What is an EPC contract?

Although several contracts can be signed to build a renewable energy plant, the most common approach is an EPC contract: Engineering Procurement and Construction (EPC: Engineering Procurement Construction).

Under an EPC (EPC) contract, a prime contractor is engaged to perform the detailed engineering design of the project, and procure all necessary equipment and materials, and then build and commission the plant for the customer. In addition, the contractor undertakes to deliver the complete plant at a guaranteed price and on a guaranteed date and further undertakes that the plant, when completed, will operate at a guaranteed level. Failure to comply with any of these requirements requires the contractor to pay financial compensation to the owner in the form of liquidated damages (DIL).

Note that EPC contracts are often called “turnkey project”.