🇺🇸United States

Chronic Capital Cost Overruns and Delays in Fossil Power Megaprojects

2 verified sources

Definition

Large fossil-fuel power generation projects routinely exceed initial capital budgets and schedules, eroding project IRR and straining utility balance sheets. Industry analyses of energy megaprojects (including fossil generation) show a persistent pattern of multi-year delays and double‑digit percentage cost overruns driven by planning and budgeting weaknesses.

Key Findings

  • Financial Impact: Typical fossil/thermal generation megaprojects experience 20–50% capital cost overruns on projects often exceeding $1–5 billion, implying recurring losses of $200M–$2.5B per project cohort across the sector every few years.
  • Frequency: Recurring on virtually every large capital build or retrofit cycle (multi‑year, overlapping annually at portfolio level)
  • Root Cause: Traditional linear planning models with frozen schedules, siloed contractors, and slow decision making lead to underestimation of execution risk and poor contingency planning; misalignment among owners, EPCs, regulators, and suppliers further drives regulatory setbacks, procurement bottlenecks, and rework, all of which manifest as capital budget blowouts in the planning and budgeting phase.[2]

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Fossil Fuel Electric Power Generation.

Affected Stakeholders

CFO, VP Capital Projects, Generation Asset Manager, Project Controls Manager, Planning & Budgeting Manager, EPC Contractor Project Director

Deep Analysis (Premium)

Financial Impact

$10M–$50M per delayed coal plant in unhedged spot-market power purchases; margin erosion on member rates • $200M–$2.5B per megaproject cohort (20–50% overrun on $1–5B projects) • $200M–$2.5B per megaproject cohort (20–50% overrun on $1–5B projects); Cooperatives operate on thin margins, overruns threaten member-owner returns

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Current Workarounds

Cooperative's finance team manually tracks supplier project status via periodic calls and email; maintains dual power procurement models in legacy spreadsheets • Excel spreadsheets for budget tracking; email chains for change orders; manual cost consolidation across contractors; WhatsApp for urgent cost alerts • Excel-based project cost tracking; manual consolidation of contractor invoices; ad-hoc queries to accounting system; email-based exception reporting; WhatsApp for urgent variances

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Overbuilding Fossil Capacity and Locking In Stranded Capital from Flawed Planning Assumptions

Analyses of U.S. utility planning show that mis‑procurement of fossil resources instead of least‑cost all‑source portfolios can raise consumer costs by hundreds of millions to billions of dollars over a plant’s life; one industry study notes that consumers bear fossil fuel cost risk via fuel riders, creating incentives to low‑ball fuel cost forecasts and approve plants that later prove uneconomic.[7]

Capital Lock-In and Underutilized Fossil Assets from Mis-timed Retrofit and Retirement Planning

Individual retrofit projects often involve capital investments in the hundreds of millions of dollars per plant; if policy or market shifts reduce run hours or force early retirement, a substantial share of this capital becomes stranded or under‑recovered over the remaining asset life.[4]

Planning-Driven Compliance Risk and Financing Barriers for Fossil Capital Projects

Losing concessional or development-bank financing can increase project financing costs by tens of basis points to several percentage points on multi‑hundred‑million‑dollar projects, translating into additional tens of millions of dollars in lifetime interest and carrying costs, along with delay‑driven cost inflation.[5][4]

Excessive Fuel Consumption from Suboptimal Economic Dispatch

$Unknown (2-4% weekly fuel savings potential)

Idle Equipment and Suboptimal Unit Utilization During Dispatch

$Unknown (tied to 2-4% fuel efficiency gain)

Suboptimal Unit Commitment from Deterministic Dispatch Models

$Reduced by stochastic model (exact baseline overrun not quantified)

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