Sand also mostly stays where you put it. While obviously water can be put in tanks easily enough, there's still more maintenance and inspection required and a gigantic watertight tank that will last
n decades is substantially more expensive then a steel sand box. Plus it only goes to 100C unless you pressurise it and that really gets hard. Unplanned release of that much water at 100C is also
extremely dangerous. Whereas even 500C sand will mostly just sit there. Plus the usual corrosion and scaling effects water systems love to develop at high temperatures.
Insulation isn't such an issue with sand because sand itself is fairly good insulator and obviously doesn't convect. 1m of sand is about the same as 10cm of air. 500C through 1m of sand if roughly 125W/m². Which isn't nothing but it's also 7m from the center to the edge, and the efficiencies only improve the bigger you make the silo.
Presumably they have a double-skin gap and other external insulation too. As the Icelandic hot water pipe systems show, which drop only a few degrees C over hundreds of kilometres of pipe (and thus a gigantic surface area to volume ratio), you can have really quite good insulation if you have space to make it thick.
The hassle of handling hot water is also presumably why they use hot air rather than water as a working fluid for heating the sand in the first place. The worst case if you spring a leak in a heat-transfer tube inside the tank is that a bit of air escapes. Leaking super-heated high-pressure water or steam into the (unpressurised) tank would be a much larger problem, and unloading up to 2000 tonnes of hot, damp, sand to plug it would be operationally very annoying if nothing else.