How Not to Shoot Yourself in the Foot: Smart Planning and P3s
When community leaders consider investments in sustainability, resilience, and smart infrastructure, they face a dilemma. Immediate priorities drive a focus on meeting short-term needs, but strategic objectives often require a big-picture outlook.
Illustrative examples are found in the sustainable energy sector. In one case, a clean-energy marketing firm offered to a municipality a long-term power purchase agreement (PPA) that would reduce its electricity costs by 15 percent while meeting its 20 percent renewable energy goal. The town conducted a competitive procurement, found the offer to be the lowest-priced option, and entered the contract. Later, however, town leaders realized that the sole-source, take-or-pay contract effectively foreclosed other opportunities to reduce costs, including energy conservation measures and the opportunity to participate in a community solar garden.
A comprehensive cost-benefit analysis showed that the town gave up potentially 35 percent in overall energy cost savings and even greater renewable energy integration to reduce only the electric portion of its energy bill by 15 percent.
In another example, a local government agency embarked on a renewable energy project that would offset its electricity purchases with output from a solar array on unused land. The solar developer promised that the remote net-metered project would reduce the agency’s electric bill by more than $250,000 over 10 years, and would virtually eliminate the carbon footprint of its electricity demand.
While the array was still under construction, however, the community commissioned a study that assessed the feasibility of using the solar array to power a resilient energy microgrid for critical community facilities. The study showed that, as designed and permitted, the array would shut down during a utility outage, and it was located too far away to serve critical facilities without investing millions of dollars in additional infrastructure. The array was deemed useless for a microgrid. Achieving power resilience would require the community to invest in dedicated diesel generation assets, at a cost that would dwarf the savings expected from the solar array – and create additional fossil fuel emissions.
As a result, community leaders decided to scale back their resilience plans and hope for the best.
Wasted money, lost opportunities, and unmet needs: These are the unintended consequences of planning and development methods that focus on specific project benefits rather than on achieving strategic goals.
These methods continue to prevail, because in many communities, strategic planning is viewed as complex and tedious. It introduces delays and uncertainties, often involves more people, and can lead to paralysis by analysis – a condition where nothing gets done because planners are always waiting for the results of additional inquiries and studies. As a result, community officials tend to pay lip service to strategic planning, while focusing efforts on short-term progress.
Some communities, however, are finding that a disciplined integrated planning process can achieve short-term impacts while also supporting long-term strategic goals. The key is found in a familiar structure: the public-private partnership.
The concept of a public-private partnership (P3) can include a wide range of projects and objectives. In recent decades, some of the most successful P3s have built transportation infrastructure, such as toll bridges and roads – built and operated by private consortia to serve public purposes. In developing countries, P3s have been used to mobilize private investment in major public works projects, such as dams and water systems.
Today, some communities are entering public-private partnerships to bring together local companies, organizations, and units of government to plan and implement projects supporting community strategic goals. The mission of such P3s is broader than a single asset; rather, they coordinate and unify the strategic and tactical efforts of several entities with complementary needs and interests. These P3s not only include government agencies and private contractors, they also include other local public and private entities with a stake in the same strategic goals. Such approaches are gaining traction in both large cities and smaller communities. Examples:
- Smart City Berlin works to implement a smart-city strategy developed in cooperation with the City of Berlin and a network of technology and service companies. The initiative seeks to manage an integrated approach to planning and development of projects in communications, transportation, public safety, infrastructure, and related areas.
- The City of Atlanta established a Smart City Office to manage SmartATL, an initiative to coordinate investments and programs involving transportation, public safety, and sustainability. SmartATL emerged from Renew Atlanta, a $250 million project to implement a 300-mile citywide fiber network. Its next efforts include a smart mobility project in a traffic corridor near downtown Atlanta.
- New Paltz (N.Y.) Community Energy was established in 2016 by three local government units, the local branch of a New York state agency, and key local businesses, as a joint effort to plan and implement local sustainability and resilience projects. The initiative is planning a community solar farm and clean energy microgrid serving several critical facilities, and expects to facilitate other sustainability and resilience investments in the future to support cost savings and economic development.
Such integrated approaches to P3s can help communities avoid the unintended consequences of “silo” planning, while bringing greater benefits at a lower cost. However, integrated P3s also present certain pitfalls and complexities that can slow progress and threaten success. Experience shows that P3s can avoid these pitfalls by applying best practices in stakeholder engagement and strategic management.
The Power of Integrated Planning
When investments in local assets are planned and implemented in an integrated way, they can serve multiple purposes – from saving money, to attracting jobs, to saving lives. Integrated planning and development, based on active stakeholder engagement and public-private collaboration, ensures that investments:
- Produce greater benefits than projects pursued in isolation;
- Are consistent with community strategic goals and stakeholder interests; and
- Achieve broad-based support and a solid foundation for implementation.
Integrated strategic planning isn’t easy, however. Stakeholders can lose patience with processes that seem complicated and that require an ongoing willingness to compromise. Avoiding these pitfalls requires P3 leaders to apply best practices for collaborative engagement and management in every step. Some key methodologies:
- P3 Charter and Structure: Successful public-private partnerships exist to address a clearly defined set of objectives, established in cooperation with key stakeholders. The broader the P3’s charter, the greater the potential benefits – and the more complex its management will be. A successful P3 has an organizational structure with resources and processes adequate to serving the scope of its charter.
- Collaborative Team and Management: As the Urban Land Institute notes in its report, Ten Principles for Successful Public-Private Partnerships, “A partnership is a process, not a product.” Over time, the success of that process depends on:
- Cooperative partners;
- Durable authority; and
- Effective management.
P3 leaders must have the ability to achieve buy-in from P3 members, and to maintain their commitment to the P3’s goals – or to adapt those goals as necessary to address evolving priorities.
- Stakeholder Engagement: Open and effective communications – both among team members and community stakeholders – ensures the P3s efforts proceed efficiently, priorities remain consistent with local needs, and deployments achieve community support. P3 leaders must be:
- Committed to maintaining information flow,
- Effective at clear communications among diverse stakeholder groups, and
- Accomplished at managing efficient progress.
- Multi-Disciplinary Approach: Achieving sustainability and resilience in any context requires addressing multiple interdependent factors. Throughout planning and implementation processes, successful P3 leaders carefully consider a full range of issues requiring professional input across multiple disciplines:
- Technical and operational design and engineering;
- Legal, regulatory, and compliance analysis;
- Economic, financial, and risk management;
- Cross-sector integration.
- Benefit-Cost Analysis: Successful P3s support a rigorous approach to weighing options, assessing feasibility, and analyzing the benefits and costs of recommended solutions. Although careful analysis takes time, it ultimately saves time and money that might otherwise be squandered on sub-optimal deployments.
- Accountability and Metrics: Public and private stakeholders alike should insist on best practices for monitoring processes and measuring outcomes:
- Open records and decision-making processes;
- Transparent reporting; and
- Quantitative metrics for measuring progress toward milestones and goals.
These practices are important in any public-private initiative, but they rise to critical importance when a P3 forms to pursue a broader set of community goals. The effort is worth it, however, because in the end an integrated approach yields greater community benefits at a lower cost.
Ultimately, smart and sustainable infrastructure is only as smart as the leaders who plan and implement it. A broad-based P3 approach, with a focus on stakeholder engagement and disciplined management, is most likely to yield the best possible outcomes for any community.
About the Authors:
Michael T. Burr is Director of Microgrid Institute, a collaborative organization that analyzes factors affecting distributed energy resources, and supports development of resilient and sustainable local energy systems.
Jeffrey Domanski is Senior Manager of Energy and Sustainability at the Institute for Building Technology & Safety (IBTS), a 501(c)(3) nonprofit established to provide services to help governments implement cost-effective services and address challenges.
This article was originally published by Meeting of the Minds on January 23, 2017.
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