Analysis of Chinese Renewable Energy Engineering

Chinese renewable energy power generation construction is undergoing a rapid flourish nowadays, so a large amount of projects need to be contracted to engineer procure construct enterprises, namely EPC enterprises. However, high-level EPC enterprises always outsource specific activities to various vendors simultaneously, thus resulting in many outsourcing risks. This paper aims to find reasonable strategy against these risks. According to first hand empirical study, this article denotes outsourcing contract risk as the major one that EPC enterprise would confront, and categories it into two detailed risks, namely adverse choice and moral risk. A game model between EPC enterprise and vendor is established to discuss bilateral behaviors after signing contract. Nash equilibrium under mixed strategy is found based on two basic hypotheses. At last a two-side strategy called Carrot and Stick is suggested to avoid vendors malversation based on the analysis results.