CAPEX and OPEX in energy and mining projects

Every project pitch contains two numbers: what it costs to build, and what it costs to run. The first is capital expenditure, CAPEX. The second is operating expenditure, OPEX. The definitions are easy. The trouble starts when you compare one project's figures with another's, because the words cover different things in different sectors, different years and different currencies.

What CAPEX includes

CAPEX is the money spent before the asset earns anything, plus the money spent later to keep or extend it. In a power plant, the bulk is engineering, procurement and construction: equipment, civil works, installation and commissioning. Around that sit the owner's costs, such as land, permits, the grid connection, project management and insurance, along with a contingency for what the estimate has not yet found. Financing costs during construction are sometimes included and sometimes shown separately.

The U.S. Energy Information Administration publishes one of the few public benchmarks. Its capital cost study, prepared for the Annual Energy Outlook 2025 with an engineering firm, covers 19 generator types and reports overnight capital cost, meaning the cost as if the plant were built instantly, without interest during construction. EIA released it on 10 January 2024. It is useful as a reference for United States conditions, and a poor guide to what the same plant costs in a country with different labour, logistics and import duties.

Mining and oil and gas split CAPEX into two parts. Initial or development CAPEX builds the mine, the plant and the infrastructure. Sustaining CAPEX replaces trucks, extends tailings dams, drills new wells and keeps output steady. A project that quotes only initial CAPEX looks cheaper than one that quotes the lifetime figure, even if they are the same project.

What OPEX includes

OPEX is what it costs to run the asset once it works. For a thermal power plant that means fuel, maintenance, staff, insurance and fixed fees. For a solar farm the fuel line is empty and maintenance carries more weight. For a mine, OPEX covers mining, processing, transport, site services and administration, usually quoted per tonne processed or per unit of metal sold. For an oilfield it is lifting cost per barrel, plus processing and transport.

Analysts divide OPEX into fixed costs, which are paid whether the asset runs or not, and variable costs, which rise with output. The split matters when prices fall. A project with high fixed costs keeps losing money at low prices. One with mostly variable costs can cut spending as output falls. When a company says it can survive low prices, ask which of the two it has.

Why the same number is not the same

Check five things before you compare two cost figures.

• Scope. Does the figure include the grid connection, the pipeline, the port, the camp and the road, or only the plant inside the fence?
• Date and currency. A 2019 estimate in one currency is not comparable with a 2026 estimate in another, and inflation in construction runs differently from consumer prices.
• Stage of the estimate. A concept-stage number can move by a very large margin. A figure from detailed engineering with signed contracts is much firmer.
• Unit. Per kilowatt, per tonne of annual capacity, per barrel per day and per contained ounce are all common, and none converts easily to another.
• Contingency and escalation. Some estimates add a buffer. Others leave it for the reader to guess.

Public disclosure rules do not fix this. The EITI Standard 2023 encourages countries to disclose capital and operating expenditures and total project costs, and it requires them to describe how they monitor company costs and publish at least summaries of final tax and cost audits (Requirement 4.10). That is a direction of travel, not a guarantee that the number you hold has been audited.

How CAPEX and OPEX drive the investment decision

A project exists on paper as a stream of cash. Money goes out as CAPEX, usually over several years. Money comes in as revenue, less OPEX, taxes and royalties, for the life of the asset. The decision is whether the later cash justifies the earlier cash, after allowing for the cost of capital and risk. Every input in that sum is uncertain, and CAPEX is the one that arrives first and is hardest to reverse.

This is why final investment decisions wait for firm CAPEX. It is also why developers push for fixed-price construction contracts, and why lenders ask for contingency and independent cost review. A project with a long construction period and a revenue contract that begins only at commercial operation is exposed to cost overruns and delay together, and each one makes the other worse.

Think about it symbolically. If a project costs C to build, earns revenue R each year, and spends O each year to operate, the annual surplus is R minus O. The years it takes to recover C depend on that surplus, and a rise in O reduces it just as surely as a rise in C raises the hurdle. A bidder who has a low CAPEX but a high O can lose to one who spends more to build and less to run, if the contract runs long enough.

Where the cost numbers come from in public sources

Start with documents that state their method. The EIA study is one. The International Energy Agency's World Energy Investment 2026 report presents full-year estimates of capital flows for 2026 and an Investment Data Explorer, and it notes that energy security concerns, including the energy crisis tied to the conflict in the Middle East, are shaping where money goes. Use it to see which sectors and regions attract capital, not to price a single project.

For a specific project, look for the technical report filed with a stock exchange, the environmental and social impact assessment, the loan documents of a development bank, or a tender's own cost schedule. Check whether the budget in the tender matches the figures in the investor presentation. A mismatch is a question to ask, not an error to assume.

Questions to ask when you receive a cost figure

Who prepared it and at what level of engineering? What is included inside and outside the boundary? What currency and date? What contingency, and what does the contingency cover? Is the OPEX figure for the first year or the life of the asset, and does it assume the plant runs at full capacity? And the question that exposes most weak models: what happens to the project if CAPEX is a fifth higher and the start date slips a year?

Guides explain how things generally work. They are not legal, tax or investment advice for a specific project or country. See our editorial policy.