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Construction Cost Overruns and Electricity Infrastructure: An Unavoidable Risk?
Abstract
An analysis of 401 power plant and transmission projects in 57 countries suggests that costs are underestimated in three out of every four projects, with only 39 projects across the entire sample experiencing no cost overrun or underrun. Hydroelectric dams, nuclear power plants, wind farms and solar facilities each have their own unique set of construction risks.
... However, a common challenge often faced by hydropower projects is the issue of cost and time overruns. A review of previous research on this subject provides clear evidence that a significant number of hydropower projects suffer from cost and time overruns [7][8][9][10][11][12][13]. ...
... The underlying causes of the time overruns, as reported in Figure 2, are quite varied. The five reasons most frequently given are geological problems (15), conflict among stakeholders (12), adverse weather and national calamities (11), financing (11), and delay in equipment delivery (9). The next five most important identified causes are challenges from government procedures and policies (7), changes in work volume (7), management challenges (7), delays in the bidding/award process (6), and construction challenges (6). ...
... The underlying causes of the time overruns, as reported in Figure 2, are quite varied. The five reasons most frequently given are geological problems (15), conflict among stakeholders (12), adverse weather and national calamities (11), financing (11), and delay in equipment delivery (9). The next five most important identified causes are challenges from government procedures and policies (7), changes in work volume (7), management challenges (7), delays in the bidding/award process (6), and construction challenges (6). ...
This paper assesses the economic benefits of 57 World Bank Group-sponsored hydropower dam plant investments. Hydropower dams are among the main sources for producing electricity and the largest renewable source for power generation throughout the world. Hydropower dams are often a lower-cost option for power generation in Clean Energy Transition for addressing global climate change. Despite its conspicuous aspects, constructing hydropower dams has been controversial. Considering the World Bank’s long history as the largest hydropower development financier, this study investigates its performance in supporting hydropower dams. The outcomes of this study apply to the wider hydropower development community. Of the projects in this study, 70% experienced a cost overrun, and more than 80% of projects experienced time overruns, incurring potential additional costs as a result. Despite the high cost and time overruns, this hydropower portfolio of dams produced a present value of net economic benefits by 2016 of over half a trillion USD. Based on our findings, the evaluated hydropower portfolio helped avoid over a billion tonnes of CO2 for an estimated global environmental benefit valued at nearly USD 350 billion. The projects’ additional environmental benefits raise the real rate of return from 15.4% to 17.3%. The implication for hydropower developers is that the projects’ assessment should consider cost and time overrun and factor them into the project-planning contingency scenarios. There is a considerable benefit for developing countries to exploit their hydropower resources if they can be developed according to industry practices and international standards. The case for developing hydropower may be stronger when considering its climate benefits. The net economic benefits of hydropower can be even higher if there is a greater effort to manage cost and time overruns.
... Especially considering that natural gas or other renewables such as biomass and geothermal power would be necessary to provide both peak and base load generation in low runoff seasons despite of the large installed hydropower capacity. The model does not deploy more than 11 GW of [86][87][88][89][90][91][92][93][94][95][96][97][98][99] new hydropower capacity in any of the assessed policy and climate change scenarios by 2050, which is below the threshold of the remaining assessed potential (detailed in Section 2.1.2). However, we note that a limitation of our study is that the time scale resolution of TIMES-EC does not allow the full value of DAM hydropower flexibility to be captured. ...
... In the Environment Priority case, the share of electricity demand that could be supplied by hydropower in 2050 is between 43% and 66%, roughly in the middle of the Boost Hydropower and the Constrain Hydropower cases (Fig. 5). [86][87][88][89][90][91][92][93][94][95][96][97][98][99] it may become difficult to prevent emissions from energy production increasing over time on a cost-optimal pathway without large-scale hydropower. This poses a trade-off between the social and environmental issues found at the local level, and the efforts to mitigate GHG emissions at the regional and global levels. ...
... In turn, this could cause the Ecuadorian Government to miss its own emission targets as stated in its NDC. More critically, this approach could also [86][87][88][89][90][91][92][93][94][95][96][97][98][99] expose the country to the risks of depending on foreign natural gas imports, given Ecuador's limited domestic reserves. Therefore, a policy choice that considers the greater deployment of other renewable energy systems could be an important alternative to either of these two options. ...
Hydropower plays a critical role in global, South American and Ecuadorian energy policy and for achieving Nationally Determined Contributions (NDCs) aiming to reduce greenhouse gas emissions. However, long-term climatic changes may affect the role of hydropower in meeting energy and climate policy objectives. The effects of climate change on runoff availability for hydropower generation are largely uncertain. This paper uses climate change scenarios derived from a large ensemble of Global Circulation Models as input for an energy system optimisation model (TIMES-EC) to examine least-cost options for the hydropower-dominated Ecuadorian power system in the period to 2050. This is done in the context of three policy cases in order to assess trade-offs between power system configuration, emissions and costs. The results show that in the long-term hydropower will remain as one of the most cost-effective and low emission technologies in the Ecuadorian power sector. However, constraints on deployment and uncertainty around climate change impacts could hinder its ability to contribute to the fulfilment of NDC targets, as well as create uncertainty around long-term power system costs. Strategies to hedge against these risks will likely require that hydropower expansion be complemented by alternative sources, namely incremental shares of thermoelectric generation with natural gas, biomass and geo-thermal energy.
... Studies have found that hydropower projects have more delays and cost overruns than other large infrastructure projects (Ansar et al., 2014). Sovacool et al. (2014) found that hydropower projects had a mean cost escalation of 71 percent and that cost overruns affected 75 percent of projects. They reported that among various project types-including solar, wind, nuclear and thermal energy projects-hydropower projects had the longest average construction period (118 months), longest time overrun (43 months) and largest total cost overrun (median of US$100 million per project). ...
... To frame this analysis, we derived a simple relationship between environmental and social impacts and time overruns associated with increased costs. We drew on data from Sovacool et al. (2014) about overall construction cost and time overruns for hydropower projects and then transformed the associated distribution curve based on a factor reflecting the relative contribution of social and environmental and social risks to project delays; for this analysis, we assumed this contribution factor to be 30 percent. ...
As governments and non-state actors strive to minimize global warming, a primary strategy is the decarbonization of power systems which will require a massive increase in renewable electricity generation. Leading energy agencies forecast a doubling of global hydropower capacity as part of that necessary expansion of renewables. While hydropower provides generally low-carbon generation and can integrate variable renewables, such as wind and solar, into electrical grids, hydropower dams are one of the primary reasons that only one-third of the world’s major rivers remain free-flowing. This loss of free-flowing rivers has contributed to dramatic declines of migratory fish and sediment delivery to agriculturally productive deltas. Further, the reservoirs behind dams have displaced tens of millions of people. Thus, hydropower challenges the world’s efforts to meet climate targets while simultaneously achieving other Sustainable Development Goals. In this paper, we explore strategies to achieve the needed renewable energy expansion while sustaining the diverse social and environmental benefits of rivers. These strategies can be implemented at scales ranging from the individual project (environmental flows, fish passage and other site-level mitigation) to hydropower cascades to river basins and regional electrical power systems. While we review evidence that project-level management and mitigation can reduce environmental and social costs, we posit that the most effective scale for finding balanced solutions occurs at the scale of power systems. We further hypothesize that the pursuit of solutions at the system scale can also provide benefits for investors, developers and governments; evidence of benefits to these actors will be necessary for achieving broad uptake of the approaches described in this paper. We test this hypothesis through cases from Chile and Uganda that demonstrate the potential for system-scale power planning to allow countries to meet low-carbon energy targets with power systems that avoid damming high priority rivers (e.g., those that would cause conflicts with other social and environmental benefits) for a similar system cost as status quo approaches. We also show that, through reduction of risk and potential conflict, strategic planning of hydropower site selection can improve financial performance for investors and developers, with a case study from Colombia.
... Proper project planning and execution in the face of these associated complexities become extremely difficult in the absence of adequate and reliable information at the project appraisal stage. Hydropower projects are thus often exposed to significant cost overruns [4][5][6][7][8]. Cost overruns represent a source of uncertainty in hydropower projects and can cause huge losses that are damaging to its stakeholders [9][10][11][12]. ...
... These differences are then expressed as a ratio of the actual real cost. The formula is presented in Eq. (7). ...
This paper investigates the potential effects of the use of reference class forecasting on the World Bank's financing decisions, and quantifies the net economic impact of such decisions in the long run. A set of 57 World Bank-financed hydropower projects constructed between 1975 and 2015 was selected based on data availability. The findings show that reference class forecasting can help reduce net losses by preventing some hydropower projects with negative economic net present values from being executed. However, it also leads to the forfeiture of even larger amounts of net economic benefits by causing the rejection of some projects that are found, from ex-post analysis, to be economically worthwhile. Furthermore, because of the increased ex-ante rejection of projects, the loss of potentially economically positive projects from the portfolio of hydro dam projects is greatly increased. The errors in the estimation of economic net present values of these hydropower projects are highly positively correlated to the errors in the estimation of the benefits and only weakly negatively correlated to the errors in the estimation of costs.
... These plans are principally oriented towards developing the hydropower (reservoir and run-of-river) resource potential in the country and extending the grid networks to remote areas, while solar, wind and bioenergy have so far received very little attention in the government's proposed energy mix [22]. Hydropower development in many parts of the world either suffers from cost overruns or project schedule extensions [25], [26], same is the case in Cameroon [27]. Furthermore, hydropower development painstakingly meets the energy demands of the rural inhabitants who have little access to the electricity grid [28]. ...
... However, the results of the BPS with solar PV forming the bulk of the total electricity generation by 2050 show that, contrary to continuous investments in developing hydropower which has been the government's focal point [22], [23], solar PV proves to be more attractive than hydropower thereby calling for a strategic reconsideration of existing government plans. Furthermore, hydropower has presented several challenges relating to cost overruns and project schedule extensions [23], [25], [26], [51] and is vulnerable to variabilities in the yearly precipitation patterns. Emodi et al. [101] conclude that climate change will have serious impacts on energy systems, which will lead to change in energy demand and supply. ...
Sustainable energy systems form an indispensable component of sustainable development especially in developing economies. Understanding the system wide techno-economics of sustainable energy systems therefore becomes critical in shaping the energy system mix within a region or country. This paper explores progressive and optimal pathways towards a fully sustainable energy system for Cameroon by 2050 in power, heat, and transport sectors as a representative case study for the Central Africa region. Six key scenarios are modelled with the LUT Energy System Transition Model to capture key policy and sustainability constraints. Results from the study show that, the optimal least cost technology combination for a fully sustainable energy system for Cameroon with net-zero greenhouse gas emissions in 2050 is dominated by solar PV (86%), complemented by hydropower (8%) and bioenergy (5%). These results show that a fully sustainable energy system for Cameroon is feasible from both the technical and economic perspectives, if policy commitment is oriented towards these low-cost energy solutions. The results of this research provide a reliable reference for planning transitions towards a 100% renewable energy-based energy system in countries within the Central Africa region.
... Nevertheless, large hydropower facilities require the construction of massive infrastructures, frequently criticized for the recurrent significant cost and time overrun in the sector [14][15][16][17]. These large hydropower infrastructures lead to the flooding of large parts of the land and natural habitats, destroying at the same time the local ecosystems [18], along with the livelihood and housing of affected people [19,20], and in some cases become a net emitter of greenhouse gases due to decay processes affecting flooded biomass [21,22]. ...
... Based on 8 (VdA) and 16 interviews (HVP), we identified 86 and 143 aggregated causal relations, respectively, all structured around 10 topical CD for each project, which were set accordingly to the topic groups of elements (Table 3). We present first the CDs for VdA (Figs. [5][6][7][8][9][10][11][12][13][14] and subsequently the CDs for HVP (Figs. [15][16][17][18][19][20][21][22][23][24]. Stakeholder categories (short form, cf. ...
The evaluation of the stakeholders’ perception of new hydropower projects is essential for assessing public acceptance, ensuring local involvement, and identifying feasible and desirable changes towards sustainable development. This study uses the concept of causal diagrams (CD) to identify the individual perspectives of stakeholders of two new hydropower projects, one in Switzerland (Val d’Ambra project) and one in Iceland (Hvammvirkjun project). For this purpose, semi-structured interviews with relevant stakeholders were conducted, which were then categorized into 5 interest groups. Using the software Atlas.ti, we identified and sequenced the perceived causality of impact pathways of the two projects. The results are exposed in two series of 10 topical causal networks, and two aggregated diagrams. For each case, CDs expose the complexity of multi-sequenced causalities between elements of a very heterogeneous nature, as expected and reported by stakeholders. This approach enables the identification of inter- and intra-group conflicting perspectives, and perceived uncertainties, concerning both subjectives matters along with much more tangible and predictable aspects. Our method enables the identification of areas where further research or better transfer of information between stakeholders is required. It also exposes how hydropower impacts can differ in time and space, when in one case study, intracommunity tensions and conflicts were identified at the earliest project stage, along with psychological distress of some local residents. Based on the presented CD, we conclude that this method can facilitate communication and problem-solving in complex social-environmental situations amid multiple stakeholder categories, which heterogeneity should not be underestimated.
... Indeed, one aspect of the balance between owned versus purchased resources is risk allocation between utility and consumer: An owned resource that will be added to a utility's rate base will generally remain there until its costs are recovered. Past cost overruns from ratepayer-funded power generation assets are an example of the risks of ownership [3]. Some regulators began to disallow cost recovery by utilities in cases of cost overruns and delays in building baseload generation, especially nuclear plants. ...
... We omit these types of transactions from our analysis, because only ~3% of transactions were made using this time frame in the 2000-2016 analysis period. 3 We use "transactions" to refer to purchases and sales, "purchases" to refer to procurement transactions, and short-term market purchases (or STMP) to refer to that specific procurement type. ...
Load Serving Entities (LSEs) can procure electricity from their owned generation or purchase it on bilateral or organized markets. Electric utility procurement decisions have important implications for rates, resource adequacy, environmental impacts, and LSE cost recovery. However, there is little or no research on trends of utility procurement practices—or the role of wholesale market transactions. This paper leverages information from the U.S. Department of Energy's Energy Information Administration, Berkeley Lab's Resource Planning Portal, and structured interviews with regulatory and utility staff. We find that use of market transactions to meet electric energy needs has been increasing across U.S. LSEs. The reasons for this trend include a general stagnation in building owned resources, a preference towards contracting renewable energy resources to meet RPS targets, and the lower relative cost of wholesale market electricity. Results suggest resource adequacy obligations may drive preferences for asset ownership more than a profit incentive. We also recommend improving the planning to procurement connection by incorporating operational constraints of market transactions within planning processes. These results provide insights on key issues in electric utility procurement that could improve overall market efficiency and identify practices that stakeholders should consider incorporating into their long-term capacity planning processes.
... Therefore, completion risk includes schedule overrun, cost overrun, and the interruption of construction. Power generation projects often experience schedule overruns and cost overruns due to various problems such as licensing problems and complaints of residents [74]. The operation of power plants needs to be preceded by the normal completion of power plants, which is a factor that has a great effect on feasibility. ...
... The completion risk has been addressed in previous studies [2,22,58,59] that evaluated the feasibility of projects. Other studies [74,75] have also addressed the schedule overrun and cost overrun that occur in solar PV and power infrastructure. Operational issues such as a grid connection are also a major completion risk. ...
Owing to rapid growth in the Asian solar photovoltaic (PV) power market, decision-making models are required to develop efficient investment strategies. Previous studies have largely focused on technological conditions and macroeconomic indicators, but not on the increasing needs of the financial sector. In this study, we developed an evaluation model of solar PV investment and financial factors at the project level. The model applies the fuzzy analytic hierarchy process and selects appropriate evaluation indicators for investment by emphasizing financial factors such as access to finance and exit strategies after the initial investment. Furthermore, we derived the relative importance of the indicators for each stakeholder. Stakeholder analysis enables comparison by quantifying the risks of each market participant. Economic factors (71.57%) were selected as the most important evaluation factors, followed by policy factors (16.26%), and technical factors (12.17%). Higher weights were assigned to indicators that directly affect profitability. Stakeholders showed significant differences in policy factors. Power generation companies showed higher weight values in policy factors than other groups. Quantification of differences in perceptions provides basic data for establishing effective investment strategies and developing policies. Therefore, the proposed model will contribute to more efficient solar PV project development.
... Other aspects are unforeseen costs and cost overruns. Sovacool et al. 38 show that hydropower plants and nuclear reactors have the highest probability and magnitude of cost overruns (71% and 117% cost increase, respectively), much higher than for thermal power plants (13%). Cost overruns for modern renewables are much lower: 8% for wind power plants and 1% for solar PV power plants. ...
... Levelized cost of storage is calculated as the annualized cost of storage system equipment and annual cost of electricity losses divided by total electricity consumption (Eq. (38)). Storage systems also include part of the fuel production facilities, which are used for fuel production for the storage system generators (e.g. for power-to-gas−gas-to-power). ...
A transition towards long-term sustainability in global energy systems based on renewable energy resources can mitigate several growing threats to human society simultaneously: greenhouse gas emissions, human-induced climate deviations, and the exceeding of critical planetary boundaries. However, the optimal structure of future systems and potential transition pathways are still open questions. This research describes a global, 100% renewable electricity system, which can be achieved by 2050, and the steps required to enable a realistic transition that prevents societal disruption. Modelling results show that a carbon neutral electricity system can be built in all regions of the world in an economically feasible manner. This radical transformation will require steady but evolutionary changes for the next 35 years, and will lead to sustainable and affordable power supply globally.
... Type of client (public/private) [35], [21], [36] and [22] Client's initial brief (clear scope definition) [21], [22] Ineffective communication between the client and the design team [37], [38] and [39] Client's attitude towards changes (variations) [40] and [41] Client's budget/cash-flow constraints [40], [42] and [36] Consultant's Responsibility Unclear and detailed drawings and specifications [43], [42] and [22] Competency and experience of the consulting firm [40]and [30] Lack of availability of a database for historical cost data [36] Quality of information and requirements between experts [22] and [42] poor estimation of the original cost [44], [45] Contractor's Responsibility [2] Financial difficulties of contractor [50], [51] , [36] and [26] lack of contractor experience [51] , [52] , [53] and [54] Complexity of design and construction [55], [56] and [57] late payment from contractors to subcontractors [26], [58] incompetent subcontractors [59] inappropriate contractor policies [60] and [61] Lack of coordination between general contractor and subcontractors [60] Project Manager's Responsibility Inadequate project manager experience [34] and [1] Lack of negotiation and cost management skills [34], [1] and [26] Technical related factors This category includes five factors including: ...
Success in building is meeting deadlines within budget and following contract criteria. Construction projects often face issues, with rising prices being the worst. Construction projects often experience cost inflation, which affects sustainability, continuity, productivity, and quality. Parties may also argue. This research study examines relevant literature to identify the main factors that cause construction project cost overruns. This extensive study comprises 96 investigations from 1997 to 2024. This detailed investigation found 45 factors that mostly raise construction project expenses. Methodically categorized aspects included stakeholder elements, technical factors, managerial factors, project resource factors, external factors, and political factors. Decision-makers, construction experts, and project stakeholders benefit from identifying and classifying these aspects. It gives them the tools to develop plans and use modern project management methods. It also helps create and implement cost management plans and monitors project activities throughout. These results allow stakeholders to adopt solutions that lower construction project expenses, assuring safe and effective project execution within budget.
... However, errors in the cost estimation of complex engineering projects are frequent due to the various risks involved (Bayraktar et al., 2011). For power plant projects, a certain amount of budget is usually allocated for visible cost items, and unforeseen events are covered by a cost contingency (Sovacool et al., 2014b). However, the contingency amount needs to be realistic and well defined. ...
Purpose
Power plant projects are very complex and encounter serious cost overruns worldwide. Their cost overrun risks are not independent but interrelated in many cases, having structural relationships among each other. The purpose of this study is, therefore, to establish the complex structural relationships of risks involved.
Design/methodology/approach
In total, 76 published articles from the previous literature are reviewed using the content analysis method. Three risk networks in different phases of power plant projects are depicted based on literature review and case studies. The possible methods of solving these risk networks are also discussed.
Findings
The study finds critical cost overrun risks and develops risk networks for the procurement, civil and mechanical works of power plant projects. It identifies potential models to assess cost overrun risks based on the developed risk networks. The literature review also revealed some research gaps in the cost overrun risk management of power plants and similar infrastructure projects.
Practical implications
This study will assist project risk managers to understand the potential risks and their relationships to prevent and mitigate cost overruns for future power plant projects. It will also facilitate decision-makers developing a risk management framework and controlling projects’ cost overruns.
Originality/value
The study presents conceptual risk networks in different phases of power plant projects for comprehending the root causes of cost overruns. A comparative discussion of the relevant models available in the literature is presented, where their potential applications, limitations and further improvement areas are discussed to solve the developed risk networks for modeling cost overrun risks.
... The participation of the World Bank has likely helped to mitigate risk factors by effectively dealing with these problems before projects begin. (See [19] on costing challenges for large projects; [20] on underestimation bias; and [21,22] on the positive impact of World Bank involvement in such projects.) ...
Hydropower as a renewable source can help many countries achieve their sustainable energy and climate goals, but large projects are challenging to finance because of their costs and risks. To fully realize the climate benefits of such projects, sponsors have recently fashioned complex financing arrangements that structure and allocate risks to reduce financing costs. This paper focuses on the blended financing approach adopted for the Nachtigal Hydropower Plant (NHP) in Cameroon. The purpose of the paper is to present a detailed systems analysis of Nachtigal’s financial arrangement to address the question of why the complex financing approach worked in practice. We accomplish this by creating a “financial simulator”—a computational model for evaluating risks and incentives embedded within the financing structure under different contract architectures and risk–event scenarios. Our simulator is a dynamic value–risk calculator that can be easily updated to study other climate-oriented projects that involve complex financial arrangements. We evaluated three aspects of the financing/contractual arrangements that made Nachtigal “bankable:” (i) guarantees that covered nonpayments, (ii) financial options on locally sourced loans; and (iii) an interest rate swap. We found: (i) the guarantees recovered project value threatened by four specific risks often associated with large hydropower investments (cost overruns, schedule delays, offtake risk, and low flow due to climate change); (ii) the mechanism significantly lowered interest rate charges; and (iii) private finance was mobilized—especially due to the options. The financial safeguards employed increased the likelihood of capturing the long-run sustainability benefits from NHP.
... https://www.texastribune.org/2011/02/08/texplainerwhy-does-texas-have-its-own-power-grid/. 26 (Durakoglu 2011;Eisgruber 2013;Bowen, Sparrow, and Yu 1999;Kander, Malanima, and Warde 2014;Pellegrini and Tasciotti 2013;Silvestre et al. 2010;Sovacool, Nugent, and Gilbert 2014;Zhang, Parker, and Kirkpatrick 2005) The SAPP is particularly important case because of its potential to dramatically change development in Africa, its relative advancement toward creating a viable regional market, and the significant political and financial hurdles the project must still overcome. Despite electricity being fundamentally a scientific and technical enterprise, politics plays a key role, particularly when the grids cross international lines and therefore immediately raise issues of sovereignty and dependency as well as internationally negotiated regulations and policies. ...
Low access, unreliable supply, and high-cost electricity have hampered many African states' ability to grow their economies. Even high-income states, like South Africa, are increasingly challenged to provide reliable electricity. To help address this shortfall, African states belong to five regional power pools: organizations that link together electricity grids of member states and create markets to buy and sell electricity across borders. Scholar have given scant attention to these power pools, and none have explored the politics behind their creation and maintenance. The path dependence framework reveals that the configuration of the power pools is directly related to the end of colonialism and the subsequent creation of regional organizations formed in the 1960's. Applying the comparative regionalism framework, I find the principal drivers for adding electricity to pre-existing organizations fall into three categories: development interests (donor states and development banks), mining companies, and some African states, especially South Africa and the Democratic Republic of Congo. Using organizations designed for other means might be hampering the region's ability to improve energy security, standards of living, and climate change goals. Donors and power pool members should consider investing more heavily in bilateral rather than regional organizations and in decentralized or distributed electricity systems.
... The construction industry faces a big challenge in controlling the cost of all commercial construction projects coupled with tight monetary supply. To maximize performance despite the overruns, economies in the world have prepared their participants in various industries to take up challenges and make sure there is proficient use of available materials (Sovacool et al, 2017). The overall cost of construction undertaking in normal circumstances is expected to be: site overheads, material, labor, and equipment. ...
For any country to succeed in the 21st century, infrastructure development is critical. Its objective is to create a significant number of employment and accelerate economic growth. Therefore, there is a need for heavy financial investment in projects involved in infrastructure development. However, one needs to consider the waste of resources a country could incur if the project is not managed properly. These losses result from a variety of risks connected to these sorts of development initiatives. These risks have a significant influence. For a project to be completed successfully, it has to be within the schedule and allocated budget. The objective of the study was to determine the influence of cost-related risks on completion of commercial building construction projects in Kisumu County. This research was guided by theory of constraints. The research used a descriptive survey research design. The research was conducted in Kisumu County and the target population constituted of structural engineers, civil engineers, construction project managers, mechanical engineers and electrical engineers making a total of 400 respondents. Yamane formula was applied in determining the sample size which was 234 respondents. Stratified sampling method was applied in selecting a sample size. Questionnaires were used to obtain primary data while contract documents, journals and progress reports from the identified projects were utilized to collect secondary data. With the assistance of a computer software, Statistical package for Social Sciences, descriptive statistics was applied in analyzing quantitative data for statistics. Inferential statistics was done through Pearson Correlation Coefficient and Regression Analysis was utilized. It was established that cost related risks with r=0.430, r2=0.185, β=0.004, t=7.151 and the F (1, 173) = 47.79 at p=0.000<0.05, concluded that the variable had a positive significant completion of commercial building construction projects. The research recommended that there is need to consider cost of the project intensely in the start period to prevent problems that bring construction delays. The research suggested that research should be done on how to create a predictive model for the execution of commercial construction building.
... Although these case studies provide insights about many of the project components, conclusions from single case studies often cannot be easily extrapolated to other energy projects. Some studies, though, use a large number of projects to evaluate broad trends across the energy sector, often focusing on one geographic region (e.g., Turkey; Sayan 2019) or one type of energy project (e.g., power plants; Sovacool et al., 2014). While researchers have studied controversies surrounding nuclear power (e.g., Jasanoff and Kim, 2009;Diaz-Maurin and Kovacic, 2015), these studies generally explore public perceptions of the nuclear power sector as a whole, rather than specific projects. ...
... Projects have also been instruments of choice for policymakers in the public sector whether they seek to build infrastructure (Flyvbjerg, 2014), plan and deliver Complex Products and Systems (CoPS) (Davies & Brady, 2000;Davies & Hobday, 2005;Gann & Salter, 2000), build or develop capacity (Ika & Donnelly, 2017), improve or reform governance (Vukomanovi c et al., 2021) or tackle and curb grand challenges (Ika et al., 2020). Several academic and industrial sources report that projects are frequently delivered late and over budget (Flyvbjerg et al., 2003;Locatelli, Mikic, et al., 2017;McKinsey, 2015;PWC, 2013;Sovacool et al., 2014;The Standish Group International Inc., 2020), and about half of the investment projects funded by donors such as the World Bank may have failed to deliver much-needed impact for the world's poor, that is, their beneficiaries, as a McKinsey-Devex survey suggests (Ika & Donnelly, 2017;Lovegrove et al., 2011). Thus, project management research is essential to develop projects that can deliver the significant 'changes' that the United Nations Sustainable Development Goals envisage (Ika et al., 2020). ...
Project management research has evolved over the past five decades and is now a mature disciplinary field investigating phenomena of interest to academics, practitioners and policymakers. Studies of projects and project management practices are theoretically rich and scientifically rigorous. They are practically relevant and impactful when addressing the pursuit of operational, tactical and strategic advancements in the world of organisations. We want to broaden the conversation between project management scholars and other scholars from cognate disciplines, particularly business and management, in a true scholarship of integration and cross‐fertilisation. This Manifesto invites the latter scholars to join efforts providing a foundation for further creative, theoretical and empirical contributions, including but not limited to tackling grand challenges such as climate change, pandemics, and global poverty. To this end, we identify five theses: Projects are often ‘agents of change’ and hence fundamental to driving the innovation and change required to tackle grand challenges.
Much project management research leverages and challenges theories across disciplines, including business, organisation and management studies, contributing to developing new theories, including those specific to projects and temporary organisations.
‘Projects’ are useful units of analysis, project management research is ideal for scientific cross‐fertilisation and project management scholars welcome academics from other communities to engage in fruitful conversations.
As in many other fields of knowledge, the project management research community embraces diversity, welcoming researchers of different genders and various scientific and social backgrounds.
Historically rooted in ‘problem‐solving’ and normative studies, project management research has become open to interpretative and emancipatory research, providing opportunities for other business, management and organisational scholars to advance their knowledge communities.
... Poorly planned or badly executed hydroelectric projects, however, with frequent cost overruns and long delays, lack of transparency and insufficient communications with local communities, have increased the opposition to hydropower [7,8,9]. Public concerns over large social and environmental impacts, including land flooding, migration barriers, loss of biodiversity, changes to flow regimes and so on [10]. ...
Hydropower is a renewable, controllable, and flexible source of electricity. These are instrumental features to support decarbonization efforts, as an enabler of non-controllable and variable sources of renewable electricity. Sometimes hydropower is accompanied by other services provided by multipurpose reservoirs, such as water supply, irrigation, navigation, flood control and recreation. Despite all these benefits, hydropower can be a polarizing issue. A large sample of projects with poor planning and execution provides numerous arguments for its opponents. Large and complex projects frequently suffer overcost and delays. The direct impacts are related to the disruption of river ecosystems and surrounding habitats due to the flooding of large areas, and the fragmentation of rivers caused by the construction of dams and the reduction of sediment transport that impoverishes aquatic life. People displacement and compensation are always a complex issue. Hydropower projects can also cause indirect impacts, such as additional deforestation related to the construction of workers' villages, access roads and transmission lines. Finally, reservoirs may also become a significant source of methane emission, especially in tropical areas. This paper offers an analytical approach for sustainable hydropower planning at the river basin scale called HERA: Hydropower and Environmental Resource Assessment. Built on three main components, namely geoprocessing, engineering, and optimization, HERA screens and compares hydropower development alternatives to guarantee social and environmental objectives while maximizing mentioned economic benefits. It was designed to encourage a transparent and participatory hydropower planning process from the early stages. Experience has shown this approach increases the chances of better and balanced outcomes. A case study is presented in the Ogooue river basin in Gabon.
... The construction period accounts for the largest costs, not only because of the costs of the actual materials and labour in the construction, but also because of the costs of financing the upfront expenses. Nuclear cost overruns have been found to be heavily influenced by interest costs and time overruns (Sovacool, Nugent, and Gilbert 2014; Gilbert, and Nugent 2014a, 2014b). The World Nuclear Association (2017, 3) recognizes that 'the economics of new nuclear plants are heavily influenced by their capital cost. ...
The changing socio-economic context has a crucial impact in nuclear decisions and execution of the projects. The nuclear projects initiated over the past 20 years reduced their construction times relative to those initiated before. Of the over 600 the nuclear projects built over the past 70 years only 3% took longer than 15 years to complete. Analysing the lengthiest projects within their economic context, reveals that ‘when and where’, (i.e., the contextual risks) explains most the delays, thus questioning whether nuclear power plant projects are inherently examples of the megaproject ‘pathologies.’ The analysis of the lengthiest nuclear power projects makes evident that the failure to deliver nuclear plants on time and within budget was related to the historical period and/or the specific location more than to any inherent characteristics of nuclear power plants. Stakeholders of nuclear projects (and megaprojects in general) should be attentive to socio-economic changes and macro-economic impacts to avoid pitfalls.
... The need for new and improved transmission lines to connect renewable energy facilities to population centers (DeRolph et al., 2019), withstand severe weather events (Zamuda et al., 2013), and handle major demand peaks (Beard et al., 2010) is a clear example. However, despite this demand and the relatively low technical uncertainty posed by high voltage transmission lines, the design and implementation process for such projects is long (typically 5-10 years) and institutionally complicated (Ciupuliga et al., 2011;Life Cycle of a Major Transmission Line Project, 2011;Sovacool et al., 2014). ...
Environmental impact assessment (EIA) procedures required in the United States and many other countries are often highlighted as a major hindrance to timely and efficient deployment of critical infrastructure projects. Under the U.S. National Environmental Policy Act, a more extensive environmental impact statement (EIS) review can take several more years and cost much more than a succinct environmental assessment (EA). This not only affects the project in question, but also likely informs how—or whether—additional projects are pursued. Thus, understanding key predictors of the EA versus EIS choice sheds light on supply‐side considerations affecting infrastructure deficits. Using the case of NEPA reviews conducted for 244 transmission line projects between 2005 and 2018 by two U.S. federal agencies in the western United States, the Bureau of Land Management (BLM) and Department of Energy (DOE), this addresses the following question: What project features most predict whether EA or an EIS is used to assess a transmission line project? Drawing upon NEPA assessment guidance and agency NEPA records, we use a regression classification tree to analyze how protocols and project attributes relate to assessment choice. The result is essentially a null finding: transmission line length is by far the most important predictor of whether a project receives an extensive EIS or a shorter EA, with little predictive value provided by other attributes. While absolute project size undoubtedly influences impacts, the lack of further differentiation in what predicts use of EISs versus EAs suggests assessment does not simply respond to project details but also shapes proposal and design choices beforehand.
... Also, increasing demand for energy supply from thermal plants for the next twenty-five 175 years has been projected to guarantee energy access (Singer and Peterson 2017). Despite the 176 commonness of thermal power plants, which have enhanced energy access globally, the successful 177 provision of this infrastructure is affected by cost overrun (Sovacool et al. 2014c). Therefore, like 178 other power projects identified in the previous section, there is a need to understand the risk factors 179 that lead to cost overrun in thermal power plants. ...
While power plant projects have seriously been encountered cost overruns, previous studies have paid less attention to predict the cost overruns in assisting contingency cost planning. Considering the critical risks producing cost overruns, this study aims to develop a Hybrid Predictive-Probabilistic-based Model (HPPM) by integrating genetic programming with the Monte Carlo technique. The proposed HPPM is based on collecting the data from thermal power plant projects (TPPP). Sensitivity analysis is also conducted by identifying the critical risks in simulating cost overruns. The simulation outcomes show that 40.48% of a project’s initial estimated budget is the most probable cost overrun, while a project is experienced 25% and 75% cost overruns with 50% and 90% probabilities respectively. These findings assist managers in improving the initial budget accuracy of power plant projects and cost management throughout the project execution phases. Besides, the applications of this model are prospective to similar infrastructure projects.
... However, the unchallenged framing of the GERD distracts from the uncertainties, long-term costs, and environmental risks that are inherently associated with such projects (Sovacool et al., 2014). For instance, details on how the benefits of the GERD will be redistributed are lacking. ...
Anchored by ambitions of economic growth and energy security, governments in developing countries are building large-scale energy infrastructures at a fast pace. While committed to making modern energy accessible to all, many are also reconfiguring their institutions to hasten the sector transformation into a market-oriented entity. In some cases, these ambitious agendas are also being pursued in the context of deteriorating infrastructure and supply shortfalls. The paper uses the Grand Ethiopian Renaissance Dam (GERD) to explore how political elites and citizens construct visions of the desirable future to be realised through large scale energy projects. After documenting how dominant accounts align with and diverge from citizens expectations, the paper explores how urban households reconcile the energy abundance large-scale projects promise with their experience of inadequate and increasingly expensive access to electricity. Furthermore, noting the absence of a meaningful and effective citizens engagement in the sector governance, the paper highlights the inherent risks of large-scale projects from an energy justice perspective.
... Many studies investigated the causes of project overruns in construction projects in various countries such as, United State (Shrestha et al. 2013), United Kingdom (Olawale and Sun 2010), Australia (Love et al. 2013), Saudi Arabia (Elawi et al. 2016), South Korea (Lee 2008), Malaysia (Karunakaran et al. 2018), Nigeria (Aibinu and Odeyinka 2006) Vietnam (Long et al. 2004), and Pakistan (Haseeb et al. 2012;Batool and Abbas 2017). Studies also investigated causes of overruns in different types of construction projects such as buildings (Abd El-Razek et al. 2008), highways (Sohu et al. 2016), groundwater (Frimpong et al. 2003), transportation including tunnel construction (Flyvbjerg et al. 2004), and power plant construction, such as nuclear, thermal, and hydroelectric construction projects (Sovacool et al. 2014;Schneider et al. 2016). The detailed review of the literature suggests different level of significance for different reasons of project overruns in various civil construction projects because of external and internal factors and the nature of the projects. ...
Tunnel construction is considered a bottleneck point in mega construction projects because of higher
associated risks and uncertainties. This study is an attempt to identify and rank the causes project overruns in tunnel construction projects in Pakistan and propose a mitigation strategy to minimize their
effects. For the given purpose, a total of 32 key causes were obtained from the literature and discussion
with a team of experts and practitioners. A web-based questionnaire survey was used for data collection.
About 55 complete responses were received from the practitioners working as clients, consultants, and
contractors in Pakistan. The identified causes were ranked using frequency, severity, and relative importance indexes. The most important causes were found to be inexperienced and incompetent contractors,
ignoring consultants’ instructions by contractors, inadequate project estimates, delay in issuance of funds
to the contractors, and low bids. This study can be employed for controlling the leading causes of overruns in tunnel construction projects. Moreover, it can serve as a guide in further investigation of the
causes of project overruns in tunneling in different countries.
... This finding aligns with an author's findings who conducted a study of 401 power plant and transmission projects in 57 countries, where costs were overestimated in 3 out of every 4 projects, with only 39 projects experiencing no cost overrun or underrun across the whole sample. Each of these types of power infrastructure comes with its own set of construction concerns [40]. ...
Design change is a common but significant problem in construction projects. Issues of delay, cost overruns, claims, and disputes in projects occur as a result. However, design change studies in the power-project area are less often discussed. As a result, the primary objective of this study was to identify important cause factors of design changes according to different power-project types in Ghana. Following a thorough assessment of the literature, 36 potential causes were identified, which were narrowed down by expert reviews to 30. In this study, power projects were classified into three categories: power plant, renewable, and distribution and transmission. The results indicate owner-related financial problems as the most important cause of design change for all three project types, followed by the second and third most significant in each of the categories, respectively: errors and omission in design and problems or unforeseen site conditions in power plant projects; deficient quality and quantity of resources and inflation and changes in interest and exchange rates in renewable projects; and problems or unforeseen site conditions and changes of plans in distribution and transmission projects. Based on the findings, power-project stakeholders are able to comprehend the dynamics of design change and develop effective design management strategies to reduce impact.
... The most important assumption with the greatest impact concerns the construction cost. Construction costs vary greatly between regions because conditions differ, as do preferences concerning the quality, model, and design of NPPs [17,18]. The charts in Figs. 4 and 5 show variations in nuclear production by country and year. ...
Energy savings are a key issue in modern society. Nuclear energy may be a solution to provide clean power. Nuclear power plants (NPPs) use nuclear fission to generate electricity. There are numerous challenges to overcome for successful implementation of NPPs. This study presents an up-to-date overview of the principal research topics and trends within the NPP research domain, with the purpose of identifying opportunities and obstacles in NPP projects. Some of the challenges, including technological challenges, economic challenges, institutional/governance challenges, and social challenges, are examined, and the future of NPPs is discussed, including (i) the history of NPPs; (ii) the benefits of NPPs; (iii) major challenges in NPP construction; (iv) a review of the current state of the art for implementing NPPs; (v) the most important opportunity for implementing NPPs; (vi) the economics (life cycle costing) of nuclear energy; (vii) a comparison of NPP and renewable energy operations; (viii) different operational constraints for NPPs compared to other power plants; and (ix) nuclear energy for sustainable development. Issues in NPP construction and possible solutions are also addressed.
... However, there are currently no large-scale power plants (even fossil-based) with integrated CCS in Europe 8 . In the European Commission [1] scenarios, nuclear power also plays a role, despite the increasingly difficult outlook for nuclear expansion in the EU: nuclear power faces not only increasing opposition in the form of moratoriums to new plants, cancellations 9 and phase-out plans, but also cost overruns [42,43,44] and abandoning of projects under development. We thus evaluate the impact that the reduced availability of CCS and/or nuclear power would have on the decarbonization pathways by running five additional scenario variants of the REF and AMB scenarios in which individual technologies cannot be deployed in the electricity sector by the model after 2020: no fossil CCS, no BECCS, no CCS at all (neither fossil nor biomass-based), no new nuclear (all constructions to be commissioned in 2025 are stopped, and no additional ones are allowed), and neither nuclear nor CCS power plants. ...
The EU Green Deal calls for climate neutrality by 2050 and emission reductions of 50–55% in 2030 in comparison to 1990. Achieving these reductions requires a substantial tightening of the regulations of the EU emissions trading system (EU ETS). This paper explores how the power sector would have to change in reaction to a tighter EU ETS target, and analyses the technological and economic implications. To cover the major ETS sectors, we combine a detailed power sector model with a marginal-abatement cost curve representation of industry emission abatement. We find that tightening the target would speed up the transformation by 3–17 years for different parts of the electricity system, with renewables contributing 74% of the electricity in 2030, EU-wide coal use almost completely phased-out by 2030 instead of 2045, and zero electricity generation emissions reached by 2040. Carbon prices within the EU ETS would more than triple to 129€/tCO2 in 2030, reducing cumulated power sector emissions from 2017 to 2057 by 54% compared to a scenario with the current target. This transformation would come at limited costs: total discounted power system costs would only increase by 5%. We test our findings against a number of sensitivities: an increased electricity demand, which might arise from sector coupling, increases deployment of wind and solar and prolongs gas usage. Not allowing transmission expansion beyond 2020 levels shifts investments from wind to PV, hydrogen and batteries, and increases total system costs by 3%. Finally, the unavailability of fossil carbon capture and storage (CCS) or further nuclear investments does not impact results. Unavailability of bioenergy-based CCS (BECCS) has a visible impact (18% increase) on cumulated power sector emissions, thus shifting more of the mitigation burden to the industry sector, but does not increase electricity prices or total system costs (<1% increase).
... While societal risks play a significant role in the construction of NPPs, construction cost overruns are multicausal and not limited to a single factor. There are factors such as procurement delays and shortages of labor that impact construction schedules (Sovacool et al. 2014c). The US Energy Information Administration (EIA) concluded that "increases in the quantities of land, labor, material, and equipment" as well as increases in financing charges all played contributory roles to the significant cost escalation and schedule delays in the previous generation of NPPs (EIA, USEIA 1986). ...
In the US, nuclear power plants offer a means of generating power with less carbon emissions and higher efficiency as compared
to traditional fossil plants. Because of this, they offer a solution that meets the requirements of the current regulatory environment. While both hydroelectric and nuclear power are attractive from an emissions standpoint, these technologies also include greater risk of cost overruns than other types of power plants, e.g., coal fired, combined cycle, or solar. This paper leverages a robust literature search to collect data about nuclear power plant construction projects in the US, and based on a peer-reviewed risk register, highlights the trends in risk prevalence based on nuclear reactor type, year of construction, and Nuclear Regulatory Commission (NRC) region. This analysis revealed that there was no correlation to NRC region versus risk. Risks are, for the most part, present in all regions without an obvious correlation between region and risk presence or prevalence. The analysis also demonstrates that among the four reactor manufacturers present in the dataset, design risk was the most prevalent risk, and that Westinghouse reactors had the greatest occurrence of risk all together. This paper contributes to the power plant construction body of knowledge by (1) categorizing risks; cited in literature from 50 US nuclear power plant construction projects using an existing peer-reviewed risk register and (2) identifying trends in risks that lead to significant cost overruns over time.
... Current areas of active research may allow for the development of more detailed, higher-dimensional models of risk perception for energy technologies, including factors such as proximity to facilities and infrastructure (e.g., NIMBY) [46,51], interactions of a divided public with polarized sources of news coverage on energy and the environment [52,53], chronic concerns regarding costs and cost overruns [54], and increasing expectations for facilities to maintain a ''social license to operate'' [55,56]. We anticipate that incorporating one or more of these factors in future models could improve their predictive capabilities and overall credence. ...
Many energy systems models have sought to develop pathways for deep decarbonization of the global energy system. Most often, these pathways minimize system costs or greenhouse gas emissions; with few exceptions, they ignore the constraints imposed by political, social, and economic factors that slow transition processes, making them prone to producing implausible decarbonization pathways. This paper integrates a key socio-technical factor—social acceptance of low-carbon nuclear power—into an energy systems model to illustrate how it alters the optimal energy generation mix. The United States was chosen as the example, but the approach itself is designed to be general and applicable to any region of interest. An empirically grounded risk tolerance model is developed to characterize acceptance of nuclear power and estimate an upper-bound deployment limit for the technology. Illustrative scenarios are presented to improve our understanding of how the socio-technical constraints that exist in the real world can alter deep decarbonization pathways. The cost-optimal generation portfolio to achieve net zero CO2 emissions by 2050 primarily relies on nuclear power. If risk tolerance concerns constrain nuclear deployment to socially acceptable levels, deep decarbonization scenarios are up to 11% more expensive than the reference scenario and require low-carbon options to be available and replace the reduced nuclear share. Results from this novel framework improve our representation of the effect of social acceptance on the adoption and diffusion of energy technologies. They also contribute to a growing literature that seeks to firmly embed the social sciences in climate and energy policy.
... There is also a large literature that has examined the cost and performance of large infrastructure projects (Bruzelius et al., 2002;Flyvbjerg, Holm, & Buhl, 2002;Girmscheid & Brockmann, 2008;Luo, He, Xie, Yang, & Wu, 2017). Among projects subject to such risk, nuclear energy is perhaps the most complex and prone to cost overruns and construction delays (Sovacool, Nugent, & Gilbert, 2014). The IAEA has guidelines on how to handle the financial risk of nuclear power plant investments (IAEA, 2017) and has identified national economic performance parameters that have a bearing on nuclear deployment in countries that are embarking on their first build (IAEA, 2017). ...
Many energy technologies that can provide reliable, low‐carbon electricity generation are confined to nations that have access to robust technical and economic capabilities, either on their own or through geopolitical alliances. Equally important, these nations maintain a degree of institutional capacity that could lower the risks associated with deploying emergent energy technologies such as advanced nuclear or carbon capture and storage. The complexity, expense, and scrutiny that come with building these facilities make them infeasible choices for most nations. This paradigm is slowly changing, as the pressing need for low‐carbon electricity generation and ongoing efforts to develop modular nuclear and carbon capture technologies have opened the door for potentially wider markets, including in nations without substantial institutional capacity. Here, using advanced nuclear technologies as our testbed, we develop new methods to evaluate national readiness for deploying complex energy infrastructure. Specifically, we use Data Envelopment Analysis—a method that eliminates the need for expert judgment—to benchmark performance across nations. We find that approximately 80% of new nuclear deployment occurs in nations that are in the top two quartiles of institutional and economic performance. However, 85% of potential low‐carbon electricity demand growth is in nations that are in the bottom two quartiles of performance. We offer iconic paradigms for deploying nuclear power in each of these clusters of nations if the goal is to mitigate risk. Our research helps redouble efforts by industry, regulators, and international development agencies to focus on areas where readiness is low and risk correspondingly higher.
... Previous studies of power plant projects, despite their well-known serious cost overruns [51], pay less attention to developing and validating contingency cost modelsfocusing instead on their unique attributes. Usually, energy infrastructure projects (i.e., power plants) are complex, and the project context and working environment vary significantly between projectsexacerbating the problem of data availability. ...
The current practice of expert judgment-based contingency cost allocation by owners lacks a holistic understanding of project risks, their causal relationships, and impact on project costs. This study presents an integrated fuzzy set theory and fuzzy Bayesian belief network model for a rational, realistic determination of contingency costs for infrastructure projects. The application of the model is demonstrated for real-world power plant projects in Bangladesh. The model has promising results for its ability to establish the amount of contingency costs with a maximum error of 20% between the contingency cost predicted with the model and the actual contingency cost. It has the potential to assist both the owner and contractor to set aside a realistic amount of contingency cost in the preliminary phase of a project. The approach is also equally useful for monitoring and controlling project risks, and dynamically updates the contingency cost amount during project execution.
... Moreover renewable electricity power plants are generally much quicker to construct than large-scale baseload generation from conventional power sources which can sometimes take more than ten years to build. The latter, which are usually situated in remote locations, incur huge long-term investment commitments; are subject to significant losses in transmission; have a plant life of approximately 30 years or more; and are far more likely to run over budget, into debt and behind schedule (Ansar et al., 2014;Sovacool et al., 2014). ...
Until recently the regulation, ownership and governance of the electricity sector was subject to long-standing debates between those advocating for a state-owned monopoly at one end and those for market liberalisation at the other. However, this debate has now been disrupted by dramatic developments in low-carbon technologies which pose a potentially radical challenge to the centralised system of electricity and have huge implications for the nature of electricity markets, policy and planning. Within this dynamic we explore how rapid technological shifts and processes of electricity governance and procurement are interacting over time, across scales, across technologies and within the different national political economies of Germany and South Africa. We find that while the nature of Germany's regulatory framework introduced in the early 1990s prioritised decentralised renewable energy systems with a strong role for community ownership, the design of South Africa's national programme for the procurement of renewable electricity two decades later has privileged generation projects at the utility-scale, and in turn the large-scale corporate and financial actors that operate and own them. Yet as such dynamics have continued to evolve, more recent policies in Germany have given greater encouragement to large-scale projects built by corporate actors, while in South Africa, small-scale distributed generation has been installed by wealthy consumers in the absence of appropriate legislation rather than because of it. In exposing these complexities, we challenge the assumption that radical low-carbon technological change will automatically result in a reconfiguration of political, economic and social power structures.
... 7 Ansar et al. (2014) show how to determine empirical distributions for cost and schedule overrun of hydropower megaprojects. Sovacool et al. (2014) determine empirical distributions of cost overruns for hydroelectric dams, nuclear power plants, wind farms, and solar facilities. ...
Major projects often deviate from their expected budget, schedule, and benefits. Existing techniques to improve the forecasted outcome, such as the Reference Class Forecasting technique, ignore any flexibility in the project timing. This paper acknowledges this flexibility and proposes a real options model to optimize the project timing and value when the project investment cost, the construction schedule, and the output value are uncertain. We illustrate the approach with thin and fat upper tails distributions of cost and schedule overruns. Finally, we show how practitioners can implement the proposed approach using empirical distributions of costs and schedules from comparable prior projects.
... Construction of mega hydropower dams is an expensive, challenging, and finance-draining process worldwide and not limited to developing countries. Sovacool et al. (2014b) studied 61 hydropower projects worldwide 6 including developed and developing countries and reported the average cost escalation of 71% in these projects. The study analysed the biggest factor of cost overrun as long construction lead times, which expose hydropower projects to many uncertainties including interest rates change, materials availability, exchange rates, inflation, tax changes, and political events, etc. ...
Hydropower projects are site specific which require huge investment and have long gestation periods. These characteristics expose hydropower projects to various uncertainties and risks such as economic, environmental, social, geological, regulatory, political, technological, financial, climate, natural, and safety. These risk factors, if not managed in time, lead to schedule and cost overruns which ultimately cause delays in the availability of power that too at a higher cost and in extreme cases lead to project failures. Sustainability has also become a critical and unavoidable issue in hydropower development due to associated environmental and social impacts. Sustainable development is related to techno-economic development along with preserving the environment. Hence, to assure this equity and manage the critical risks more efficiently, there arises a strong need for comprehensive risk management in hydropower projects. This paper presents a systematic review of risk management in hydropower projects with a specific focus on sustainable development. The paper discusses various risk assessment techniques and recommends sensitivity analysis as a primary method to evaluate the significant risk factors. The construction phase of hydropower projects is identified as the most critical phase associated with uncertainties and involves considerable cost. Thus, the review highlights the need for incorporation of risk analysis in the cost estimation process and the provision for finance with sufficient margin on the ex-ante base cost to account for uncertainties, especially for developing countries. For future research, the use of fuzzy hybridized with artificial neural network and genetic algorithm is suggested for risk assessment of hydropower projects.
... In Table 2, we identify a number of key studies that have quantified the cost performance for social infrastructure projects, which we define as the construction and maintenance of facilities that support social services. Examples of studies reporting the magnitude of cost overruns that occur in economic infrastructure projects are widespread [33,45,50,58,60,69]. The reported cost overruns for economic infrastructure projects can vary in magnitude [58]. ...
The Planning Fallacy is at play in projects when optimism bias and/or strategic misrepresentation are present. We examine the cost performance of approximately U$ 6.5 billion worth of social infrastructure projects that were procured in Hong Kong and specifically the differences between their final accounts and the various types of estimates that were prepared prior to construction. We focus on the (honest) Planning Fallacy and hence aim to determine whether estimates are more optimistic than actual costs. Our data shows that 43% of projects incurred a cost underrun from their contract award. We therefore infer that at best 57% of projects may be explained by the presence of the Planning Fallacy. Based on our findings, we argue that optimism and pessimism bias co-exist. Likewise, the Planning Fallacy and competing explanations can simultaneously account for cost deviations in social infrastructure projects. We submit that the prevalence of the Planning Fallacy has been exaggerated and hence provide an explanation as to why this has occurred. We finally suggest there is a need for additional empirical work to test the claim that the Planning Fallacy is the underlying cause of cost overruns and thus the best 'theory' to explain 'how projects work'.
... The applied range of 20-40% of cost overruns is rather conservative, given the scientific analysis for 180 nuclear reactors that suggest costs overrun of around 117% on average. Moreover, there has been no single reactor that was completed within the planned budget and time frame (Sovacool et al., 2014a;2014b). ...
Jani-Petri Martikainen has raised a few concerns after examining in detail the peer-reviewed published article Ram et al. (2018) and the technical report Ram et al. (2017) in his letter Martikainen (2019). However, Martikainen (2019) fails to contextualise the approach in estimating the levelised cost of electricity (LCOE) across different power generation sources adopted in Ram et al. (2017) and Ram et al. (2018). Martikainen (2019) seems to raise issues that have already been clarified and further explained in the original published article as well as in the technical report. In an effort to ensure that the readers are not confused or misled by some of the claims made in Martikainen (2019), the authors of Ram et al. (2017) and Ram et al. (2018) have responded to all the concerns raised.
... Given that geotechnical conditions cannot be precisely assessed until after the construction of the project begins, hydropower presents inherent difficulties during the construction phase including unforeseen excavations and construction problems that can increase investment requirements considerably. Hydropower has been identified as one of the technologies with the largest average cost overruns (second only to nuclear power), having an average cost overrun of 70%, compared to, for example, a 12% average cost overrun for traditional thermal plants (Sovacool, Nugent, & Gilbert, 2014). Ecuadorian hydropower infrastructure during the last decade has also experienced cost overruns. ...
Hydropower is the dominant renewable energy source to date, providing over two-thirds of all renewable electricity globally. For countries with significant hydropower potential, the technology is expected to play a major role in the energy transition needed to meet nationally determined contributions (NDCs) for greenhouse gas (GHG) emission reductions as laid out in the Paris Agreement. For the Republic of Ecuador, large hydropower is currently considered as the main means for attaining energy security, reducing electricity prices and mitigating GHG emissions in the long-term. However, uncertainty around the impacts of climate change, investment cost overruns and restrictions to untapped resources may challenge the future deployment of hydropower and consequently impact decarbonisation efforts for Ecuador’s power sector. To address these questions, a partial equilibrium energy system optimisation model for Ecuador (TIMES-EC) is used to simulate alternative electricity capacity expansion scenarios up to 2050. Results show that the share of total electricity supplied by hydropower in Ecuador might vary significantly between 53% to 81% by 2050. Restricting large hydropower due to social-environmental constraints can cause a fourfold increase in cumulative emissions compared to NDC implied levels, while a 25% reduction of hydropower availability due to climate change would cause cumulative emissions to double. In comparison, a more diversified power system (although more expensive) which limits the share of large hydropower and natural gas in favour of other renewables could achieve the expected NDC emission levels. These insights underscore the critical importance of undertaking detailed whole energy system analyses to assess the long-term challenges for hydropower deployment and the trade-offs among power system configuration, system costs and expected GHG emissions in hydropower-dependent countries, states and territories.
... In Figure 2.2 we show 1850 because we wanted to show projected growth by continent. 17 Assuming investment costs averaging 2.5 million US$ per MW of installed capacity; For example, Sovacool, et al., (2014) In addition to providing electricity, hydropower also provides a set of ancillary energy services that benefit an electrical system. 12 By storing water upstream of turbines-both in traditional reservoirs on rivers and in pumped storage reservoirs (Box 2.1)-hydropower reservoirs store water as potential energy that can quickly be converted to electrical energy and thus can contribute to load following and peaking, and thus grid stability. ...
Solar power is sustainable and one of the mainstream resources for meeting power demands. It has emerged as the most adaptable solution to energy access and security concerns. Despite offering modularity and low cost of generation advantages, the projects suffer overruns and often fail to deliver the desired performances. However, limited studies are available on investigating solar power project risks
and their impact on project performances, primarily based on empirical evidence. Moreover, such studies rarely analyze the underlying contractor’s approach in addressing them. Therefore, through case studies in India, this study empirically attempts to identify the potential risk issues and associated impacts responsible for impaired solar project performance. The study also explores the contractors’ approach
toward their management concerning their enterprise listing, i.e., private and public. The study outlines the 16 key risk factors, including error in project estimations, incorrect site assessment, delays in statutory and regulatory compliances, change in management, ineffective communication and control, improper distribution of works, insufficient workforce, and lack of quality control mechanism. Also, the study
evaluates their impact on project performance, such as reworks, cost and time variance, imposition of liquidated damages, loss of revenue, and disputes and claims. Moreover, the study suggests mitigation measures, i.e., proactive and inclusive planning, a thorough study of project parameters and conditions, utilizing IT for reducing response time, training and development, and continuous monitoring and control, that could have minimized the impact of risk in the cases. Further, the study reveals that irrespective of the contractors’ listing type, the approach toward risk management remains casual, leading to derailed project outcomes. Overall, this study fills a critical gap in the body of knowledge on solar power project development by identifying risk factors that cause impaired performances and the contractors’ perspectives based on empirical evidence from India.
Multiparty alliances (MPAs) are increasingly used to deliver large utilities infrastructure projects on‐time, on‐budget, and to specified quality. In theory, MPAs should help buyers to coordinate suppliers, enable concurrent scheduling, and create process innovations. On the other hand, these governance structures are inherently less stable than dyadic relationships due to their additional complexity and greater opportunities for free riding. We conduct a multi‐source, longitudinal study, investigating how a buyer actively manages the dynamics between competition and cooperation during the formation of an MPA consisting of a lead organization and directional relationships between all partners. We contribute to MPA and coopetition literature by exploring cooperation and competition dynamics that are associated with the MPA structure that would largely be absent in dyads, and unpack the process by which a buyer orchestrates these dynamics by sequentially introducing new initiatives that seek to balance coopetition. MPAs have been recommended by governments and industry bodies as one solution for time and cost overruns in the utilities infrastructure sector, our study also provides guidance to buyers on the management of the alliance during the critical formation stage of the relationship lifecycle.
Small modular reactors (SMRs) have been recently attracting attention as a means to overcome the cost overruns and schedule delays typically associated with large reactors; and as a tool to combat climate change by offering a carbon-free source for power and/or process heat. The smallness (in power and physical size) reduces financial risk and initial capital cost, by enabling incremental addition of SMR units as demand increases. The lower power of SMRs makes them also appealing to jurisdictions of low power demands. In addition, the development of new reactors is an opportunity to incorporate in the design the safety and economic features of Generation IV reactors. However, the “M” is SMRs can be ambiguous, as it has many meanings and definitions. This paper discusses the various concepts and phases of modularity, in an attempt to provide a framework for communication with and among researchers, designers, manufacturers, construction contractors, decision makers and the public at large. This framework is called here “Generation Modular Reactors”, in analogy with “Generation IV reactors”, as both represent pivotal evolution of nuclear-reactor technology.
Current processes in definition, estimation, and financing of large resource projects often exclude relevant sources of socio-technical risks with overarching effects. This paper proposes an expandable Object-Oriented Bayesian Network (OOBN) to incorporate the effects and dependencies of project risk factors and outcome variables as related to cost. The model can be trained based on collected data, expert knowledge for previously unmeasured sources of socio-technical risks, or some combinations thereof. The model is linked to a reference class of mining projects to position the project at hand within the reference class and to distinguish various extents of cost overrun. Three rounds of interviews were conducted with project expert cohorts to identify socio-technical risk factors, establish their influence weights, and verify specific projects' results. The methodology helps overcome various biases within project estimation processes by combining both singular-evidence of the project at hand (i.e., inside view) and distributional-evidence of the peer reference class (i.e., outside view).
There are undeniable signs from all over the world demonstrating that climate change is already upon us. Numerous scientific studies have warned of dire consequences should humankind fail to keep average global temperatures from rising beyond 1.5°C. Drastic measures to eliminate greenhouse gas emissions from all economic activities across the world are essential. Major emphasis has been on the energy sector, which contributes the bulk of GHG emissions. Inevitably, energy scenarios describing future transition pathways towards low, and zero emissions energy systems are commonly proposed as mitigation strategies. However, there is growing awareness in the research community that energy transitions should be understood and analysed not only from technical and economical perspectives but also from a social perspective. This research explores the broader ramifications of a global energy transition from various dimensions: costs and externalities of energy production, democratisation of future energy systems and the role of prosumers, employment creation during energy transitions at the global, regional and national levels and the effects of air pollution during energy transitions across the world.
This research builds on fundamental techno-economic principles of energy systems and relies firmly on a cost driven rationale for determining cost optimal energy system transition pathways. Techno-economic analyses of energy transitions around the world are executed with the LUT Energy System Transition Model, while the corresponding socioeconomic aspects are expressed in terms of levelised cost of electricity, cost effective development of prosumers, job creation, and the reduction of greenhouse gas emissions along with air pollution.
Findings during the course of this original research involved novel assessments of the levelised cost of electricity encompassing externalities across G20 countries, cost optimal prosumer modelling across the world, estimates of job creation potential of various renewables, storage and power-to-X technologies including the production of green hydrogen and e-fuels during global, regional and national energy transitions. The novel research methods and insights are published in several articles and presented in this thesis, which highlight robust socioeconomic benefits of transitioning the current fossil fuels dominated global energy system towards renewables complemented by storage and flexible power-to-X solutions, resulting in near zero emissions of greenhouse gases and air pollutants. These research findings and insights have significant relevance to stakeholders across the energy landscape and present a compelling case for the rapid transformation of energy systems across the world. However, the research does have limitations and is based on energy transition pathways that are inherent with uncertainties and some socioeconomic challenges. Nonetheless, actions to enhance and accelerate the ongoing energy transition across the world must be prioritised, if not for technical feasibility or economic viability, but for the social wellbeing of human society and future generations.
In this study, we analyze the economic consequences of nuclear power plant outages in a regulated market when information on production costs and pricing rules is hidden through regulations. By using a latent factor model with a market-specific structure, we uncover the hidden supply-side factors and estimate the prospective changes in electricity prices, welfare redistribution, and the increase in carbon emissions through the nuclear plant outage scenario analysis. By analyzing time series data from 2004 to 2018 in South Korea, we find that the one reactor outage at more than the average outage level would result in a reduction of US 33.8 million, in the first 12 months.
Lead time—the duration of construction and commissioning—is an important determinant of the capital cost of nuclear power plants (NPPs). For an industry dominated by a handful of multinational firms, the degree of cross-national variation is surprising. NPP lead times have historically trended upward over time in Western nations, and yet they are comparatively quick and stable in East Asia. I theorize that the institutional capacity and autonomy of subnational governments can partially explain these patterns in the data. Having assembled a novel data set on the design specifications of the global population of NPPs, I empirically document a positive association between political decentralization and NPP lead time that is not explained by observed cross-country differences in NPP design. The results are suggestive of the hypothesis that political decentralization creates conditions that slow NPP construction for nontechnical reasons. However, the findings are not robust to certain robustness checks and fail to rule out the possibility that unobserved differences in design explain this association.
This article describes an optimization-based procedure that identifies the maximum power flow that each branch in an electrical network could be exposed to. The procedure uses a linear optimal power flow formulation that determines the flow-maximizing generator dispatch and loading conditions for each branch in turn. This theoretical upper bound on the power flow that a branch could be exposed to is termed its
loadability
. This article proposes this loadability as a descriptive structural metric that helps reveal the fundamental origin of congestion in power system. For instance, it is insightful to compare a branch’s loadability with its as-built thermal capacity, to identify those branches that are most congestion-prone, or alternatively, those lines that can never exploit their full available capacity. In the six test systems studied, it is found that there is wide variation in the loadability of the various branches, where some would be loaded well beyond their thermal limits by particular generating schedules, whereas other branches can never operate beyond even a fraction of their thermal capabilities. Low branch reactance is found to be a key driver of high loadability in power systems, and this suggests new approaches to alleviating transmission system congestion.
For decades, reputation of the construction industry has been tainted by poor cost performance caused by project cost overrun. In addition, studies by scholars worldwide have also found cost overrun to be more serious in developing countries compared to the developed countries. Despite the numerous researches addressing the issue of cost overrun in the construction industry through the years, the issue remains. Acknowledging that maintaining good cost performance is a key factor of project success and that the issue has persisted for decades, this study aims to explore the distinction of cost overrun studies that has been conducted between developed nations and developing nations. In achieving this aim, a systematic literature review is performed by following the integrative steps of PSALSAR (Protocol, Search, Appraisal, Synthesis, Analysis and Report) and PRISMA (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) for screening and selecting the retrieved studies. The synthesis and screening of literatures have yielded with 152 articles which are then classified into their countries, developed countries (44) and developing countries (108). The results indicated a significant difference in the domain of research on cost overrun between the 2 nations. Despite the numerous studies on cost overrun in the developing nations compared to developed nations, the majority of the studies are not directed to any specific type construction while developed nations have moved forward to focus on more specific projects. The project with the highest attention in the developed nations is transport infrastructure construction projects, particularly rail infrastructure projects. The findings of this study have shown that there have been broad studies conducted on cost overrun in both developing nations and developed nations. However, there is a slight lacking in comprehensiveness of cost overrun studies in the developing nations, perhaps future studies on cost overrun in developing nations can be directed to more specific areas of construction projects such as those that have been performed by researchers of the developed nations.
Electricity infrastructure confronts societies with immense costs as it must ensure the generation of power and its transmission to locations with consumption requirements. We minimize these costs by formulating an electricity generation and transmission problem that facilitates the design of electricity infrastructure on a macro level. Our problem specifies the capacity, type, and location of power plants and, at the same time, determines the appropriate arrangement of high-voltage transmission lines in order to fulfill the demand of individual cities. We specifically incorporate the non-linear nature of cost functions for power generation that are common in practice. This results in a mixed integer non-linear problem, for which the branch-and-reduce solver from GAMS exceeds runtime constraints, even for small instances with 25 locations. As a remedy, we develop heuristics based on the reduced variable neighborhood search and the greedy randomized adaptive search procedure (GRASP). Their performance enables us to address large-scale problems that arise in real-world applications. We demonstrate this with an actual, nationwide example that spans all 4537 municipalities in Germany.
The issuance of a Federal Energy Regulatory Commission (FERC) license is an important milestone in the development process of new U.S. hydropower projects. The complexity and uncertain timeline of the licensing process have been often cited as a key deterrent to new hydropower installations in the United States. However, very little attention has been paid to post-licensing timelines and attrition rates. This article explores the challenges faced by developers in bringing their FERC-licensed hydropower projects to the construction stage. Post-licensing activities to be completed before starting construction include obtaining additional permitting from other federal or state agencies, completing the technical design, securing financing, and in most cases, negotiating a power purchase agreement. For the set of projects that obtained a FERC license between 2007 and 2018, we assembled a dataset—combining information from FERC dockets and responses from a questionnaire to developers—to calculate attrition rates and development timelines and to examine the reasons for delays and cancellations.
Preventing cost overruns of such infrastructure projects as power plants is a global project management problem. The existing risk assessment methods/models have limitations to address the complicated nature of these projects, incorporate the probabilistic causal relationships of the risks and probabilistic data for risk assessment, by taking into account the domain experts’ judgments, subjectivity, and uncertainty involved in their judgments in the decision making process. A knowledge-based expert system is presented to address this issue, using a fuzzy canonical model (FCM) that integrates the fuzzy group decision-making approach (FGDMA) and the Canonical model ( i.e. a modified Bayesian belief network model) . The FCM overcomes: (a) the subjectivity and uncertainty involved in domain experts’ judgment, (b) significantly reduces the time and effort needed for the domain experts in eliciting conditional probabilities of the risks involved in complex risk networks, and (c) reduces the model development tasks, which also reduces the computational load on the model. This approach advances the applications of fuzzy-Bayesian models for cost overrun risks assessment in a complex and uncertain project environment by addressing the major constraints associated with such models. A case study demonstrates and tests the application of the model for cost overrun risk assessment in the construction and commissioning phase of a power plant project, confirming its ability to pinpoint the most critical risks involved in this case, the complexity of the lifting and rigging heavy equipment, inadequate work inspection and testing plan, inadequate site/soil investigation, unavailability of the resources in the local market, and the contractor’s poor planning and scheduling.
Cost overrun risk assessment in the preliminary stages of a power plant project is laden with subjectivity, uncertainty, imprecision, and the vagueness of expert judgment. Current fuzzy approaches to risk assessment in such projects specifically require improvements in the reliability and aggregation process of experts' judgments as well as the incorporation of project phase-based risk assessment to comprehend the sources of the risks and their corresponding effects on cost overruns. In response, this study proposes a modified fuzzy group decision-making approach (FGDMA) and assesses cost overrun risks considering different project phases [(1) design and procurement, and (2) construction and commissioning] of the power plant projects of varying types, sizes/capacities, and contracts. The proposed methodology is applied to 10 different project scenarios to better understand the context of project risks and their profile and identify the critical cost overrun risks involved. This study will aid the comprehensive assessment of risks and increase the accuracy of project budgeting and contingency allocation decisions.
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Energy Policy, 69 + (2014) 43-56. doi:10.1016/j.enpol.2013.10.069
A major source of risk in project management is inaccurate forecasts of project costs, demand, and other impacts. The paper presents a promising new approach to mitigating such risk, based on theories of decision making under uncertainty which won the 2002 Nobel prize in economics. First, the paper documents inaccuracy and risk in project management. Second, it explains inaccuracy in terms of optimism bias and strategic misrepresentation. Third, the theoretical basis is presented for a promising new method called "reference class forecasting," which achieves accuracy by basing forecasts on actual performance in a reference class of comparable projects and thereby bypassing both optimism bias and strategic misrepresentation. Fourth, the paper presents the first instance of practical reference class forecasting, which concerns cost forecasts for large transportation infrastructure projects. Finally, potentials for and barriers to reference class forecasting are assessed.
Results from the first statistically significant study of the causes of cost escalation in transport infrastructure projects are presented. The study is based on a sample of 258 rail, bridge, tunnel and road projects worth US$90 billion. The focus is on the dependence of cost escalation on (1) length of project implementation phase, (2) size of project and (3) type of project ownership. First, it is found with very high statistical significance that cost escalation is strongly dependent on length of implementation phase. The policy implications are clear: Decision makers and planners should be highly concerned about delays and long implementation phases because they translate into risks of substantial cost escalations. Second, it is found that projects have grown larger over time and that for bridges and tunnels larger projects have larger percentage cost escalations. Finally, by comparing cost escalation for three types of project ownership--private, state-owned enterprise and other public ownership--it is shown that the oft-seen claim that public ownership is problematic and private ownership effective in curbing cost escalation is an oversimplification. The type of accountability appears to matter more to cost escalation than type of ownership.
This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects. Based on a sample of 258 transportation infrastructure projects worth $90 billion (U.S.), it is found with overwhelming statistical significance that the cost estimates used to decide whether important infrastructure should be built are highly and systematically misleading. The result is continuous cost escalation of billions of dollars. The sample used in the study is the largest of its kind, allowing for the first time statistically valid conclusions regarding questions of cost underestimation and escalation for different project types, different geographical regions, and different historical periods. Four kinds of explanation of cost underestimation are examined: technical, economic, psychological, and political. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, i.e., lying. The policy implications are clear: In debates and decision making on whether important transportation infrastructure should be built, those legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust the cost estimates and cost-benefit analyses produced by project promoters and their analysts.
A brisk building boom of hydropower mega-dams is underway from China to Brazil. Whether benefits of new dams will outweigh costs remains unresolved despite contentious debates. We investigate this question with the “outside view” or “reference class forecasting” based on literature on decision-making under uncertainty in psychology. We find overwhelming evidence that budgets are systematically biased below actual costs of large hydropower dams—excluding inflation, substantial debt servicing, en-vironmental, and social costs. Using the largest and most reliable reference data of its kind and multilevel statistical techniques applied to large dams for the first time, we were successful in fitting parsimonious models to pre-dict cost and schedule overruns. The outside view suggests that in most countries large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return unless suita-ble risk management measures outlined in this paper can be affordably pro-vided. Policymakers, particularly in developing countries, are advised to prefer agile energy alternatives that can be built over shorter time horizons to energy megaprojects.
Some argue that almost no projects, including our most treasured ones, would ever be undertaken if some form of deception about costs and benefits weren‘t involved. The Brooklyn Bridge, for instance, had a cost overrun of 100%, the Sydney Opera House of 1,400%. Had the true costs been known, these architectural wonders may not have been built. Deception is necessary for action—and for exquisite design—according to this argument. By systematic comparison of the Guggenheim Bilbao Museum and the Sydney Opera House, and by examples from dozens of other projects, the article demonstrates how seductive, yet precarious, the argument is.
A major source of risk in project management is inaccurate forecasts of project costs, demand, and other impacts. The paper presents a promising new approach to mitigating such risk, based on theories of decision making under uncertainty which won the 2002 Nobel prize in economics. First, the paper documents inaccuracy and risk in project management. Second, it explains inaccuracy in terms of optimism bias and strategic misrepresentation. Third, the theoretical basis is presented for a promising new method called "reference class forecasting," which achieves accuracy by basing forecasts on actual performance in a reference class of comparable projects and thereby bypassing both optimism bias and strategic misrepresentation. Fourth, the paper presents the first instance of practical reference class forecasting, which concerns cost forecasts for large transportation infrastructure projects. Finally, potentials for and barriers to reference class forecasting are assessed.
This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects. Based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods, it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts.
Results from the first statistically significant study of the causes of cost escalation in transport infrastructure projects are presented. The study is based on a sample of 258 rail, bridge, tunnel and road projects worth US$90 billion. The focus is on the dependence of cost escalation on: (1) the length of the project‐implementation phase, (2) the size of the project and (3) the type of project ownership. First, it was found, with very high statistical significance, that cost escalation was strongly dependent on the length of the implementation phase. The policy implications are clear: decision‐makers and planners should be highly concerned about delays and long implementation phases because they translate into risks of substantial cost escalations. Second, projects have grown larger over time, and for bridges and tunnels larger projects have larger percentage cost escalations. Finally, by comparing the cost escalation for three types of project ownership - private, state‐owned enterprise and other public ownership - it was shown that the oft‐seen claim that public ownership is problematic and private ownership effective in curbing cost escalation is an oversimplification. The type of accountability appears to matter more to cost escalation than type of ownership.
Humanity already possesses the fundamental scientific, technical, and industrial know-how to solve the carbon and climate
problem for the next half-century. A portfolio of technologies now exists to meet the world's energy needs over the next 50
years and limit atmospheric CO2 to a trajectory that avoids a doubling of the preindustrial concentration. Every element in this portfolio has passed beyond
the laboratory bench and demonstration project; many are already implemented somewhere at full industrial scale. Although
no element is a credible candidate for doing the entire job (or even half the job) by itself, the portfolio as a whole is
large enough that not every element has to be used.
Based on extensive original research, this book explores the technical, social, political, and economic dimensions of four Asian energy megaprojects: a regional natural gas pipeline network in Southeast Asia, a series of hydroelectric dams on the island of Borneo, an oil pipeline linking Europe with the Caspian Sea, and a very large solar energy array in the Gobi desert. © Benjamin K. Sovacool and Christopher J. Cooper 2013. All rights reserved.
Large sunk costs and incomplete regulatory contracts in public utilities create the Possibility of opportunistic behavior by either regulators or regulated firms. We present an empirical methodology for identifying opportunism within a regulated setting, and apply it to the large-scale cost disallowances levied by state regulators on electric utilities during the 1980s. Examining the investment propensity of all firms-both those that faced cost disallowances and those that did not-within particular regulatory jurisdictions, we find little evidence that cost disallowances were opportunistic. Instead, regulators appear to have been largely driven by the desire to punish specific poorly managed utilities.
How it happened that technological prowess and national glory (or “radiance,” which also means “radiation” in French) became synonymous in France as nowhere else.
In the aftermath of World War II, as France sought a distinctive role for itself in the modern, postcolonial world, the nation and its leaders enthusiastically embraced large technological projects in general and nuclear power in particular. The Radiance of France asks how it happened that technological prowess and national glory (or “radiance,” which also means “radiation” in French) became synonymous in France as nowhere else.
To answer this question, Gabrielle Hecht has forged an innovative combination of technology studies and cultural and political history in a book that, as Michel Callon writes in the new foreword to this edition, “not only sheds new light on the role of technology in the construction of national identities” but is also “a seminal contribution to the history of contemporary France.” Proposing the concept of technopolitical regime as a way to analyze the social, political, cultural, and technological dynamics among engineering elites, unionized workers, and rural communities, Hecht shows how the history of France's first generation of nuclear reactors is also a history of the multiple meanings of nationalism, from the postwar period (and France's desire for post-Vichy redemption) to 1969 and the adoption of a “Frenchified” American design.
This paperback edition of Hecht's groundbreaking book includes both Callon's foreword and an afterword by the author in which she brings the story up to date, and reflects on such recent developments as the 2007 French presidential election, the promotion of nuclear power as the solution to climate change, and France's aggressive exporting of nuclear technology.
Several U.S. utilities are now advancing proposals for a new generation of nuclear power plants. Though massive cost overruns and construction delays in the 1970's and 1980's caused U.S. utilities to cancel over 130 nuclear plant orders 1 , the nuclear industry is now hoping to ride a wave of concern over global warming. Can new nuclear power help the U.S. electric power industry cut greenhouse gas emissions, at a reasonable cost? EXECUTIVE SUMMARY It has been an entire generation since nuclear power was seriously considered as an energy option in the U.S. It seems to have been forgotten that the reason U.S. utilities stopped ordering nuclear power plants was their conclusion that nuclear power's business risks and costs proved excessive. With global warming concerns now taking traditional coal plants off the table, U.S. utilities are risk averse to rely solely on natural gas for new generation. Many U.S. utilities are diversifying through a combination of aggressive load reduction incentives to customers, better grid management, and a mixture of renewable energy sources supplying zero-fuel-cost kWh's, backed by the KW capacity of natural gas turbines where needed. Some U.S. utilities, primarily in the South, often have less aggressive load reduction programs, and view their region as deficient in renewable energy resources. These utilities are now exploring new nuclear power. Estimates for new nuclear power place these facilities among the costliest private projects ever undertaken. Utilities promoting new nuclear power assert it is their least costly option. However, independent studies have concluded new nuclear power is not economically competitive.
This paper examines the reliability of estimates for construction costs and schedules of power generation projects in developing countries, and indicates how the results can be used to improve the selection and implementation of these projects. This is important for these countries, in terms of both the economic justification and the financing of these projects, as they need massive investments in power generating capacity. Based on regression analysis, the paper identifies factors that are significantly associated with bias and uncertainty in estimates of construction costs and schedules for a group of power generation projects approved for financing by the World Bank between 1965 and 1986, and completed by 1994. The paper concludes that estimated values were significantly biased below actual values and that the large variance in the accuracy of estimated values limits the benefit of making a simple adjustment factor to estimates. The paper finally shows how regression models based on the significant factors can be used to derive unbiased expected values that carry much greater reliability than the corresponding estimated values.
On a $/kW basis, wind turbine prices in the U.S. have declined by nearly one-third on average since 2008, after having previously doubled over the period from 2002 through 2008. These two substantial and opposing trends over the past decade – and particularly the earlier price doubling – run counter to the smooth, gradually declining cost trajectories predicted by standard learning curve theory. Taking a bottom-up approach, we examine seven possible drivers of wind turbine prices in the U.S., with the goal of estimating the degree to which each contributed to the doubling in turbine prices from 2002 through 2008, as well as the subsequent decline in prices through 2010. In aggregate, these seven drivers – which include changes in labor costs, warranty provisions, manufacturer profitability, turbine scaling, raw materials prices, energy prices, and foreign exchange rates – explain from 70% to 90% (depending on the year) of empirically observed wind turbine price movements in the U.S. through 2010. Turbine scaling is found to have been the largest single contributor to the price doubling through 2008, although the incremental cost of scaling has been justified by greater energy capture, resulting in a lower cost of wind generation.
This paper presents a study performed by the European Clearinghouse on Operational Experience for NPPs and covering events related to construction, commissioning and manufacturing of nuclear power plants (i.e. events prior to the start of commercial operation). The events considered are both issues detected during the pre-operational stages, and events detected during further operation of the plant.This study summarises the analysis of 582 construction, commissioning and manufacturing related events reported to different databases. To help identify generic lessons learned, the events were classified into three main categories: construction, manufacturing and commissioning, and secondly, into sub-categories related to components: civil engineering, electrical components and Instrumentation & Control,…This paper presents the concrete lessons learned for the different components.Highlights► Three different event databases were screened. ► 582 events were found to be relevant for this study. ► The most concerned groups of components are electrical components, I&C and welds.
This article evaluates whether the world can transition to a future global electricity system powered entirely by nuclear power plants, wind turbines, solar panels, geothermal facilities, hydroelectric stations, and biomass generators by 2030. It begins by explaining the scenario method employed for predicting future electricity generation, drawn mostly from tools used by the International Energy Agency. The article projects that the world would need to build about 7744 Gigawatts (GW) of installed electricity capacity by 2030 to provide 37.2 thousand terawatt-hours (TWh). Synthesizing data from the primary literature, the article argues that meeting such a projection with nuclear and renewable power stations will be difficult. If constructed using commercially available and state-of-the-art nuclear and renewable power stations today, the capital cost would exceed 1 trillion per year, and immense strain would be placed on land, water, material, and human resources. Even if nuclear and renewable power technologies were much improved, trillions of dollars of investment would still be needed, millions of hectares of land set aside, quadrillions of gallons of water used, and material supplies of aluminum, concrete, silicon, and steel heavily utilized or exhausted. Because of these constraints, the only true path towards a more sustainable electricity system appears to be reducing demand for electricity and consuming less of it. Copyright © 2009 John Wiley & Sons, Ltd.
The paper reviews the history and the economics of the French PWR program, which is arguably the most successful nuclear-scale up experience in an industrialized country. Key to this success was a unique institutional framework that allowed for centralized decision making, a high degree of standardization, and regulatory stability, epitomized by comparatively short reactor construction times.Drawing on largely unknown public records, the paper reveals for the first time both absolute as well as yearly and specific reactor costs and their evolution over time. Its most significant finding is that even this most successful nuclear scale-up was characterized by a substantial escalation of real-term construction costs. Conversely, operating costs have remained remarkably flat, despite lowered load factors resulting from the need for load modulation in a system where base-load nuclear power plants supply three quarters of electricity.The French nuclear case illustrates the perils of the assumption of robust learning effects resulting in lowered costs over time in the scale-up of large-scale, complex new energy supply technologies. The uncertainties in anticipated learning effects of new technologies might be much larger that often assumed, including also cases of “negative learning” in which specific costs increase rather than decrease with accumulated experience.
This paper examines the reliability of estimates for construction costs and schedules of power generation projects in developing countries, and indicates how the results can be used to improve the selection and implementation of these projects. This is important for these countries, in terms of both the economic justification and the financing of these projects, as they need massive investments in power generating capacity. Based on regression analysis, the paper identifies factors that are significantly associated with bias and uncertainty in estimates of construction costs and schedules for a group of power generation projects approved for financing by the World Bank between 1965 and 1986, and completed by 1994. The paper concludes that estimated values were significantly biased below actual values and that the large variance in the accuracy of estimated values limits the benefit of making a simple adjustment factor to estimates. The paper finally shows how regression models based on the significant factors can be used to derive unbiased expected values that carry much greater reliability than the corresponding estimated values.
We present a reactor-by-reactor analysis of historical busbar costs for 99 nuclear reactors in the United States, and compare those costs with recent projections for next-generation US reactors. We argue that cost projections far different from median historical costs require more justification than estimates that lie close to those medians. Our analysis suggests that some recent projections of capital costs, construction duration, and total operations and maintenance costs are quite low—far enough from the historical medians that additional scrutiny may be required to justify using such estimates in current policy discussions and planning.
The amount of wind power capacity being installed globally is surging, with the United States the world leader in terms of annual market share for three years running (2005–2007). The rapidly growing market for wind has been a double-edged sword, however, as the resulting supply-demand imbalance in wind turbines, along with the rising cost of materials and weakness in the US dollar, has put upward pressure on wind turbine costs, and ultimately, wind power prices. Two mitigating factors–reductions in the cost of equity provided to wind projects and improvements in project-level capacity factors–have helped to relieve some of the upward pressure on wind power prices over the last few years. Because neither of these two factors can be relied upon to further cushion the blow going forward, policymakers should recognize that continued financial support may be necessary to sustain the wind sector at its current pace of development, at least in the near term. Though this article emphasizes developments in the US market for wind power, those trends are similar to, and hold implications for, the worldwide wind power market.
Experimental psychologists and decision theorists suggest that managers are overly reluctant to terminate economically unviable projects and that they fail to ignore sunk costs. This study serves two purposes. First, it shows that the framework of prospect theory allows us to reconcile the sunk cost effect with some older, well-established ideas in investment decision-making. Secondly, the study investigates the external validity of the sunk cost research in the context of the U.S. nuclear power program. The empirical analysis is based on share price movements in reaction to, among other events, all plant completions and cancellations (over $50 million) prior to March 1984. The results are mixed. However, prudency reviews ordered by Public Service Commissions around the nation point to evidence consistent with the sunk cost fallacy.
Large sunk costs and incomplete regulatory contracts in public utilities create the possibility of opportunistic behavior by either regulators or regulated firms. We present an empirical methodology for identifying opportunism within a regulated setting, and apply it to the large-scale cost disallowances levied by state regulators on electric utilities during the 1980s. Examining the investment propensity of all firms---both those that faced cost disallowances and those that did not---within particular regulatory jurisdictions, we find little evidence that cost disallowances were opportunistic. Instead, regulators appear to have been largely driven by the desire to punish specific poorly managed utilities. Ordering information: This article can be ordered from https://pubs3.rand.org/cgi-bin/rje/pdf.cgi .
Studies of the cost of construction of nuclear power plants rely upon a measure of cost, called "overnight cost," that contradicts accepted capital theory. The studies report evidence that construction cost per megawatt of capacity decreases as plant scale increases. We employ a more correct measure of cost and compare the results of this measure versus overnight cost for Japanese nuclear power plants. Using overnight cost, the results give "evidence" of economies of scale in Japanese power plants, but when the correct measure of cost is substituted, the scale variable is not statistically significant.
The combination of substantial public funding of nascent energy technologies and recent increases in the costs of those that have been most heavily supported has raised questions about whether policy makers should sustain, alter, enhance, or terminate such programs. This paper uses experience curves for photovoltaics (PV) and wind to (1) estimate ranges of costs for these public programs and (2) introduce new ways of evaluating recent cost dynamics. For both technology cases, the estimated costs of the subsidies required to reach targets are sensitive to the choice of time period on which cost projections are based. The variation in the discounted social cost of subsidies exceeds an order of magnitude. Vigilance is required to avoid the very expensive outcomes contained within these distributions of social costs. Two measures of the significance of recent deviations are introduced. Both indicate that wind costs are within the expected range of prior forecasts but that PV costs are not. The magnitude of the public funds involved in these programs heightens the need for better analytical tools with which to monitor and evaluate cost dynamics.
In response to energy security and environmental concerns, the U.S. is collaborating with nine other countries to develop fourth-generation reactor technology that the industry intended to be safer than current reactors, available at lower total cost, and incurring financial risks no greater than those for other energy technologies. From a three-decade historical database of delivered costs from each of 99 individual U.S. nuclear reactors, we discuss the financial risks for new nuclear power to achieve its cost objectives. We argue that past technology development patterns indicate the importance of including high-cost surprises in the planning process.
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
An Assessment of the Costs of the French Nuclear PWR Program, 1970-2000. International Institute for Applied Systems Analysis
- A Grubler
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