Energy Management

Bridging the expertise gap to deploy energy P3s

State and local agencies shoulder roughly 80-90% of U.S. public infrastructure investment and face increasing pressure to modernize. Yet they face a multi-trillion-dollar funding gap just to maintain and update existing assets, according to a recent Brookings article. Traditional design-bid-build procurement often cannot deliver projects fast enough to keep pace with growing energy demand and resilience needs. That model also leaves public agencies holding most of the risk of building, operating, and maintaining the infrastructure.

Public-Private Partnerships (P3s), particularly the Energy-as-a-Service (EaaS) model, allow agencies to take control of their energy needs and budgets, as well as harden critical infrastructure without upfront capital. EaaS also shifts performance risk to experienced private partners.

However, the success of these models often depends on how they are perceived. Most early U.S. P3 projects focused on high-visibility assets such as toll roads, bridges, and airport terminals, often sparking debate about privatization of public landmarks. Energy P3s, by contrast, target invisible infrastructure such as microgrids, HVAC systems, building controls, and EV charging. Using a P3 model for these projects allows agencies to materially improve resilience and lower operating and asset lifecycle costs without ceding control of public icons or triggering the same level of public scrutiny.

Transitioning to these innovative models requires navigating a complex landscape of legal, political, and operational hurdles. To successfully deploy these projects, it can be helpful if public leaders are prepared to tackle four common roadblocks.

To help navigate P3 options, Schneider Electric developed a P3 Playbook centered on three models: energy savings performance contracts (ESPCs), power purchase agreements (PPAs), and energy as a service (EaaS). This is the fourth in a series of blog posts to help public leaders learn about the benefits of P3s. Other blog posts in the series are:

One of the most significant barriers to P3 adoption is the differing legal frameworks across states. All 50 states have legislation supporting Energy Savings Performance Contracting (ESPC) models, but program design and allowable measures vary widely. Power Purchase Agreements (PPAs) and EaaS are often subject to more nuanced regulatory statutes and utility regulations, particularly in territories where incumbent utilities have strong monopoly or franchise protections. Traditional procurement rules are often designed for design-bid-build approaches and may lack the flexibility needed for energy-related P3s.

Mitigation strategies to legal and regulatory hurdles include:

  • Internal and external reviews: Use legal and financial resources to thoroughly review state legislation and organizational bylaws to determine if energy P3s are a viable option.
  • Consultation: Engage with other public entities that have successfully undertaken similar P3 projects to gain valuable insights into navigating local regulations.
  • Legislative advocacy: Work with local and state officials to amend restrictive laws, improve procurement processes, or issue executive guidance to unlock P3 potential.

Political and public opposition

Because energy P3s function as a modernized utility service with agencies retaining control over facilities, they tend to face less public pushback than a toll road or airport concessions, where users face direct changes in pricing or branding. However, success still hinges on clear communication. Agencies can consider proactively addressing concerns regarding transparency and ensure the contract is structured to remain stable across multiple political administrations, preventing a shift in priorities from derailing long-term energy goals.

Mitigation strategies for political and public opposition include:

  • Value-for-money analysis: Perform a robust analysis to demonstrate the clear financial and operational value the partnership brings to the community.
  • Stakeholder outreach: Develop a plan to educate stakeholders and solicit community feedback. This includes engaging affected employees and ensuring transparency throughout the process.
  • Early buy-in: Garner support from key internal stakeholders early on to help build a foundation for project success.

Capacity and expertise gaps

A global survey of 60 renewable-energy P3 experts found that one of the top reasons P3 projects succeed is having skilled, efficient public-sector teams to manage them. This highlights the potential challenges for local governments when such capacity is absent.

Surveys of state and local governments consistently identify lack of internal capacity—especially specialized legal, financial, and technical skills—as a primary barrier to adopting P3 structures. This knowledge gap often prolongs the procurement process and contract awards.

Mitigation strategies to overcome capacity and expertise gaps include:

  • Staff training: Invest in peer-to-peer learning upfront to reduce long-term reliance on external firms.
  • Targeted external advisory: Budget for qualified legal and financial advisors who have a proven track record of closing similar P3 deals.
  • Advisory panel/center of excellence: Leverage industry associations to bring on technical, legal, and financial advisors to provide ongoing guidance and support, mitigate structural learning curves, and accelerate procurement.

Financial and risk allocation issues

Independent evaluations of P3 programs highlight risk allocation, especially around construction, demand, and long-term operations, as a primary determinant of project success. When misaligned, they are a frequent source of disputes. Poorly structured long-term agreements can reduce an agency’s future budget flexibility. This is particularly true when availability payments or minimum payment guarantees are not balanced with performance and termination protections.

Well-structured energy P3s can convert unpredictable capital and operating costs into more predictable, performance-based payments while accelerating upgrades to mission-critical infrastructure. The collaborative processes and disciplined approaches outlined below provide a strong foundation for a sound, value-driven agreement:

  • Risk allocation workshops: Conduct internal sessions to determine the optimal balance between cost and risk transfer.
  • Lifecycle evaluation: Study similar long-term assets to ensure the contract preserves enough flexibility for future technological shifts and that all costs related to these assets—such as maintenance, insurance, and permitting—are considered in comparing the P3 to a traditional capital project.
  • Clear performance metrics: Establish key performance indicators (KPIs) before selecting a partner to ensure long-term accountability.

Download our P3 Playbook to learn more about energy P3s

By addressing legal constraints, fostering political buy-in, and proactively closing expertise gaps, agencies can successfully leverage private capital for public purposes. Download our P3 Playbook to learn more about P3s.

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