@RISK Creates an 80% Cost-Savings for Nuclear Power Company

@RISK Creates an 80% Cost-Savings for Nuclear Power Company Building a new power plant in the U.S. is not for the risk-averse. The average cost of building one of these plants is historically 300% of the planned cost at the start of construction. Because of these prohibitive cost risks, as well as unfavorable public sentiment in reaction to the Three-Mile Island accident in 1979, U.S. nuclear power plant construction had ground to a halt for decades.

Almost 30 years later, the first contracts for new plants were signed by a major U.S. nuclear power company in 2008. The total expected project cost for the three projects was over $30 billion. Hoping to avoid the abysmal track record of cost overruns in the industry, the nuclear power company wanted to use a new and improved risk-management approach to the planning process—so they hired Dr. Sola Talabi, Risk Management Professor at Carnegie Mellon University and Risk Management Consultant for Pittsburgh Technical, to serve as Nuclear Power Plant Risk Manager. “They knew what the history had been with these projects, and they didn’t want it to happen again,” says Dr. Talabi.

In previous power plant construction projects, risk management was only an objective of project managers. This time, risk management was both an objective and a function; the company created a dedicated risk organization whose only role was to manage risk. Furthermore, the company switched from deterministic risk planning methods, to probabilistic methods—using @RISK. Armed with the software, Dr. Talabi and his risk management team were able to characterize the uncertainty associated with cost items and perform quantitative risk analysis using Monte Carlo simulation. They were also able perform a sensitivity analysis to identify key cost drivers, such as the fact that supply chain issues was the greatest risk driver of all.

Thanks to this analytical, @RISK-driven approach, Dr. Talabi and the risk organization were able to dramatically impact these nuclear power plant projects, reducing cost overruns by roughly 80% relative to the historical trend. “While we still have cost overruns, it’s nothing like what we had before,” says Dr. Talabi. “I think it’s very important for decision-makers to realize that the rampant cost overruns of the past can be much better managed using tools like @RISK.”

» Read the complete case study here.


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