As the industry matures, ways of procuring and managing the wide range of high value contracts required in delivering an offshore wind farm evolves. Choices depend on the risk profile of the project, the capability and financial strength of the project developer, the maturity of the technology and the supply chain, and the method of financing the project. The two main approaches are explored below. Developers will typically opt for a variant that sits somewhere between.
Multi-contracting
What is it
- About nine main contracts are awarded covering the key elements of the wind farm
- Supply and install packages are often awarded to different companies
- Some packages can be split or combined depending on developer needs and supply chain capabilities
- Developers will typically retain flexibility during procurement to secure the best value from the supply chain
Who uses it
- Experienced developers including Equinor, Ørsted, RWE Renewables and ScottishPower Renewables tend to multi-contract, particularly if the project is balance sheet funded
- They invest in the technical and management skills internally as they prefer to manage risk rather than pay EPCI contractors
Pros and cons for project developers
+ Offers chance of lowest outturn cost
+ Gives owner most understanding and control of their assets and the chance to best optimise
– Requires larger in-house technical and management teams
– Higher financial risk, depending on details of contracting
Illustration of multi-contracting package structure.
EPCI contracting
What is it
- EPCI stands for engineer, procurement, construction and installation, where a few, large contracts are placed, each for an end-to-end scope of supply
- Usually involves three main packages, one of which will be turbine
- Involves large contracts, meaning only large, experienced contractors have the financial strength and capability to deliver
Who uses it
- Independent developers and utilities that prefer a smaller internal project team, especially when seeking to minimise own risk in order to secure project finance. Examples are SSE Renewables and Ocean Winds
- EPCI has been less common than multi-contracting in the UK
Pros and cons for project developers
+ Enables smaller development teams to deliver
+ Enables wider range of finance options
– Generally higher base cost but potentially lower cost of energy
– Optimisation generally harder to deliver across main packages
