Challenges in Cost Estimation under Uncertainty—A Case Study of the Decommissioning of Barsebäck Nuclear Power Plant

Abstract

Abstract:Cost estimation is an important part of project planning. Over the years different approaches have developed, taking uncertainty into account in the cost estimation processes in order to tackle the dynamic nature of projects. However, when implementing these approaches, some challenges have been revealed. The aim in a cost estimation process is to establish a realistic overview of the total project costs and its uncertainties. Even though tools and methods for taking uncertainty into account are implemented, projects with cost overruns are often seen. In this paper we look into some challenges with the practice in cost estimation processes and identify possible improvements to overcome them. The purpose of this paper is to illustrate better solutions to some of the major weaknesses identified in current cost estimation practice. We use a case study of decommissioning of Barsebäck Nuclear Power Plant to illustrate how to overcome these challenges. First of all, this is an interesting case with challenges related to the project and the cost estimation process, given the complexity in the situation and that very few have experiences related to decommission of nuclear power plants. Second, we applied an approach that is not yet commonly used to develop cost estimates for this kind of projects. The paper concludes that it is possible to improve the results of uncertainty analysis of cost estimates. A well prepared process, with a suitable group of experts that go through a well-structured process, focusing both on risks and opportunities and using a top-down approach can compensate for some of the challenges related to cost estimation under uncertainty.

How Stochastic Cost Estimates Could Be Applied in Relation to Target Value Design

“…These kinds of approaches are commonly used in infrastructure projects in the Nordic countries, especially stochastic cost estimation methods (Lichtenberg 2000;Torp and Klakegg 2016;Klakegg and Lichtenberg 2016). Stochastic methods are used for decades to estimate project cost, mostly in the front-end of projects (Lichtenberg 2000;Klakegg and Lichtenberg 2016;Torp and Klakegg 2016), but also in the design phase and after design to calculate the cost for the chosen design prior to construction. Lichtenberg (2000) introduced the successive principle, saying that when estimating cost for projects, one should use a top-down approach, include everything, focus on uncertainty and use subjective estimation.…”

“…Lichtenberg (2000) introduced the successive principle, saying that when estimating cost for projects, one should use a top-down approach, include everything, focus on uncertainty and use subjective estimation. Torp and Klakegg (2016) show this approach applied for estimating the costs of demolition and decommissioning of a Nuclear Power Plant. Torp and Klakegg (2016) discuss some challenges with the approach, and how to overcome some of the challenges.…”

“…Torp and Klakegg (2016) show this approach applied for estimating the costs of demolition and decommissioning of a Nuclear Power Plant. Torp and Klakegg (2016) discuss some challenges with the approach, and how to overcome some of the challenges. The main challenges seem to be the composition of the estimation team, the level of detail in the estimation model, lack of focus on opportunities, underestimation of uncertainty and underestimation of the Expected cost.…”

Forced nuclear energy reactors shutdown in France: the Energy Transition Act’s mechanisms

“…65 As Olav Torp and Ole Jonny Klakegg highlight, the two reactors shutdown in Barsebäck in the years following the adoption of the act were situated at '30 km from Malmö and only 20 km from Copenhagen, Denmark', cumulating 'more than three million people in two countries [living in their] neighbourhood'. 66 The supreme administrative court validated the mechanism and the justification for the shutdown of the Barsebäck reactors, because of their location. 67 Some French nuclear plants could be shut down on this basis, as many nuclear plants are situated close to important cities and/or borders.…”

Cost Overruns Helping to Define What They Really Mean

“…Globally, NDPs costs estimates lie in the range of hundreds of billions of pounds, reaching £55 billion in France (WNA 2015) and almost £70 billion in the UK (NDA 2016a). Moreover, NDPs estimates are extremely challenging (Torp & Klakegg 2016) and keep increasing. This is partially due to the fact that the number of the completed NDPs is negligible compared to the new build, therefore there is limited data regarding the cost estimation.…”