As you likely know, a public-private partnership (PPP or P3) is a contract between a government organization and a private company. The goal of this long-term partnership is to provide a significant public service or benefit.
In general, most people agree that PPPs are more efficient than traditional government projects. When public and private entities work together, they create innovative financing and design alternatives that are assets for everyone involved.
If you are interested in a renewable energy project, a PPP might be a good tactic. This type of collaboration can offer you support and funding that you might otherwise not have. Below are five key issues to consider.
Most renewable energy projects—such as installing geothermal HVAC systems, solar panels, or wind turbines—require significant design and construction costs. However, many of these projects also offer federal income tax benefits. Government (and other nonprofit) organizations cannot take advantage of those incentives, but your company can.
For many years, the U.S. government has been offering tax benefits for green initiatives, and those offerings have increased. Within the Consolidated Appropriations Act, 2021, Congress provided several renewable energy tax credit additions and extensions. Among them are investment tax credits (ITCs) for solar projects, biofuels, wind, and commercial energy conservation.
Risks and Rewards
Entering a PPP will provide your company with substantial options. You will be able to concentrate on what you do well—namely, construction and project management—while your government partner can focus on planning and public service. In each PPP, the private and public entities share different project delivery responsibilities. These include designing, building, financing, operating, and maintaining the system or project. The specific structure varies from program to program, so your company’s level of responsibility may depend on the project’s goals.
Be aware, however, that private companies usually take on most of the financial risk with PPPs. Therefore, it is critical that you keep the project running on time and on budget.
Commitments Beyond the Contract
Both you and the government entity will sign a contract when you enter a PPP, but beyond the legal agreement, your sense of dedication is imperative. Both you and your private partner must be equally committed to each other’s goals.
While a contract can outline responsibilities and expectations, you must be ready to communicate honestly and openly. Regular updates from both parties can help you meet benchmarks along the way. Do not shy away from voicing any concerns you have or asking questions. Both parties must be fully invested in the project’s success.
When things go wrong, and they likely will, you must be prepared to discuss the issues with your partner, hash out your differences, and find solutions. Remember that in a PPP, you are in a collaboration, so you must avoid blaming the other party. Instead, be transparent. Admit any mistakes you have made or accept any that your partner has made. Then find ways to get the project back on track.
Being successful in this endeavor requires that you employ an experienced and capable staff who can work professionally with your government partner. Make sure you have a point person who monitors all the details of the project to keep you informed and hold your partner accountable.
Reasons for Renewable Energy
No matter what problems you may encounter along the way, undertaking a sustainable energy initiative is a noble cause. Since renewable energy originates from the sun, wind, water, and other natural sources, it is clean and inexhaustible.
Renewable energy can contribute to inclusive and environmentally friendly growth. By promoting and supporting sustainable energy, contractors and lawmakers can help address climate change and pollution, while also assisting with job creation and energy security. Transitioning from energy that relies on fossil fuels to one that offers low carbon emissions is essential for our world. Playing a role in that process is a smart strategy for your company.
More and more consumers want to invest in renewable energy, so your company must be equipped to help satisfy that demand. By doing so, you are providing energy sources that benefit the earth and save your customers money on energy costs. You are also expanding your services, which is good for your bottom line.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.