Renewable Energy & Environmental Technology

Insuring carbon capture storage risks

Rhys Newland 25 March 2025

Risk allocation and risk transfer are critical issues for carbon capture storage (CCS) value chains. However, these are often immature in terms of commercial arrangement and insurance solutions.

Hot topic: Energy from waste

The energy from waste (EfW) sector has, arguably and unfairly, been labelled as the largest power-related producer of carbon emissions in the UK. This is forgetting that its primary purpose is to reduce pollution by landfill operations (which emit significant greenhouse gases to the atmosphere) and not as a power generator from fossil fuels (and the power generation is a far less significant function).

Carbon emissions were not a significant issue when most power plants were designed and built, but nevertheless, it appears that EfW plants, as well as power plants, industrial projects, kilns and more across Europe may need to consider new carbon capture technology. This could be considered as either as a bolt-on for existing assets, or as part of planning application and design for new assets.

CCS plants and sector trends

At the start of any new project, it is important for project teams to map the risk exposures, interface these risks with the rest of the value chain, and explore risk transfer through contractual arrangements and insurance.

Current sector trends suggest that EPC contractors are reluctant to provide performance wraps on CCS plants due to the unproven nature of CCS plant technology. Performance guarantee insurance is a potential gamechanger in this area, as it will help enable funding and protect balance sheets from punitive underperformance regimes (in the UK, for example).

The challenges of construction and operational insurances

Traditional construction and operational insurances are also not a given for this technology, particularly for revenue protection covers and defects ‘LEG’ covers. It is important to have a broker who is familiar with the challenges, and who can provide a wording that covers the risk exposures that may not be transferable through contractors’ and suppliers’ contracts.

Particular issues can be seen with contingent business interruption coverage, increased costs of working on delay in start-up (DSU) coverage, and business interruption covers. This is due to the knock-on effects of physical damage to transport and storage assets that are undertaken by a third-party T&SCo, but nevertheless, leaving the CCS plant operator with a significant problem on what to do with the carbon emissions.

How Miller can help

The Miller Renewable Energy & Environmental Technology team has vast experience in this area and can assist with solving these complex risk issues in the development of CCS plants and the performance and value chain risks. Our expertise also includes design and sizing of insurance programmes to meet balance sheet exposures.

Our team routinely deal with lenders’ concerns advisers, as well as acting for our clients in thread party negotiations with lenders, contractors, suppliers, and working with legal advisers to specify contractual insurance arrangements.

CCS is a complex, emerging risk area, and it is important to engage the right risk adviser and insurance broker to work with you at project design stage to ensure the risks are identified, quantified, and transferred (whether through insurance or otherwise). At Miller, we have a risk technique known as the Critical Risk Identification and Transfer Review (CRITR) to assist clients with this process.

Miller’s expertise

Head of Renewable Technology & Environmental Technology at Miller, Rhys Newland, advised the UK Government on the UK Full Scale Demonstration Project 1 in the 2000s, and was the lead insurance adviser to the White Rose Consortium and Drax bidding for the UK Government Full Scale Demonstration Project 2 in the early 2010s.

Additionally, since 2022, Miller’s expertise can be seen through their recent advisory roles on a number of new global CCS projects.

Miller has a wealth of experience in the complex risks, risk allocations, and critically, what can and cannot be transferred from a participant’s balance sheets by insurance cover.