacy, making gas detection effectively mandatory for code-compliant installations. Nexceris reports that its Li-ion Tamer sensors are installed in over 15 GWh of global BESS capacity, with European deployments doubling year-over-year as the EU Battery Regulation's safety provisions approach enforcement.

The frontier of this subsegment is multi-gas analytics platforms that combine sensor data with BMS telemetry and ambient condition monitoring to generate probabilistic risk assessments. These systems move beyond binary alarm states to provide graduated response protocols, for example, recommending load reduction at low-risk thresholds and automated shutdown at high-risk thresholds, reducing both false alarm rates and response times.

Liquid Immersion Cooling

Liquid immersion cooling, in which battery cells or modules are submerged in dielectric fluid, represents the fastest-growing thermal management approach for high-density installations. Unlike indirect liquid cooling (where coolant circulates through plates or channels adjacent to cells), immersion cooling provides direct contact between the cooling medium and cell surfaces, achieving heat transfer coefficients 5 to 10 times higher than air cooling and 2 to 3 times higher than cold plate systems.

Megapack-class installations from Tesla and CATL have driven adoption of indirect liquid cooling as standard practice. However, for next-generation high-density configurations and demanding climate conditions, immersion cooling is emerging as the preferred approach. Companies including Midas Green Technologies, LiquidCool Solutions, and engineering firms such as Wattcool are commercializing immersion systems specifically designed for BESS applications.

European procurement teams are paying particular attention to immersion cooling for several reasons. Southern European installations face ambient temperatures exceeding 40 degrees Celsius during summer peaks, precisely when grid demand and storage cycling are highest. Immersion systems maintain cell temperatures within 2 to 3 degrees Celsius of target setpoints regardless of ambient conditions, compared to 8 to 12 degrees Celsius variation typical of air-cooled systems. The safety benefit is equally significant: dielectric fluids used in immersion systems are inherently fire-retardant, providing an additional barrier against thermal runaway propagation.

Aerosol and Clean Agent Suppression

Traditional water-based fire suppression is poorly suited to lithium-ion battery fires for multiple reasons: water can cause electrical short circuits, it does not address internal cell chemistry reactions, and the volumes required for effective cooling of large BESS installations create structural and drainage challenges. The subsegment of aerosol-based and clean agent suppression systems designed specifically for BESS applications has responded with rapid product development.

Stat-X, manufactured by Fireaway, and similar condensed aerosol generators release potassium-based particles that interrupt the chemical chain reaction of combustion. These systems are significantly lighter and more compact than traditional gas-based suppression, require no pressurized piping, and can be installed within individual battery enclosures at the rack level. Novec 1230 (manufactured by 3M until its planned phase-out, now sourced from alternative suppliers) and FK-5-1-12 clean agents remain relevant for enclosed BESS rooms, though their effectiveness against thermal runaway propagation is limited compared to their performance against conventional Class A and B fires.

The most promising developments combine suppression with thermal management. Systems from companies such as BETTERIES and Ditch the Duct integrate aerosol suppression with liquid cooling in unified platforms that both prevent and contain thermal events. European regulatory bodies, particularly the German Institute for Standardization (DIN) and the British Standards Institution (BSI), are developing testing protocols specifically for these combined systems, with standards expected by late 2026.

Cell-to-Pack Safety Architecture

The structural design of battery systems, specifically how cells are arranged, isolated, and contained, has become a distinct subsegment attracting significant engineering investment. CATL's cell-to-pack (CTP) technology and BYD's Blade Battery architecture both incorporate safety as a structural design principle rather than an add-on feature. In these designs, thermal barriers, pressure relief pathways, and fire-resistant materials are integrated into the pack structure itself, reducing reliance on external safety systems.

European manufacturers including Northvolt and FREYR are developing proprietary safety architectures for their stationary storage products. Northvolt's Voltpack platform incorporates ceramic-fiber thermal barriers between cell groups rated to withstand 1,100 degrees Celsius for 30 minutes, sufficient to prevent propagation between modules even under worst-case single-cell thermal runaway scenarios. These integrated approaches are gaining traction with procurement teams because they reduce the number of discrete safety systems that must be specified, installed, and maintained independently.

Where Capital Is Flowing

Venture capital and strategic investment in BESS safety technologies exceeded $1.2 billion globally in 2024-2025, according to PitchBook data. Early warning detection companies attracted approximately $340 million, thermal management innovators received roughly $420 million, and fire suppression and containment technologies captured approximately $280 million. The remaining investment targeted software platforms for safety analytics and predictive maintenance.

European investors are particularly active. EIT InnoEnergy, the EU's innovation engine for sustainable energy, has funded multiple BESS safety startups through its acceleration programs. The European Investment Bank provided $180 million in project finance specifically earmarked for safety system upgrades at existing BESS installations in 2025. Corporate venture arms of major utilities, including Enel Green Power Ventures and Iberdrola's PERSEO, have made direct investments in thermal management and detection startups.

Insurance-linked investment is an emerging trend. Several reinsurers, including Swiss Re and Munich Re, have launched dedicated programs that offer premium reductions for installations incorporating specified safety technologies, effectively subsidizing adoption of advanced detection, suppression, and thermal management systems.

Procurement Implications

For European procurement teams, the rapidly shifting safety landscape creates both risks and opportunities. Projects specified with 2023-era safety requirements may face retrofitting costs or insurance complications within 2 to 3 years as standards evolve. Conversely, early adoption of advanced safety technologies can secure favorable insurance terms, accelerate permitting, and reduce lifecycle costs.

Specific procurement recommendations include requiring UL 9540A test reports at the cell, module, and system levels for all BESS proposals. Specifications should mandate gas detection systems with response times under 60 seconds and sensitivity to at least hydrogen, carbon monoxide, and volatile organic compounds. Thermal management systems should demonstrate cell temperature uniformity within 3 degrees Celsius across the operating range, with documented performance at maximum ambient design temperature plus a 5 degree Celsius margin. Fire suppression systems should be tested and certified specifically for lithium-ion battery applications, not repurposed from general commercial fire protection.

Action Checklist

• Audit current BESS safety specifications against UL 9540A (2024 edition) and NFPA 855 (2025 edition) requirements
• Require vendors to provide thermal runaway propagation test data at cell, module, and unit levels
• Specify early warning gas detection with sub-60-second response times as a minimum requirement
• Evaluate liquid cooling or immersion cooling for all installations above 20 MWh or in ambient temperatures exceeding 35 degrees Celsius
• Engage insurance underwriters during project specification phase to align safety features with coverage requirements
• Establish maintenance protocols for safety systems with documented inspection intervals and performance verification
• Monitor EU Battery Regulation implementation timelines and adjust procurement specifications to ensure compliance by February 2027
• Include safety system upgrade provisions in long-term service agreements to accommodate evolving standards

Sources

• BloombergNEF. (2025). Global Energy Storage Market Outlook 2025-2030. New York: Bloomberg LP.
• Interact Analysis. (2025). Battery Energy Storage Safety Systems: Market Sizing and Competitive Landscape. Oxford: Interact Analysis Ltd.
• FM Global. (2024). Property Loss Prevention Data Sheet 5-33: Battery Energy Storage Systems. Johnston, RI: FM Global.
• National Fire Protection Association. (2025). NFPA 855: Standard for the Installation of Stationary Energy Storage Systems, 2025 Edition. Quincy, MA: NFPA.
• European Commission. (2023). Regulation (EU) 2023/1542 Concerning Batteries and Waste Batteries. Official Journal of the European Union.
• UL Solutions. (2024). UL 9540A: Test Method for Evaluating Thermal Runaway Fire Propagation in Battery Energy Storage Systems, 5th Edition. Northbrook, IL: UL Solutions.
• PitchBook. (2025). Energy Storage Safety Technologies: Venture Capital and Strategic Investment Report. Seattle, WA: PitchBook Data.
• International Electrotechnical Commission. (2024). IEC 62619: Secondary Lithium Cells and Batteries for Use in Industrial Applications, Edition 2.0. Geneva: IEC.