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Carbon capture in the UK: risk considerations

In this article — the first in a three-part series — we outline CCUS targets in the UK, examine how carbon is captured, and consider the risks involved in that process and the role risk transfer can play.

Carbon capture, utilisation, and storage (CCUS) is set to play a vital role in the UK’s green industrial revolution to reduce carbon dioxide emissions and enable a net-zero economy by 2050.

CCUS will also provide a pathway for the production of hydrogen as a clean alternative to fossil fuels for use in homes, transport, and industry.

UK government’s stance on CCUS

One of the goals of the COP26 summit was to secure commitments to net-zero CO₂ emissions by the middle of the century. Carbon capture is an essential part of the UK’s strategy to combat greenhouse gas releases, with the government targeting the capture of 10 million metric tons of carbon dioxide a year by 2030 — the equivalent of four million cars’ worth of annual emissions.

As laid out in its ten-point plan for a green industrial revolution in the UK, the government has committed to investing up to £1 billion to support the establishment of CCUS in four industrial clusters. These clusters are transport and storage networks with a set of onshore and offshore pipelines, and associated offshore storage. The pipelines must be capable of transporting CO₂ to a storage site, such as a saline aquifer or depleted oil and gas field, which is able to store it safely and permanently.

The UK government recently announced the locations of two clusters — the East Coast Cluster, which will capture and store emissions produced across the Humber and Teesside, and the HyNet North West project in Liverpool Bay, where low-carbon hydrogen from fossil gas will also be produced. These are expected to be up and running by the mid-2020s. The government has committed to support a further four clusters by 2030, at the latest.

The capture process

Carbon capture and storage (CCS) is the capture of CO₂ at source and storing of it, to stop it from entering the atmosphere. First, the CO₂ produced by power creation or industrial activity is separated from other gases. It is then captured, compressed, transported, and injected into geological formations at least 1 kilometre deep underground where, in this state, it can be stored for millions of years.

In CCUS, CO₂ can be converted into materials such as plastic, concrete, and biofuels. The CO₂ can also be used to produce hydrogen — a clean, flexible, net-zero energy source and a replacement for fossil fuels.

There are three main approaches to capturing CO₂ produced in industrial processes.

CO₂ is captured before the fuel is combusted.
CO₂ is captured after the fuel has been combusted. This is the most commonly used technique at present and can be applied to many industrial plants, which can be retrofitted to use this method.
Capture takes place after the fuel is burned with pure oxygen. Known as “oxyfuel combustion”, this technique is still being developed.

Direct air capture (DAC) has also been suggested as an alternative to post-combustion carbon capture. In this process, CO₂ is “sucked out” of the atmosphere and then buried underground. This method can be used to remove CO₂ emissions in the ambient air — car exhaust fumes, for example.

While there are several DAC projects being set up around the world, there are challenges involved in scaling this technology and it is likely to be complementary, rather than an alternative, to CCUS from industrial facilities.

Risk and opportunity

There is an opportunity for risk transfer and insurance to support development of the UK’s industrial clusters and CO₂ capture operations. Some of the key risks are outlined below.

Technical hazards

The construction of the plants needed to capture and process CO₂ can be complex. Whether this construction is of new facilities or those that are being retrofitted, the plants require dedicated tanks and technologies, enabling the separation of CO₂ from other gases. There are inherent technical exposures in the CO₂ separation process, related to the compression and cooling of gases flowing through pipes and the use of chemical solvents, for instance.
Fire and explosion

There are lifting, handling, or accidental damage risks at carbon capture plants, as is the case at any construction site. When carbon capture technology is retrofitted to operational industrial plants or facilities in typically high-hazard locations, such as power stations, the risk of accidental damage and subsequent fire and explosion risk to existing assets may be enhanced.
Leaks

While some of the above risks are still present in the post-construction phase, perhaps more pertinent to the operations of carbon capture facilities is the potential for CO₂ to cause cracks in steel pipes, tanks, and vessels when they reach low temperatures.

Owners and operators of carbon capture plants also will need to address the risk of corrosion. In its dry, gaseous state, CO₂ is not corrosive to metals and alloys. However, if it comes into contact with water, or liquids containing water, it forms carbonic acid, which can cause corrosion. If carbonic acid escapes into water sources, it can also cause relatively local environmental liability.
Business interruption and failure to meet carbon goals

In order to treat CO₂ and ready it for transportation, pure carbon dioxide gas can be compressed so that it reaches its dense or supercritical phase. In some cases, it can instead be cooled, which transforms it into a liquid state. Mechanical failures or breakdowns affecting this stage of the process could lead to lengthy business interruptions for clients. If the captured CO₂ cannot be transported, this may affect emissions targets and carbon credits committed to by clients.

CCUS now in scope

CCUS is still in its infancy. Several previous CCUS projects in the UK have been abandoned because of cost concerns, after the removal of subsidies. Additionally, there is a potential lack of infrastructure in the UK to enable projects to be scaled up to meet the government’s targets.

However, the recent announcement of the cluster locations underscores the government’s commitment to CCUS as part of its CO₂ emissions reduction plan. As a result, energy companies in the UK will be thinking about the next phase of CCUS development.

If you have any questions about carbon capture, utilisation, and storage (CCUS), please contact your Marsh advisor.

Future blogs in this series will examine the transportation risks involved in the CCUS process, as well as risks around storage and the business interruption implications if an escape of CO₂ invalidates carbon credits. The risks and opportunities involved in the utilisation of CO₂, including the integration with blue hydrogen production, will also be looked at.

Article

Carbon capture in the UK: risk considerations

UK government’s stance on CCUS

The capture process

Risk and opportunity

CCUS now in scope

Meet the authors

Andrew Herring

Thomas R D Smith

Vlad Vorobet

Related insights

Mitigating risks and strengthening resilience in the LNG industry

Repowering UK wind turbines: Key risk considerations

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Carbon capture in the UK: risk considerations

UK government’s stance on CCUS

The capture process

Risk and opportunity

CCUS now in scope

Meet the authors

Andrew Herring

Thomas R D Smith

Vlad Vorobet

Related insights

Mitigating risks and strengthening resilience in the LNG industry

Repowering UK wind turbines: Key risk considerations

Delivering on hydrogen: Transport and storage solutions

Offshore wind: Resourcing for growth