Project developers make choices regarding what is subcontracted to whom for the high-value contracts. Two high-level ways of doing this are described in this section:
- EPCI contracting, where the developer places several larger subcontracts to reduce the number of interfaces and associated risks, but may pay more, and
- Multi-contracting, where the developer places many smaller contracts.
Choices depend primarily on the capability and financial strength of the project developer and supply chain, and the method of financing the project. As the industry matures, ways of procuring and managing the wide range of high value contracts required in delivering a floating offshore wind farm are expected to evolve from EPCI contracting towards multi-contracting, as they have in the fixed offshore wind industry.
EPCI contracting
What is it
- EPCI stands for engineer, procure, construct, and install, where a few, large contracts are placed, each for an end-to-end scope of supply
- It usually involves three main packages for fixed offshore wind (wind turbines, foundations and the electrical balance of plant) and these remain the three broad areas for floating projects, and
- It involves large contracts, meaning only large, experienced contractors have the capability to lead, this is most often the installation contractor.
Who uses it
- Independent developers and less experienced utilities prefer this approach, especially when seeking to minimise their own risk to secure project finance
- EPCI has become less common than multi-contracting in the UK for fixed offshore wind farms, as the industry has matured and risks are understood better, and
- EPCI is expected to become more common than multi-contracting for the early floating offshore wind farms in the UK, particularly for the floating substructure with its anchors, moorings and installation, where there are many inter-related interfaces and risks.
Pros and cons for project developers
+ Enables smaller development teams to deliver with much of the work and risk undertaken by the EPCI contractor
+ Enables wider range of finance solutions
– Generally higher base cost as paying EPCI package leads to take additional risk
– Optimisation generally harder to deliver across different EPCI packages
Illustration of EPCI package structure.
Multi-contracting
What is it
- Design, supply and installation packages are often awarded to different companies, and
- Some packages can be split or combined depending on developer needs and supply chain capabilities.
Who uses it
- The most experienced developers including Equinor, Ørsted, RWE Renewables, ScottishPower Renewables and Vattenfall tend to multi-contract, particularly if the project is balance sheet funded, and
- They invest in the technical and management skills internally as they prefer to understand and take risk themselves, rather than pay EPCI contractors to take it.
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
