A wave of new capital projects is about to cross the globe. McKinsey estimates that by 2027, about $130 trillion will flood into public and private sector works as countries mobilize to meet their net zero commitments and renew aging infrastructures.
Many of these will be green tech facilities that have never been built before: large-scale green hydrogen factories, new carbon technologies, energy storage facilities.
To help our clients capture this unique opportunity, we are expanding our Capital Analytics capability, which provides detailed benchmarking and analytics-driven insights to project owners and developers. This week, we are welcoming Strategic Estimating Systems (SES), a Houston-based consultancy and global leader in independent cost estimating for capital projects, to the firm. Their team of estimators and cost engineers will bring deep expertise and the intellectual capital gained from 20 years of experience with more than 200 projects around the world.
Capital Analytics
“Our work across industries and technologies, combined with our computer-aided estimating software, and the accurate, highly efficient work processes we’ve developed have enabled us to best serve our clients through all phases of the project-execution life,” says Mike Monteith, CEO of SES.
When we integrate SES's estimating capabilities and datasets with our own capital projects assets, we will strengthen our offering to help clients scope–more precisely–costs, time, and value opportunities associated with all phases of a project. We will also be able to provide estimates three times faster than traditional approaches. “SES joining our team and strengthening our capital analytics capability with richer benchmark datasets, especially in energy transition projects, and analytics-based cost estimation, comes at a point when there is significant need for new work and tremendous pressure to reduce costs,” observes Ishaan Nangia, a McKinsey senior partner. “The timing couldn't be better.”
McKinsey first partnered with SES two years ago estimating costs for a green hydrogen plant, for which there were no benchmarks. We developed a highly detailed and accurate view. Our collaboration grew as integrated teams worked with some 30+ clients helping to estimate, plan, and develop facilities for battery storage, alternative energies production, plastics recycling, semiconductor, and pharmaceutical facilities.
This experience proved how complementary our organizations are—and that by combining resources and expertise, we could step up the way we serve our clients at this turning point in the global economy.
We can take a piece of paper and a dream and detail it out with enough accuracy to [help it]…move towards the next phase of development.
“What really got us excited was realizing we could create these very detailed estimates from the bottom up and use them to inform models that allowed us to help clients in real time optimize the designs of their facilities…to evaluate scope, equipment selection, and operability tradeoffs,” explains Justin Dahl, a McKinsey partner. “This is especially valuable when you are planning a highly complex energy transition project that's never been built before.”
Driving climate action & growth
For example, the integrated team recently worked with a startup that had developed an alternative battery technology. They estimated—including detailed equipment analysis and alternative 3D layouts—what it would cost to scale the production ten times, from a small demonstration plant to a giga factory rolling out 20,000 units. The effort also included 20 percent in scope optimization opportunities to reduce costs during the project development phase. It provided enough detail and confidence for the company to pursue funding and grants and move to the next stage of the project.
“We can take a piece of paper and a dream and detail it out with enough accuracy that it can be visualized as a very real project,” says Rafael Van Gysel, a solution expert. “It helps companies accurately forecast capital needs for their innovative, strategic bets, properly accounting for risks as they move towards the next phase of development.” Rafael adds, “It also helps to take dreams of a more sustainable and resilient built-environment one step closer to reality.”