Contributors
PFI projects can play a significant role in helping the public sector reach its net zero targets and the Government has now published guidance on the decarbonisation of operational PFI projects.
Know the project
Success will be much more likely where authorities have a thorough understanding of their project, in particular the way in which energy provision and use is addressed and how the change mechanism operates. The guidance acknowledges that PFI agreements may continually need to be reviewed and varied to make the changes necessary to achieve decarbonisation.
Come together
The government primarily recommends that parties should work together at the outset to develop a decarbonisation plan identifying the baseline emissions of a PFI project and a pathway to net zero carbon with a series of preferred interventions that could be implemented in the short, medium and longer term, subject to detailed assessment and approval in appropriate stages. This plan should be based on five key principles:
- Data first – parties should start by gaining access to data about existing energy consumption and operational carbon emissions which can be used to establish baselines
- Know your contract – parties should understand where risk and responsibility is allocated in relation to existing requirements
- Engage stakeholders – all stakeholders should be represented in groups that can approve, deliver and oversee change
- Prioritise – reduce budgets by reducing energy demand before investing in more efficient mechanical systems;
- Make a plan – parties should make a flexible long term plan for decarbonisation which identifies baselines, targets and monitoring of progress.
Ready to start
Once the decarbonisation plan has been developed, parties can then begin the process of actually delivering the net zero change and building on what was identified in the decarbonisation plan. The starting assumption for many net zero changes will be that the change will be implemented using the change mechanism in the contract, although this may not always be the case and the parties should look at opportunities to deliver decarbonisation without having to instigate a formal change.
Where formal change is required, early feasibility assessment, is crucial to understanding whether the net zero change will be successful. Government advises that prior to any major decisions being undertaken to create a working group, made up of key stakeholders, to agree a plan going forward. Considerations should be given to:
- Any baselining (most likely already determined in the decarbonisation plan)
- Resources, relationship and management of any net zero change
- Any due diligence required for any contract changes
- The actual process of implementing change under any change mechanism.
If parties agree that the change is feasible, the steps that follow (i.e. the building of proposals and implementing the change) will build on the decarbonisation plan and feasibility assessments already carried out. This will streamline the process and make it more likely to be implemented effectively.
We have experience advising clients in relation to both decarbonisation projects and operational PFI projects across a range of sectors including education, health and waste. If you would like support with the decarbonisation of your PFI project, please contact Andrew Hirst.
