The burden of taking on all the financial risk of design and construction in a new and often hostile environment was just too heavy for a sole contractor to bear, they had concluded.
As a result, it became the developers who had to acquire the skills and personnel needed to assign and manage the contracts for turbine supply, foundation design and fabrication, and installation of their wind farms.
Now, it seems, the tide may be about to turn once again and move in the direction of the early engineering, procurement and construction (EPC) approach and away from the multi-contracting approach of recent times.
As banks become increasingly involved in financing wind farm construction, they are calling the shots over how that construction is managed.
They want to see the process de-risked. That means passing the risks onto a third party—the EPC contractor, who they expect to become responsible once more for their contribution to any project.
With the prospect of a huge pipeline of wind projects over the coming decade, some of the largest contractors in the world are diving into offshore wind, says Joel Staadecker, CEO of SeaEnergy Renewables.
He points out that Fluor, which is currently building the Greater Gabbard wind farm in the North Sea for Scottish and Southern Energy and RWE npower Renewables, has been active in the sector all along.
Others, such as KBR and Petrofac are expected to pursue the EPC role aggressively, he says.
What is of overall importance is the quality of the EPC contractor and the depth of its balance sheet.
"If you’re going to rely upon them they have to have very strong organisation. To date I’m not sure we’ve seen that in offshore wind," he says.
"But as we move to 18 (UK) developments comprising 6000 to 9000 turbine installations, we’re going to see major offshore contractors come into this space that have proved their mettle in offshore oil and gas. They will de-risk this process."
Staadecker notes that the financial community often sees the EPC contract as a panacea. "The fact is that when things go wrong it’s good to have the owner buried in that operation so that someone with ownership is actually responsible for the problems that arise.
"Multi-contracting lends itself to the owner having a much more active role, but from a financing point of view that doesn’t match up with banking objectives."
Element Power’s president and chief operating officer Mike O’Neill does not want to see the balance sheets of contractors constrain the industry just to appease the banks.
"If you look at the amount of work that needs to be done over the next ten years, their balance sheets aren’t going to support the scale of progress we need."
The EPC route may work well to get initial deals closed and financed, he says. "We just don’t want to develop that as a model and build in inefficiencies, margins and costs in an industry where we need to keep costs down."
All deals that have been project financed to date have been built on a multi-contract basis, points out Jérôme Guillet, CEO of Energy Bankers à Paris.
"EPC is just being lazy," he says. "It is easier to analyse the risk when you have multi-contracting because you need to go into the interface risks.
"Some well-known projects have had massive subcontracting problems despite having strong EPC contracts."
But multi-contracting needs to be undertaken by people who understand the interfaces and know what they don’t know, says Guillet.
"There’s a lot of arrogance in the sector. You have onshore people that say: I can do offshore, it’s easy; and small developers in Germany thinking they can do offshore, and you have oil and gas people thinking we’ve done 10,000 tonne structures, it’s easy to do 1000 tonnes. But when you have to do it 240 times in high seas, it’s not the same thing."
Those managing the contracts must be willing to call for outside expertise. "Offshore you don’t know everything.
"You have to have people that are ready to deal with problems rather than people who expect not to have problems."