Insurance companies wary of the carbon capture technology could hit power plants storing emissions with large risk premiums, Shell said in a document posted on the UK Department of Energy and Climate Change website.
The document, which was initially reported by Bloomberg, outlines Shell’s insurance strategy for its carbon capture and storage project at SSE’s gas-fired plant north of Aberdeen, Scotland.
Many risks involved in CCS are not that different from a typical upstream oil and gas project and are closely aligned with enhanced oil recovery projects that Shell has been involved in for 20 years, the energy company says in the document.
“CCS is however perceived by insurers to be a combination of new technology due to the project being the world’s first commercial scale demonstration of CO2 capture, transport and offshore storage from a gas-fired power station,” according to Shell.
The lack of available underwriting information, including the absence of claims history, limited number of existing CCS projects over which to spread their risk, and undefined liabilities make it difficult for insurers to price the risk, and may cause reluctance to underwrite the risk or result in large risk premiums, Shell says in the document.
In February, the US Department of Energy and Shell Canada announced they would collaborate in field tests to validate advanced monitoring, verification, and accounting (MVA) technologies for underground storage of carbon dioxide.
The tests will take place at Shell’s Quest carbon capture and storage project in Alberta, Canada. The project will reduce CO2 emissions from Shell’s Scotford Upgrader by more than 1 million metric tons per year by capturing the CO2 and injecting it more than one mile underground.