The evolving demands facing higher education institutions today create intense competition for capital and resources internally, and traditional business models are not enough to ensure critical energy and infrastructure improvements are addressed.
Mounting deferred maintenance backlogs and aging infrastructure are tell-tale signs that traditional models are no longer effective in solving for the complex needs of today’s campuses. Administrators are increasingly turning to public-private partnerships; a delivery model that generates alternative pools of capital and shifts owning, operating and managing infrastructure assets on behalf of the college or university to external partners.
Replacing one-off models with one enhanced-scope delivery model
Many campuses are familiar with diversified funding and delivery models for energy and infrastructure projects, such as design-build, performance contracting and PPAs. Each of these models have unique attributes that allow an institution to deliver on better operational outcomes and cost savings. However, one model by itself will only address pieces of a larger puzzle and may not be enough to deliver the needed business impact that colleges and universities seek.
For example, major repairs are often deferred due to significant capital requirements and impact on debt loads. Through performance contracting, as an example, institutions can benefit from faster capital recovery and access cash flow to offset project costs, but the long-term debt, asset ownership and liability would be held by the university. Alternatively, public-private partnerships (P3) offer institutions necessary financial flexibility, including opportunities to mitigate capital and performance risk.
P3 can build on these existing models and add a larger pool of capital with less associated risk. For example, instead of looking to retrofit lighting in one project and add renewables in another, a P3 will encompass all objectives with the intent to replace or upgrade larger components of infrastructure—entire buildings, central utility plants, microgrids, etc.—and shift the performance risk of this infrastructure to an experienced partner.
With P3s, performance outcomes go beyond cost savings to include key performance indicators (KPIs) around guaranteed uptime of critical energy systems or meeting carbon reduction targets. Shifting the operational burden and performance risk to a strategic partner that has access to advanced predictive maintenance, ongoing operational support and enhanced monitoring improves outcomes. With this infusion of capital and expertise into the operations and modernization of the campus’s energy infrastructure, higher education leaders can focus their resources and investments toward meeting institutional and educational goals.
Learn more about the benefits of P3 from Schneider Electric's national head of higher education projects:
Moving to P3 for mission-critical energy infrastructure and campus resilience
Colleges and universities rarely desire to own and operate as utilities, just as they have little desire to build and manage student housing, bookstores or food services. But while P3 has been successfully utilized for housing, bookstores and dining facilities for several years, it remains an untapped opportunity for complex and costly energy infrastructure projects. For many, energy infrastructure P3s could be the next critical step to modernizing costly, aging facilities that become a competitive advantage in attracting students, faculty and research, while reducing the operational burden of owning and operating complex, critical systems.
P3 is quickly becoming a go-to business model for large infrastructure initiatives. This model offers a wide variety of benefits in the areas of funding, construction, ownership, operations and energy management. It’s also freeing up countless capital and human resources to reinvest back into the mission and vision of today’s universities and colleges.
To learn more about how to accelerate your university's campus infrastructure projects, watch the recording of our recent webinar with project financing experts from Hannon Armstrong and Schneider Electric.