May 30, 2024
Prior to surging interest in renewables, little had changed over the past few decades in an energy industry dominated by fossil fuels.
Prior to surging interest in renewables, little had changed over the past few decades in an energy industry dominated by fossil fuels. At this point, it is clear that we need new energy solutions. Even as we continue to rely heavily on fossil fuels, they will not last forever. Enter public-private partnerships (PPPs). They are the future of energy.
The idea of harnessing PPPs in the search for new energy solutions is to combine the best of what both the public and private sectors have to offer. If we have learned anything about renewable energy production over the last 20 years, it is that new energy sources require PPPs to get off the ground.
Financing and Development
Harnessing the power of PPPs in the energy sector is about two things: financing and development. Public partners have access to a level of financing the private sector does not. As such, government funding is critical to developing new energy solutions.
The public sector also helps through regulatory framework, policy support, and scientific assistance. Meanwhile, private sector partners bring industry expertise, project management, and technological development to the equation. Their ability to commercialize projects eventually makes them self-sustaining, mitigating the need for government funding.
Why the Partnerships Work
History is rife with examples of PPPs that didn't work. Furthermore, logic dictates that some partnerships just aren't appropriate. That is not the case in energy. The energy sector is one of the few industries that seems custom made for PPPs. To be blunt, PPPs just work in energy. Here's why:
Increased Funding – Implementing new energy solutions is not easy or cheap. A tremendous amount of expensive research and development goes into every project. Without PPPs, most new energy projects would never get beyond the concept stage.
Improved Innovation – If funding is the fuel that drives energy projects, innovation is the engine that does the work. Combining public and private resources speeds up the innovation cycle. PPPs encourage collaboration, knowledge sharing, and pushing the envelope. It all leads to improved innovation.
Improved Efficiency – Public-sector projects have a history of efficiency problems. On the other hand, efficiency is a cornerstone of the private sector. By combining the two sectors in partnership, you get public-sector resources deployed more efficiently by private-sector players.
Developing new energy solutions requires all three: large volumes of funding, significant innovation, and the efficiency to make it all work. PPPs can do things for energy projects that neither the public nor private sector can do on its own.
It's Already Happening
It is worth noting that harnessing PPPs for new energy solutions is not something to work for in the future. It is already happening right now. Those of us involved in the energy sector need only take advantage of the opportunities in front of us. As we do, PPPs will only grow.
One of the organizations already on board with PPPs is the World Bank. Its Climate Toolkits for Infrastructure PPPs provide frameworks for new projects in water production and treatment, transport infrastructure, solar and wind power, hydropower, and more.
In Latin America and the Caribbean, the Inter-American Development Bank (IDB) is heavily involved in promoting PPPs devoted to projects focused on bringing micro-grid electricity to remote regions. The bank financed more than $14.8 billion in projects in 2022.
The world relies heavily on energy. Cutting out fossil fuels and returning to the days prior to the industrial revolution are not an option. So if we are to press forward, we need to develop new energy solutions. PPPs are a critical component without which new energy solutions will remain just out of reach.
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