FEED Approach and TIC Estimating in a Changing Economic Environment
Executive Summary
Energy infrastructure development is entering a period where economic volatility is no longer episodic. It is structural. Demand growth is accelerating at the same time capital markets, supply chains, labor availability, and regulatory frameworks are becoming more constrained and less predictable. Taken together, these forces are reshaping how projects are evaluated, sanctioned, and ultimately delivered.
In this environment, Front-End Engineering Design (FEED) and Total Installed Cost (TIC) estimating have moved beyond their traditional roles as preliminary planning steps. They now function as strategic mechanisms that influence project bankability, capital allocation, and long-term viability.
Assumptions embedded early, often implicitly, have an outsized impact on outcomes.
Across oil and gas, renewable energy, and power generation supporting data center development, organizations that continue to rely on static estimating methods and legacy benchmarks are increasingly exposed to cost escalation and execution risk. Disciplined FEED execution, paired with dynamic and risk-adjusted TIC estimating, is becoming a prerequisite for capital discipline rather than a differentiator.
The Strategic Role of FEED in Today’s Market
FEED has historically been treated as a technical milestone required to advance a project toward final investment decision. That framing is increasingly inadequate. In the current economic climate, FEED represents the primary opportunity to shape scope, challenge assumptions, and align technical decisions with commercial and execution realities.
In oil and gas, sustained price volatility and geopolitical uncertainty have sharpened focus on capital efficiency. FEED studies that do not explicitly address probabilistic cost outcomes, supply chain exposure, and execution risk tend to produce estimates that lose relevance once projects move into procurement. As a result, many organizations now use FEED to deliberately stress-test assumptions and quantify downside exposure before capital is committed.
In renewable energy, the challenge is different but no less demanding. Rapid technology evolution, policy-driven incentives, and interconnection constraints require FEED approaches that balance design maturity with adaptability. Overly rigid designs risk obsolescence, while insufficient definition undermines cost certainty. Effective FEED strikes that balance.
For data center power generation, demand growth is without precedent. The pace of AI adoption and cloud expansion is driving power requirements that exceed traditional grid development timelines. As John Ketchum, Chief Executive Officer of NextEra Energy, has observed:
“We’re going to need it all. We’re going to need renewables. We’re going to need gas. We’re going to need nuclear.”
That reality reinforces the importance of FEED studies that evaluate hybrid configurations, modular deployment strategies, and phased capital investment while maintaining credible cost visibility in an increasingly constrained market.
Rethinking TIC Estimating Under Economic Pressure
TIC estimating has long relied on historical benchmarks, standardized cost indices, and budgetary supplier pricing. Those tools still have value, but on their own they are no longer sufficient. Inflationary pressure, regional labor constraints, and extended equipment lead times have materially reduced the reliability of static cost models.
TIC estimating that supports effective FEED execution increasingly incorporates three core elements.
- Dynamic market inputs
Real-time commodity pricing, labor availability, and supplier capacity must inform both base estimates and contingencies. Cost models that remain fixed at a single point in time quickly lose relevance in volatile markets. - Scenario-based cost modeling
Rather than presenting a single deterministic outcome, FEED should evaluate a range of economic scenarios. Explicit consideration of base, upside, and downside cases improves transparency with stakeholders and reduces the likelihood of unexpected escalation later in the project lifecycle. - Integrated value engineering
Value engineering delivers the greatest benefit when applied early. During FEED, alternative materials, equipment configurations, modularization strategies, and execution approaches can be assessed without compromising schedule or performance.
The consequences of neglecting these practices are increasingly visible. Oil and gas projects that advanced beyond FEED with limited market sensitivity and insufficient contingency have experienced cost growth well beyond original expectations. By contrast, renewable and infrastructure developers that embraced scenario-based estimating have demonstrated greater resilience under similar market pressures.
Implications for Power Generation and Data Center Development
Power generation projects supporting data centers sit at the intersection of several competing pressures. Schedules are compressed, reliability requirements are high, and competition for equipment and labor is intense. Demand is expanding faster than traditional supply development models can absorb.
As Daniel Droog, Vice President of Power Solutions at Chevron, noted in the context of data center power demand:
“The customer interest is high. It’s really trying to intersect where they have that level of need because they’re building new or expanding facilities at a rate that’s ahead of the power supply.”
This imbalance elevates the importance of FEED-driven decision-making. Projects must be structured to accommodate phased execution, optionality in fuel and technology selection, and clear visibility into TIC drivers before procurement decisions become irreversible.
Strategic Advantages of Disciplined FEED and TIC Practices
Organizations that elevate FEED and TIC estimating from procedural requirements to strategic processes consistently realize measurable benefits.
- Improved capital allocation
Transparent, risk-adjusted estimates grounded in current market conditions increase confidence among investors and internal stakeholders. - Greater execution certainty
Early identification of cost and schedule risk enables proactive mitigation rather than reactive correction. - Cross-sector knowledge transfer
Risk modeling and cost control approaches proven in oil and gas and renewable projects translate directly to data center power generation, improving outcomes across portfolios.
Conclusion
The economic conditions shaping energy infrastructure development have fundamentally shifted. Volatility is no longer an outlier. It is the operating environment. In this context, FEED and TIC estimating are no longer administrative checkpoints. They are strategic instruments that determine whether projects are resilient or exposed.
Organizations that invest in disciplined FEED execution, dynamic cost modeling, and early value engineering are better positioned to manage uncertainty, protect capital, and deliver reliable energy infrastructure across oil and gas, renewable energy, and data center power generation.
