How to lower the cost of energy using the right contracting strategy

October 8, 2016

Getting your contracting strategy right is an important step in improving wind project profitability - from lowering CapEx and OpEx costs, lowering insurance premiums through lower risk and shorter construction periods by using specialist contractors for each element. Let's explore how multi-contracting can significantly lower the cost of energy...

Wind power developers must stop using the thumbscrews on suppliers to deliver products and services that are not in their area of expertise. The more that you want a supplier to do for you, the higher his risks and prices become.

If developers of offshore wind projects took a more active role by using what we call multi-contracting or risk and opportunity management, costs could be lowered significantly.

Getting it right

By assigning the right job to the right contractor with more focused contracts, we see that return on investment can easily be improved 1-2 percent, insurance risks go down and installation days are reduced.

It does requires a higher commitment in the form of time and resources for the planning of a wind project from the developer, however, this front-loaded approach and investment will pay back several times due to the projects reduced uncertainty and enhanced cost transparency.

We see from our engagement in more than 1,000 projects across the world, that a contractors’ scope is more precise from the early stages onwards. Desk planning prevents forgetting interfaces, contracts are more inter-linked, double work and coverage is eliminated and insurance premiums are reduced due to enhanced understanding from the financial and insurance communities.