By Duc Hoang and Tam Tran
Building a wind farm is much like assembling a complex puzzle. It involves aligning numerous components—contracts and partnerships—in perfect harmony. But fear not, for understanding and managing these contracts are crucial steps towards ensuring the success of your project. Let’s embark on brief discussion through various contract types and learn how to navigate them effectively.
EPC Full Turnkey
In this setup, the EPC (Engineering, Procurement, and Construction) contractor shoulders the construction risks, thus lightening the load on the project owner. With the EPC contractor overseeing all aspects, the likelihood of errors is minimized.
However, challenges may surface in sourcing experienced contractors, especially those well-versed in local practices. Additionally, this type of contract often comes with a higher price tag.
To tackle these challenges, consider tailoring the contract to better align with the project’s unique requirements.
HV + Wind EPC Turnkey
Similar to the EPC Full Turnkey, this contract transfers construction risks to contractors, leveraging the expertise of High Voltage (HV) specialists in local power grid connections.
Yet, finding experienced contractors and ensuring seamless collaboration between HV and Wind EPC contractors can prove challenging.
To address these issues, consider making adjustments to the contract to foster better teamwork and cohesion.
HV + BOP + TSA
This contract utilizes local HV contractors familiar with power grid connections, while also incorporating additional Balance of Plant (BOP) contractors and turbine suppliers, potentially leading to cost reductions.
However, meticulous planning is essential, as the complexity of multiple components increases the likelihood of integration challenges.
Moreover, the project owner shoulders most risks, with poor planning potentially resulting in additional expenses.
Strong project management and detailed planning are crucial to successfully navigate these complexities.
HV + EBOP + CBOP + T&I BOP + TSA or multiple packages
Expanding upon the previous contract structure, this arrangement involves even more contractors, potentially offering further cost savings.
However, the heightened complexity demands meticulous planning and organization. With more components in play, there’s an increased risk of errors, and the project owner assumes significant risks.
Maintaining robust project management and meticulous planning is crucial to effectively mitigate these risks.
Selecting the appropriate contract for a wind farm project requires striking a delicate balance between benefits and potential pitfalls.
Through careful planning, effective communication, and diligent management, navigating the complexities of wind farm development can become a manageable endeavor. By following these strategies, building a wind farm can indeed become a breeze!
It’s worth noting that for the full EPC Turnkey and SubEPC contracts, the Silver Book is commonly used. However, there are differences, as the Sub EPC may not include performance guarantees. For multiple package contracts, the Red Books are often utilized, where valuation and payment are typically determined by measurement and applying rates and prices from a bill of quantities.
In the next article, we will deep dive more into the usecases and different types of FIDIC contracts.