COVER STORY | STAGE GATE SUCCESS project success A gateway to


Like many energy infrastructure developments nuclear projects are often over-budget and long-delayed. Given the existing project development and delivery model clearly isn’t addressing this challenge,


NEI talks to Edward Stone about a new approach to nuclear new build


ENERGY INFRASTRUCTURE PROJECTS IN GENERAL and nuclear plant developments in particular are often characterised by being over budget and overdue. It’s an issue that threatens not just the bankability of nuclear power projects but also one of the key objectives of the nuclear build out programme - addressing climate change in a timely and economical way. One of the central issues, Edward Stone, a partner In


the Energy and Major capital projects practices at Bain and Company tells NEI, is the current model that is used to manage large energy infrastructure projects. The so-called stage-gate framework is usually modelled


around five central stages and initially emerged from chemicals industry developments of the 1940s, but really took flight in the 1960s as oil & gas majors rolled it out through a wave of CAPEX build. Realising that large infrastructure projects necessarily had to be broken up into more manageable chunks and in order to manage the developers return on capital, a five ‘gate’ framework emerged. Typically, gate one is simply project selection, a gigawatt-scale nuclear project in a certain location. The second gate follows with high-level design, a 1 GW EPR with a high level layout. Gate three is typically the


final investment decision at which point all the design work should be complete, immediate and long lead item contracts are in place and ready to advance, the schedule is set out, the permitting and consents process is complete, the funding is in place and the project is ready to move into the construction phase. By gate three and the start of construction, perhaps 5 or 10% of the total project investment has been expended but that is the critical point at which a decision is made on committing, in the case of a large nuclear power plant project, perhaps $30bn. Gate four is the start of commissioning, while the fifth gate comes at the end of commissioning when the project is handed over to the owner and their operations team. It’s a model that has been relatively successful but can create projects that break budgets, and can sometimes over run by a decade or more. Stone explains: “The stage process is absolutely


necessary, but no longer sufficient to be assured of on time, on budget delivery, and hence returns maximisation. There are a number of factors driving this – the move from single projects to programmes of work; changing dynamics between owners and the supply chain; the advent of new energy technologies; the advent of Agile approaches and new technologies, to name just a few. Collectively, these are leading companies to redesign and supplement their stage gate process in three ways”. Noting that the cost overruns and the delays that have happened historically will be dramatically exacerbated by the scale of the energy transition, Stone suggests that developers now need to consider the full portfolio of all their projects and go far beyond just those five gates to deliver projects on time and on budget. He identifies three central strategies that can support timely and within budget nuclear developments.


Above: Hinkley Point C in the UK is the beginnings of a programme series of EPR projects Source: EDF


16 | July 2024 | www.neimagazine.com


A collaborative approach For nuclear, the traditional EPC model for energy infrastructure development has never been entirely suitable. Governments need gigawatt-scale projects to be delivered on time in order to meet net zero commitments, they also want it delivered on budget if possible. However, many of the prime contractors and all of their associated subcontractors don’t have the balance sheet to be able to absorb all the project risk. Stone contends that radical change is needed. “That simple, just hand over the project to the prime contractor model, needs to shift. You can’t just hand off all the risk to the EPC to deliver it on time or budget,” he says.


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