High Energy

On-campus energy infrastructure P3s have been a popular choice in recent years. We check in with one project after 18 months of operation

In January 2021, the University of Idaho reached financial close on its trailblazing energy P3. Under the deal, the university received a $220m upfront payment from a consortium led by Plenary and Sacyr, in exchange for giving the consortium the right to manage and maintain its energy system for 50 years.

The project includes “long-term leasing of facilities covering the supply and management of chilled water, steam and condensate, electrical distribution, domestic water, compressed air, stormwater, sanitary sewer and reclaimed water”, according to the university.

It is hoped that the move will result in the operation and management of a more efficient, environmentally friendly energy plant across the university campus. However, more than that, the P3 agreement is designed to take away responsibility for managing the energy operations from the university, and give it to the private sector experts who can work to improve and develop the system.

Eighteen months into the new contract, the transition appears to have gone well. “Most people wouldn’t know there has been a change because they will see the same people carrying out the work,” says Brian Johnson, utilities engineer and P3 liaison officer at the university.

Lee Espey, division operations officer at the university, agrees. “We spend a lot of time on the contract management side. We have a good relationship with the private partners. The premise on which the P3 is based creates a lot of incentives for the private partners.

“Sacyr and Plenary have been great partners: this is their first utility P3 in higher education in the US, and so they have been learning as well. We have spent a lot of time building the team.”

With energy prices currently soaring, handing over responsibility for improving energy efficiency and utility services to private sector experts may be a good choice over time.

“The P3 has had zero effect on our energy costs because we still pay those directly,” explains Johnson. “But in the long term, with the improvements that are planned, it will help reduce our energy costs by making the system more efficient.”

“The mechanism for paying fees based on CPI does protect us from large spikes and dips,” adds Espey, “but the structure of the contract means the fees do escalate over time.”

In fact, the key benefit of the P3 may not be in the energy utility itself, but in the cash that the deal has freed up for other purposes. Espey points out that the upfront investment from the consortium has been invested in the university’s core missions of research and education.

“The bet is that it will pay off above what we pay back to the concessionaire,” he says. 

That bet may already be showing signs of being a success. Espey believes that the investment the university has been able to make into its other facilities has been a key factor in attracting more students.

“We are expecting more students because of the investments we have made,” he continues. “There is a significant increase in numbers for Fall 2022 because of some of those investments.”

The project is demonstrating how an investment into one area can lead to significant dividends elsewhere on the university campus.