In January the Swiss insurer Zurich Financial Services AG launched two insurance products to cover liabilities for Carbon Capture & Storage.
It is now processing four submissions from some of the 10 to 15 European companies planning to have plants running by 2015. Additional companies in Europe, United States, Australia, China and Japan were also expressing interest in the coverage, a sign companies are beginning to explore implementing the as yet largely undeployed technology.
“There is a ‘fog of war’ surrounding the actual risks of CCS,” John Scott, head of risk insights at Zurich Global Corporate, said. “Operators need certainty. It is difficult as a business person to make any long-term investment decisions unless you have certainty about the costs of risks,” John Scott said.
“Actually, the most challenging thing is what happens beyond 50 years or when a storage site is sealed. Who then bears the risk?”
The insurance risk is similar to that created by nuclear power plant waste, because carbon dioxide storage presents a potential health danger if the stored carbon dioxide is accidentally released in its concentrated form.
Carbon dioxide can be poisonous in a concentrated form. In 1986, a natural release of carbon dioxide from a volcanic lake in Cameroon killed 1,700 people.
Just as with nuclear power this risk of stored carbon escape is difficult to assess. Unlike the case with nuclear power there have been no previous carbon capture and storage plants – making it almost impossible to assess the risk and thus the cost of insurance coverage.
Patton said it was too early to reveal the cost of any potential policies. However, insurance is essential to developing CCS. “Without insurance, even if companies get subsidies, we won’t get a deployment of the technology,” Patton said.
Uncertainty about the potential risks slows the technology’s deployment; but the technical costs of fitting new coal plants with CCS raises the cost about 50 percent, with additional transport storage and operational costs, a McKinsey & Company report estimated in late 2008.
“No amount of insurance will make a bad site good. But we want to make sure we identify sites which have the greatest compatibility with geo-chemistry so there is the greatest likelihood of success,” Patton said.
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