The city of Los Angeles leads the way in pursuing clean energy solutions for its citizens. As the largest green economy in the nation, Los Angeles has recognized that in lieu of a federal energy policy, it must make clean energy improvements and upgrades itself.
But, challenges remain, and cities like Los Angeles still search for ways to consume energy more responsibly, upgrade critical grid infrastructure, and effectively accelerate and implement grant opportunities. In order to make a significant shift toward a more sustainable energy economy and ensure that demonstration programs grow to large scale, Los Angeles and other cities across the country must embrace public-private partnerships, or PPPs.
Public-private partnerships combine the best of public-sector governance with the most valuable private-sector efficiencies. Commonplace throughout the rest of the world, these unique partnerships allow government to tap into an enormous pool of idle private capital. Fifty-five percent of megacity stakeholders around the globe predict that PPPs will become the main financing method behind major city management. And research shows that even in some of the wealthiest parts of the world – Europe, for example – 15 percent of public-sector organizations use public-private partnerships to finance infrastructure developments.
It’s no doubt these partnerships bring value to cities, but to date, the public sector has been slow to develop infrastructure projects using PPP vehicles. Some of this is due to legislative requirements; additionally, it takes time to implement new policies and procedures when public funds and projects are at stake. U.S. investors are beginning to show an increasing appetite for PPPs as infrastructure investments continue to provide more stability.
So, with mutual interest in infrastructure and the need for further investment, one would expect to see a large number of public-private partnerships throughout the country. But, while some promising deals have trickled out from the pipeline over the past several years, the expected flood of projects has not occurred.
Well-designed program
However, the U.S. PPP market appears to have moved on from projects done on an ad hoc basis to deals that focus on identifying and potentially selecting viable PPP projects and advancing a number of these projects through a well-designed program.
The key to developing more of these partnerships is to rely on experience shared among the financier and the facility. As the politicized nature of these partnerships continues to disappear, cities need to take advantage of the alternative methods available to them.
The L.A. region is extremely well-positioned to lead the nation in successful implementation of infrastructure projects through these partnerships. Thanks to a bill signed in February 2009, legislative authority is in place for the state Transportation Department and regional transportation agencies to enter into unlimited public-private partnerships until Jan. 1, 2017. This bill means that initiatives such as the downtown L.A. streetcar project, DesertXpress and the e-Highway concept, large-scale projects that likely will only be realized through PPPs, have the best chance for success.
By establishing partnerships with companies, Los Angeles can also take better advantage of funding initiatives such as the $120 million Smart Grid regional development program. The program began with a $60 million award from the Department of Energy and the city matching 50 percent of the grant with local funds. Public-private partnerships could extend not only the funding, but increase the scope and significance of the proposed projects to include additional features such as demand response and vehicle-to-grid technologies.
The goal is to put dollars to work in the right way. PPPs help control project costs, secure new capital and ensure projects can go from demonstration to implementation on a larger scale. By adopting more public-private partnerships, Los Angeles can improve the quality of life for its citizens by making the critical energy infrastructure improvements necessary to move toward a more sustainable energy economy for the long term.
Thierry Godart is president of the Siemens Smart Grid Division, U.S., in Minnetonka, Minn.
