Public-Private Partnerships are Energizing Higher Education Institutions

In our last post, we discussed how in recent years colleges and universities have been among the most successful users of the public-private partnership (“P3”) model. The uptick in higher education P3 utility projects comes as no surprise given the unique demands and features of most institutions, which often rely on government funding, donations, and increasing debt to support their operations and programming. In particular, higher education institutions across the nation have looked to the private sector’s expertise and capital for cost-effective and innovative solutions that shift institutions’ risks and burdens associated with operating and maintaining energy and water utility systems and related infrastructure, especially in light of the growing demand placed on aging facilities and systems. 

For example, the University of Florida (“UF”) located in Gainesville, Florida, currently has no source of islandable power generation to support critical operations in the event of a grid outage or failure. In addition, its current utility system is insufficient to meet the needs of UF’s growing campus, and its cogeneration facility is approaching the end of its service life. UF elected to turn to the private sector to address these issues and to achieve a resilient system able to fulfill its needs far into the future. With the assistance of its technical advisor, Jacobs Engineering Group, UF is currently in the second phase of its Central Energy Plant Project, a competitive solicitation seeking a private sector partner to design, construct, finance, operate, and maintain a campus thermal energy plant, a thermal piping distribution loop, and an electrical substation, in addition to other related facilities. Four teams were recently shortlisted and will each submit their proposals to UF later this year. 

Nationally, numerous universities, including several of the “Big Ten” universities like the University of Iowa, the Ohio State University, and the University of Maryland have also looked to the P3 model to select private concessionaires to revamp their utility systems. 

Notably, on March 11, 2020, the University of Iowa  officially transferred management of its utility system to global energy provider, ENGIE North America, and Meridiam, an investment firm. In addition to benefitting from the expertise and investment of its private partners — including meeting the university’s goal of being coal-free by 2025 — UI’s partnership illustrates how a utility P3 project fits within the overall strategic plan and mission of a higher education institution. As part of its deal, the university received over $1 billion in funding, of which $15 million will be used annually to support teaching, research, and scholarship. Recently, the university’s P3 Board awarded eight projects using its $15 million fund, including an interdisciplinary project to develop a new National Cancer Institute grant in early-stage lung cancer treatment and a clinical trial to examine the impact of certain innovative treatments. 

The UF and University of Iowa P3 projects, as well as the multitude of similar higher education utility P3s occurring nationwide, illustrate the flexibility of the P3 model to offer holistic solutions that not only address critical utility systems to meet the institutions’ current and future demands, but also support campus-wide programs and even create new sources of revenues. Moreover, higher education institutions make great partners due to their long-term economic stability. As a result, private partners also financially benefit from operating said utility systems as well as collecting other associated fees and costs. The result is a win-win situation that we expect to  produce a wide range of benefits for years to come.