What are Public-Private Partnerships?
Public-private partnerships come in many forms, but typically are long-term contracts between a government entity and a private partner to collaborate on a project, such as public transportation, parks, and convention centers. The partnership collaboration can include financing, building, and operating projects.
There are 10 different model types for public-private partnerships, differing in responsibility of project construction, operation, ownership, and revenue generation. In the context of carbon removal, the three most relevant model types include:
For carbon removal, public-private partnerships enable the federal government to invest in technology innovation, procurement, and innovation by unlocking significant private investment. Additionally, public-private partnerships can de-risk carbon removal technologies in the eyes of markets, promoting commercial opportunities.
How do Public-Private Partnerships work?
Public-private partnerships function through contracts, with contract periods typically lasting 20 to 30 years. Each public-private partnership is unique to a certain extent, but, typically, the public entity will define project objectives and monitor compliance. On the other hand, the private entity will participate in designing, completing, implementing, and funding the project. Typically, the public entity will provide project financing, but in certain partnership types, the private entity will be in charge of financing. Both entities will distribute project risks between them, based on each entity’s ability to assess, control, and cope with risks. However, establishing effective public-private partnerships can be difficult. Public-private partnerships differ across sectors, project types, and government levels, making establishment and management of the partnership challenging.
Public-private partnerships promote large-scale government projects and spur technology and innovation. Additionally, these partnerships help lessen government investment risk. The private sector can play a big part in decreasing government risk by reducing costs, enhancing technical expertise, and improving delivery of services. Through these avenues, public-private partnerships can play a major role in advancing carbon removal. A key avenue for the federal government to promote carbon removal innovation and infrastructure is through “crowding in” (i.e., attracting) private sector investment. To encourage carbon removal research, the federal government can leverage its research capabilities to analyze and share information about the opportunities and challenges facing carbon removal solutions. Additionally, the federal government can bring key stakeholders across industry and civil society together to catalyze project development. As for carbon removal infrastructure projects, the federal government can collaborate with industry and civil society to accelerate infrastructure buildout.
Key Design Considerations for Public-Private Partnerships
What are the project objectives? What are the desired outcomes for the partnership collaboration to advance carbon removal?
What are important checkpoints and deliverables for different phases of the project to reach desired outcomes?
Which contract type works best for achieving carbon removal project goals?
How long-term must the contract or partnership be in order to achieve project goals?
What are potential project risks? How much risk can each entity undertake safely?
- Ownership –– Which entity has ownership over the entire project, or parts of the project?
- Financing –– Which entity is providing funding for which parts of the project?
- Design –– Which entity is in charge of project design?
- Construction –– Which entity is in charge of project construction?
- Maintenance –– Which entity is in charge of maintaining the project?
- Operation –– Which entity is in charge of the project operations?
What type of financing mechanisms make sense for the project?
U.S. Experience with Public-Private Partnerships
The U.S. Department of Energy (DOE) has experience with public-private partnerships through its Clean Energy Manufacturing Initiative (CEMI). CEMI establishes partnerships with the private and public sectors, universities, think tanks, and labor organizations to advance innovation and markets for clean energy. Partnership projects include pilots, initiatives, institutes, and facilities. CEMI initiatives include the Technologist in Residence pilot designed to catalyze strong national laboratory-industry relationships, and the Cyclotron Road created to provide resources for entrepreneurial researchers to advance breakthrough energy materials and manufacturing technologies.
DOE also leads on a number of carbon capture, utilization and storage (CCUS) projects; research, development, and demonstration programs, and initiatives to advance the commercial deployment of CCUS. The Regional Carbon Sequestration Partnerships (RCSP) Initiative is a network of seven public-private partnerships, comprised of more than 400 organizations, with the goal of developing the necessary technology, infrastructure, and regulations required for large-scale implementation of carbon dioxide sequestration in different regions and geologic formations. Additionally, the Clean Coal Power Initiative (CCPI) is another public-private partnership under the DOE between government and industry with the goal of developing and demonstrating CCUS technology. Lastly, the DOE’s National Energy Technology Laboratory (NETL) is implementing a public-private partnership program, known as the Industrial Carbon Capture and Storage Projects (ICCS), with the goal of increasing investment in CCUS.