Understand the Specifics of Large Renewable Energy Projects

Large renewable projects and in particular, offshore wind and hydropower projects are becoming more prevalent. They have some specifics that owners and contractors should be aware of. These specifics are due to the specific type of energy source (low density, wide area), and also on the financing requirements as many of those projects are financed using institutional or non-recourse financing. In our new White Paper [2022-04] ‘Specifics of Large Renewable Energy Projects’ we detail some key specifics of those projects.

As large renewable projects become more widespread, it is useful to remember that such projects have some important specific aspects. A lot derive from the fact that such projects are very capital intensive, in terms of share of Capex in the overall economics. Also, due to the low density of the energy source, they tend to spread over a much wider acreage. The current scale of such projects and their sheer number creates bottlenecks in the supply-chain that need to be considered early. Also, series effect, while creating potentially significant savings, can also be a major risk if not properly addressed. Finally, financing arrangements have also to be considered carefully to keep a proper decision-making and governance framework.

All of these aspects need to be understood and require prudence for owners that are involved in other energy sources and would like to develop large renewables projects. Contractors must also understand those factors to keep their risk profile under control.

Read our new White Paper [2022-04] ‘Specifics of Large Renewable Energy Projects’ for those specificities of large renewable energy projects that need to be fully understood before addressing this type of projects.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2023-04_renewables_projects_specifics_v1.pdf

How to Avoid Underestimating Cost Expectations during Project Definition Phase for Owners

Many owners fail to properly understand the concept of estimating uncertainty. Particularly during project definition phase, inadequate grasp of estimating uncertainty can lead to inadequate expectations of senior management regarding cost at termination, and as a consequence, insufficient funding for the project. In our new White Paper [2022-03] ‘How to Avoid Underestimating Cost Expectations during Project Definition Phase for Owners’ we investigate the issue of accounting for, and presenting, estimating uncertainty. We too often have to remind senior management to add uncertainty on top of Capex estimate when reaching Final Investment Decision!

A proper understanding of the concept of estimating uncertainties is required for owner senior management, so as to fully appreciate the estimating values provided and take decisions in full awareness of the implications. In particular, funding requirements and business planning must fully account for this concept to be realistic. Senior management expectation management is often an essential project success factor, and it is important to provide the fullest and correctly represented information. When presented to senior management, a base estimate must always be qualified and used carefully, including making its uncertainties visible. The number used as an anchor as the value of the project for the organisation must always be considering proper qualifications. This is an essential educational role of the project manager and the lead estimator.

At PVD we have encountered a situation many times, where management held in mind the base estimate value at the end of Preliminary Feasibility as a reference for decision-making. In that case, even if the project is successfully completed, questions will be asked about a visible 20 to 25% increase in actual cost at completion relative to the baseline budget something which will almost inevitably occur as the result of estimating uncertainty at the decision-making time. The reason for this increase may not be poor project management, but rather inadequate management of senior management expectations. Nevertheless, this situation can create significant issues in the middle of project execution if senior management questions actual project performance compared to its expectations.

Read our new White Paper [2022-03] ‘How to Avoid Underestimating Cost Expectations during Project Definition Phase for Owners’ to better understand how to account for estimating uncertainties when presenting early stage estimates to project sponsors and project management.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2023-03_capex_estimating_expectations_v1.pdf

Why Industrial Project Definition Needs to be Split in Stages

Splitting project definition in several stages is a common approach for industrial project owners. There are generally as a minimum 3 main stages: concept, preliminary feasibility and detailed feasibility (also called bankability). Why is the project definition phase thus split in stages and what are the rationale and benefits of such a practice? How can agile project management suggest improvements to the current practice? Our new White Paper [2023-02] ‘Why Industrial Project Definition Needs to be Split in Stages’ discusses the philosophy of splitting the project definition phase in stages.

Project definition stages can be seen as runs in an agile iterative approach, where the opinion of key clients and stakeholders is obtained at the end of each run to adapt the objectives of the next. It is useful to consider project definition in that manner because it explains much of the actual practices implemented and highlights the need to be strict on the actual duration of each stage and on the clarity of the deliverables that are expected. It also emphasises how stakeholder feedback at the end of each stage will inform the expectations for the next stage of project definition.

From this perspective, agile practice can provide useful experience. For example, agile teaches us specifically that it is essential to be very strict on the timing of each iteration and to let sufficient time to determine the exact objectives of the next run. This is an example of good practices for project definition stages that need to be taken into account in the staged approach.

Read our new White Paper [2023-02] ‘Why Industrial Project Definition Needs to be Split in Stages’ to understand why this approach is essential, how many stages should be considered, and what we can learn from agile practices to enhance this approach.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2023-02_why_stages_project_development_v1.pdf

When is Agile Project Management Suitable for Industrial Projects?

Abundant literature exists that confront agile and waterfall (predictive) approaches to projects. The two approaches to project management are not necessarily exclusive, and a project plan can benefit from both. Like tools, it is important to know when and how they can be used. In our new White Paper [2023-01] ‘When is Agile Project Management Suitable for Industrial Projects?’, we expand on how to use agile or waterfall on large, complex industrial projects.

Because long lead time hardware is involved which often cannot be modified without substantial consequences on the project, industrial projects are mainly executed in waterfall project management mode and will remain so in the future. However, agile project management approaches could be used more frequently and explicitly during the project definition phases, and to tackle certain issues during execution, in particular to respond to unexpected situations. Therefore, lessons learnt and practices from agile project management could still be deployed with substantial value in those areas.

Read our new White Paper [2023-01] ‘When is Agile Project Management Suitable for Industrial Projects?’, to understand better in what circumstances agile project management can be deployed and how.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/2023-01_when_agile_suitable_compared_waterfall_v1.pdf