From our Transforming the CRE Technology Landscape Thought Leader Contributor, EY.

In today's rapidly changing economic and regulatory environment, the dynamic nature of the energy sector is heightening pressure on capital project delivery.

As energy demand continues to grow and the energy transition gains traction, organizations must adapt their strategies to effectively navigate the complexities of financing, technology adoption, and sustainability goals. The latest EY Power & Utilities Outlook highlights the necessity for creativity in making the math work—balancing the growth of generation, transmission, and distribution against high interest rates and the urgent need for infrastructure upgrades.

Utilities are grappling with an equity crunch driven by deferred maintenance, electrification, and the emergence of new demand centers, such as data centers and reshored manufacturing. As traditional financing models are challenged, the sector is exploring innovative partnerships and asset management tactics to secure funding.

Confronting key barriers to transformation

At this pivotal crossroads, the energy sector has a unique opportunity to reimagine how capital projects get done. However, this transformation will come with challenges. To not only survive, but thrive in this turbulent landscape, organizations must tackle these key obstacles head-on:

· Lack of a future-ready foundation for growth: Organizations lacking a clear roadmap risk inefficiencies and missed opportunities as they scale for growth in sectors like data centers, nuclear energy and reshored manufacturing. Establishing a future-ready foundation—comprising essential infrastructure, processes and planning—is essential to mitigate these inefficiencies and capitalize on emerging opportunities. This is particularly crucial as the sector approaches a potential nuclear renaissance, necessitating advancements in project planning, management, and execution.

· Misalignment in investment decisions and strategy: Aligning investment decisions with key objectives is crucial for maximizing resource allocation and budgeting efficiency. The energy sector often exhibits a risk-averse approach to investment, which can lead to overly cautious decision-making and extend project timelines into decades. By addressing this misalignment and adopting a more balanced risk approach, utilities can navigate capital investments more effectively and seize emerging opportunities that align with their long-term goals.

· Reskilling shortfall: Evaluating readiness for evolving industry demands offers a crucial growth opportunity. The EY Future of Energy Survey reveals that while reskilling is essential, it often takes a backseat. While 91% of power and utilities executives believe reskilling will determine their success in five years, only 26% actively retrain staff. This gap underscores a need for improvement. Additionally, 88% of executives plan to rely more on external resources, and 86% believe their workforce can adapt to changing needs, presenting an opportunity to drive project success.

· Execution inefficiencies: Delays in scoping, permitting, procurement and construction slow project delivery. This increases costs, impacts timelines and creates delays in meeting organizational goals. By breaking down silos in project management practices, businesses can enhance standardization, collaboration, and knowledge sharing, ultimately leading to more efficient project delivery.

By creating a clear roadmap, aligning investment approaches, prioritizing reskilling, and fostering collaboration, organizations can strengthen their project delivery capabilities and be in a better position to confront the energy sector challenges ahead.

Five steps to better capital project delivery

To make this happen, organizations can adopt five key strategies that align with their goals and enhance operational efficiency:

1. Establish project alignment: Develop a well-structured framework that ties capital investments directly to their objectives. This involves evaluating projects based on long-term impact, regulatory requirements, and financial viability. By adopting a structured approach, organizations can make informed decisions regarding resource allocation, enabling the most critical initiatives to receive the necessary funding and attention.

2. Optimize stage gate and governance processes: To enhance capital project execution, organizations should manage stage gate processes at the program level, taking steps to verify they are fit for purpose and include off-ramps for projects that no longer align with key objectives. Standardizing review criteria and decision-making processes fosters efficiency and avoids siloed thinking. Early engagement with regulatory bodies helps clarify requirements, reducing delays. Additionally, improving construction sequencing and pre-procuring long-lead items can mitigate bottlenecks. By allowing lower-risk projects to advance more quickly, organizations can streamline project timelines while maintaining flexibility to pivot when necessary.

3. Break down silos in program delivery: To effectively tackle the challenges associated with capital project execution, organizations must prioritize collaboration among all

stakeholders. Implementing collaborative contracting among contractors, architecture and engineering (A&E) firms, and subcontractors fosters teamwork and enhances data integrity by treating data as a shared resource. This collaborative approach should enable seamless access to critical information, which is vital for technology innovation and AI adoption. Disconnected input data often hampers AI's effectiveness. By protecting data integrity through collaborative agreements, organizations can leverage AI for applications such as schedule analysis, predictive resourcing, and project management optimization.

4. Implement process standardization for execution: Establish standardized processes to manage the full project lifecycle—from initial scoping to closeout. This can significantly improve efficiency and accountability. Mapping workflows across key project phases—scoping, permitting, design, procurement, scheduling, construction, and closeout—helps optimize resource allocation and improve cost estimation. Clearly defining roles, responsibilities, and decision-making checkpoints reduces ambiguity and enhances accountability throughout the project lifecycle.

5. Implement technology for enhanced project oversight: Organizations should prioritize technology solutions, such as Project Management Information Systems (PMIS), to improve project visibility and execution. By integrating data and analytics, these tools provide real-time insights into program health, enhancing transparency and workflow efficiency. This emphasis on technology facilitates proactive decision-making and better oversight. A digital control tower exemplifies the output of such implementations, offering centralized visibility to help organizations respond swiftly to emerging risks.

By taking these key steps, organizations can enable a stronger pathway to capital project delivery.

Summary

Embracing these strategies can empower organizations to transform capital allocation and prioritization, accelerating project timelines and enhancing cost efficiency. Increased transparency and collaboration will make the most of the opportunities AI provides and should unlock sustainable value from infrastructure investments, positioning utilities to thrive amid rising energy demand and the ongoing transition. This should help organizations to navigate challenges with agility and seize new opportunities in the ever-evolving energy landscape.