Addressing net-zero targets on Public Private Partnership contracts
According to the Canadian Council for Public Private Partnerships, Infrastructure must be an important part of the Federal Government’s pledge to target a net-zero economy by 2050.
The organization further states that findings from a UN global report reveals that infrastructure accounts for 79 percent of all greenhouse gas emissions and 88 percent of all adaptation costs. In Canada the construction industry accounts for approximately 39 percent of total GHG emissions annually.
The Canadian Council for Public Private Partnerships says that there are currently 291 active P3 projects across Canada. Thirty-nine of these are in the pre-construction phase, 29 are in construction and 223 in operation: “Some existing and many future P3 projects will face upgraded government targets before the end of their contracts, resulting in the need to review some design, construction, and operational considerations.”
A decade ago, sustainability and carbon emissions were a topic, but emissions were seldom incorporated into the contract language or technical requirements, says the organization. Since then, technology, carbon capture and other emissions reduction techniques have evolved to a point where there are several examples of the private partner needing to embed GHG emission targets in project performance requirements.
While P3 contracts vary in nature, they do contain mechanisms that address future change, including legal, regulatory, innovation or client driven change. Existing P3 contracts will need to use these change mechanisms to adopt improvements in GHG emission targets, as part of the performance specifications during construction and/or operation.
Feedback from the industry suggests that the impact on annual operations and maintenance (O&M) and the life cycle replacement costs, because of a need to comply with GHG emission targets, is negligible. The impact is seen in the design and construction costs associated with making these changes and will need to be accounted for within the adopted change mechanism.
The next wave of P3 projects will need to consider implications for Canada’s emissions and net-zero targets. This includes upfront research to establish targets that can feasibly be met, not just within the technical requirements, but also in relation to energy usage, greenhouse gas emissions and the practical requirements of the vertical or horizontal infrastructure.
To demonstrate what can be done, the Canadian Council for Public Private Partnerships has highlighted below the Gatineau 2 project as a case study, delivered for Library and Archives Canada. This P3 project shows how GHG emission targets can be successfully included in a P3 project performance mechanism.
The Gatineau 2 project recently won the gold award for Infrastructure from the Canadian Council for Public Private Partnerships. It was the first P3 project subject to the Federal Government’s Greening Government strategy, that requires the use of carbon-free renewable energy sources for the day-to-day operations to reduce the annual GHG emissions to close to zero.
The Gatineau 2 project’s 21,000m3 of highly controlled environment for the protection of archives is the first net-zero preservation facility in the world, and the largest preservation facility with an automated storage retrieval system. In addition, the existing Preservation Centre had to achieve 80 percent GHG reduction over the next 30 years. Currently, it has approximately 2,000 tonnes of GHG emissions per year, but a 40 percent reduction must be achieved by 2030 and 80 percent by 2050.
Multiple changes were needed to meet this net-zero requirement, with the most crucial challenge being the wording in the RFP documentation to allow the bidders to propose an affordable solution to meet the requirements. Now the project has been completed on site, there are opportunities to learn that could change the way buildings operate. Solutions have been developed for the operations of the Gatineau 2 facility that could set a benchmark for other buildings in the future.
Lessons learned from the Gatineau 2 project for both future P3 projects and those using other procurement models:
- Set expectations from the start of the procurement process and include completing research to establish what can feasibly be achieved in terms of emissions targets and energy use in both the construction and operation phases. This should be included in the project business case prior to going to the market.
- During procurement, open discussions with bidders are needed to clarify expectations, how performance will be measured and where risk is apportioned. Innovative solutions can be submitted as options with the RFP response.
- During construction, commitment to the outcomes established in the procurement phase must be maintained. Change required during construction should not compromise the performance targets.
- Throughout construction and operations, performance measurement and reporting must be established and maintained in accordance with the contract requirements.
The P3 procurement model can provide innovative, on time and on budget solutions when used on the right projects. It is possible to meet the government’s future reduction in GHG emission targets within the construct of future P3 contracts when appropriate planning and controls are adopted.