With the increased demand for energy worldwide, capital energy investments are on the rise, along with mounting delivery challenges that many companies are facing.
Accenture Research addressed this topic with its recent report on effective delivery of capital projects. According to “Developing Strategies for the Effective Delivery of Capital Projects,” energy demand will continue to rise through 2035, while new-generation capacity investments are “forecast at nearly $10 trillion.”
China, the report notes, will account for the largest share at $2 trillion, while countries throughout Asia, Europe and North America are expected to spend about $1.7 to $1.8 trillion in the new-power generation arena.
The report findings show that rising investments are due to two key components: the need to maintain security of supply and the need to meet environmental targets
The report attributes the high demand and increasing investments in many areas, such as China and India, to rapidly growing economies and increased urbanization. However, in Europe and North America, the data shows older plants, which may be in need of replacement or upgrades, drive investments.
The report also notes that the need to offset pollution has led to increased investments in renewable sources, such as wind and solar power, which “account for 60% of the investments in new generating capacity in forecasts to 2035.” Investments in natural-gas fired plants, the report says, have also increased over the years “largely driven by the low cost of natural gas.”
The report finds that as these growing numbers of capital projects present increased challenges, additional challenges begin to arise. The data show that a delay in effectively delivering these projects has become one of the most daunting issues.
“Barriers include access to financing, regulatory uncertainty in many countries, lack of sufficient price signals and public opposition,” the report said. “Complex supply chains have not been well utilized for decades. In addition, many utility companies in Europe and North America have limited recent experience delivering major capital projects, such as building nuclear plants and major transmission networks.”Accenture researched the energy utilities sector between November 2011 and February 2012 and found that while 84% of those interviewed felt effective project delivery was “critical” to success, only 39% were meeting their own targets.
Through surveyed responses, Accenture found that three recommended initiatives could significantly improve returns on capital projects. The first would require companies to must remain focused on the task and plan accordingly to stave off investment uncertainties. That includes assessing assess risk management and project delays, as well as improving collaborations with suppliers and improving the use of analytical data.
Accenture’s second recommendation centers on the recruitment of high performing, talented individuals to aid in the success of effective project delivery. “Developing a talent is essential, and there are multiple elements to consider, including leadership, talent and culture, and organizational structure,” the report said.
Lastly, the report recommends that adequate attention be paid to a project’s construction to production period. The findings show that the leading performers surveyed “surpassed average performers by nearly 40% when it comes to effectively managing the capital projects to operating assets.”
The Accenture report finds that working closely with operations, improving configuration management and integrating IT as a means of delivery would aid in the successful delivery of future projects.
According to the report, these three implementations, along with constant improvements and innovations within the project, can lead to high performing projects.
“A holistic, end-to-end approach is warranted to streamline the transition from construction to production,” the report concluded. “Continuous innovation throughout the project life cycle will be critical to deliver improved returns from large capital projects.”