Spotlight on power and utilities megaprojects
How can we ensure infrastructure projects are built to succeed?
The power and utility (P&U) Industry is set to invest US$20t in large-scale power infrastructure projects from 2016 to 2040, according to the International Energy Agency. The new wave of investment should transform our energy future – as well as stimulating economies, creating societal benefits and supporting long-term growth.
“ The new wave of investment should transform our energy future, stimulate economies, create societal benefits and support long-term growth. But these projects often run significantly over budget and over schedule – putting all those energy, business and societal benefits under threat.”
- Safia Limousin, Global Power and Utilities Capital and Infrastructure Leader, EY
But cost and schedule overruns on big infrastructure projects are a worldwide phenomenon, and the gap between projections and performance can be significant. EY has found that the average P&U megaproject is delivered 35% over budget and two years behind schedule.
If nothing is done to counter this runaway tendency, there’s more at risk than just the loss of hundreds of billions of dollars in annual budget overruns and lost return on investment. All the associated energy, water, economic, business and societal benefits are at threat too.
How can the industry make sure megaprojects stay on the right track, and deliver on their promise?
Off the blocks and onto the grid
The infrastructure that this sector builds in the next three decades will be the bedrock of growth and prosperity in mature and developing economies. If these projects fail, there will be serious consequences all round the world for security of supply, economic development and commodity prices.
Not without a challenge
All over the world, power and utility infrastructure projects are regularly delivered significantly late and over budget.
An EY survey of top sector executives sought to understand the challenges they face in delivering capital projects to market, and identify the root causes. The overwhelming majority told us that securing finance was the single largest challenge, followed by delivering on time and on budget.
A global perspective
We analyzed 100 of the world’s largest power generation, transmission and distribution, and water projects across all asset lifecycle stages for reported project delays and cost overruns and found systematic and significant delays and cost overruns across all technologies and geographies.
The infrastructure iceberg
In EY’s recent global survey of more than 200 top sector executives, 80% of respondents said they found financing projects and delivering on schedule and on budget challenging.
A complex mix of factors is creating tough challenges for financing and delivery that are sinking business cases for many projects. EY identified six root causes that lie hidden in the P&U organizational structure.
Setting up for success – finding the silver bullets
The majority of executives we surveyed told us they had not identified specific process or data innovations to overcome financing and delivery challenges. There are major opportunities to boost projects by leveraging leading practices, rethinking program management and innovating around big data.
Innovate, innovate, innovate
We outline three key innovations in project fitness assessment, big data management and decision support that have the potential to transform projects. They all focus on providing actionable, timely insight for decision-making and are all geared to ensuring projects deliver on budget, on time and ultimately deliver expected returns.
The world is looking to P&U organizations to deliver the projects that will secure energy and create prosperity and growth. It’s vitally important - for the sector, the global economy and society as a whole - to get this right.