Ernst & Young (EY) has found that an average power and utility megaproject is delivered 35% over budget and two years behind schedule, with offshore wind and gas-powered generation projects suffering significantly less delays and cost overruns than water, hydropower, nuclear and coal projects.
In its latest research on cost and schedule overruns on big infrastructure projects, EY analysed 100 of the world’s largest power generation, transmission and distribution and water projects across all asset life cycle stages — from pre-financing through to decommissioning — for reported project delays and cost overruns.
The research confirmed that large capital projects are inherently challenging due to their size, scope and complexity, with systematic and significant delays and cost overruns across all technologies and geographies.
Of the megaprojects surveyed, 64% were delayed and 57% were over budge. Almost three-quarters of hydropower, water, coal and nuclear infrastructure projects were over budget by 49% on average, with hydropower and nuclear projects typically suffering the greatest cost overruns at USD 4.6 billion and USD 4 billion respectively. Project delays were longest for coal and hydropower technologies, at nearly three years on average, EY reports.
The power and utility (P&U) industry is set to invest USD 20 trillion in large-scale power infrastructure projects from 2016 to 2040, according to the International Energy Agency, EY said. “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,” said Safia Limousin, Global Power and Utilities Capital and Infrastructure Leader, EY.
“We strongly feel that sector leaders need to rethink program management and innovate around big data,” EY writes.
The huge strides made in digital connectivity and predictive analytics can support the optimal financing and delivery potential of megaprojects, according to EY.