5 key considerations for formalising public sector energy collaborations
In the rapidly evolving landscape of place-based decarbonisation, the importance of collaboration between public and private sector organisations cannot be overstated. As we've explored in our previous article, these partnerships are crucial for delivering the complex, integrated energy solutions needed to meet our net zero ambitions. But what do these collaborations look like in practice?
First and foremost, it's essential to understand that there's no one-size-fits-all approach to energy collaborations. The right model depends on a variety of factors, including the specific needs of the local area, the risk appetite of the parties involved, and the nature of the projects being undertaken. That said, we typically see partnerships falling along a spectrum, from informal collaborative agreements to more formal, structured relationships.
At one end of this spectrum, we have Memorandums of Understanding (MOUs). These non-binding agreements are often the starting point for many partnerships because they create a framework for collaboration without the need for complex legal arrangements, setting out the shared goals and intentions of the parties involved. The benefits of MOU’s lies in their flexibility and speed - they allow partners to start working together quickly, exploring opportunities and developing solutions without being bogged down in lengthy contractual negotiations.
Meanwhile, Joint Development Agreements (JDAs) take collaboration a step further, often involving cost-sharing arrangements and more specific commitments. JDAs are particularly useful when partners are ready to progress from high-level discussions to more concrete project development. They can help provide the structure and confidence needed to move forward with cost incurring activities like grid applications or planning consents.
At the other end of the spectrum, we have Joint Ventures (JVs). These are formal legal entities created by the partners to deliver specific projects or programmes. While JVs can be powerful vehicles for delivering complex projects, the high level of upfront work required to establish and maintain can make them time-consuming to get off the ground. This approach may not align with the urgency of decarbonisation needs in some cases, given the pressing timelines we face in addressing climate change.
If you're considering how to formalise collaboration to pursue your energy strategy, here are five key things to consider when identifying the best approach:
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Goals and timelines: What are you trying to achieve, and how quickly? MOUs and JDAs can be faster to implement, offering the flexibility to adapt to rapidly changing circumstances. If you need to move quickly, these more agile frameworks might be more suitable than a JV.
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Risk appetite: How much risk are you willing and able to take on? While JVs generally provide access to a revenue stream, they also involve significant risk-sharing. Many public sector bodies might find MOUs or JDAs more appropriate, allowing for collaboration without taking on excessive financial or operational risks.
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Resource availability: Do you have the internal capacity to manage a more complex partnership structure? If resources are limited, starting with an MOU allows you to explore opportunities without committing significant management time upfront.
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Project pipeline: Is there a clear set of projects or opportunities identified? MOUs and JDAs can be effective for exploring and developing a project pipeline collaboratively, before considering more formal structures.
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Procurement considerations: What are the procurement implications of different partnership models? This is a crucial consideration for public sector bodies. MOUs and JDAs often offer more flexibility within existing procurement frameworks.
It's also worth noting that partnerships can evolve over time. Many successful collaborations start with an MOU, progress to a JDA for specific projects, and may eventually lead to more formal arrangements if the partnership proves fruitful and there's a long-term pipeline of opportunities.
Regardless of the model chosen, there are some key principles that underpin successful energy partnerships. First and foremost, partners need to be aligned on what they're trying to achieve, sharing a common vision and goals. Open communication is equally crucial, as regular, honest dialogue helps navigate challenges and opportunities that arise along the way.
Flexibility is another vital principle, given that the energy landscape is changing rapidly, and partnerships need to be able to adapt. This goes hand in hand with a long-term commitment, as decarbonisation is a marathon, not a sprint. It's important to look for partners who are in it for the long haul.
Finally, a local focus is essential. The best partnerships are those that truly understand and invest in the local community to realise a just transition to a low carbon economy. By embracing these principles, energy partnerships can create robust foundations for successful collaboration and impactful outcomes in the journey towards net zero.
By carefully considering these factors and principles, public sector bodies can forge collaborations that not only deliver on their decarbonisation goals but also bring wider benefits to their communities. Through effective partnerships, we can accelerate the transition to net zero, create local jobs, and build more resilient, sustainable cities and communities across the UK and Ireland.
