Matt, welcome to the campus energy and sustainability podcast. In each episode, we talk with leading campus professionals, thought leaders, engineers and innovators addressing the unique challenges and opportunities facing higher ed and corporate campuses. Our discussions will range from energy conservation and efficiency to planning and finance, from building science to social science, from energy systems to food systems. We hope you're ready to learn, share and ultimately accelerate your institution towards solutions. I'm your host, Dave carlscod. I'm a Director of Energy and Sustainability at Brailsford and dunlavey. You
know they say in the p3 space, if you've worked on one p3 you've worked on one p3 so they're always different and changing, which is why it's so fun to work on these. It's
really interesting to see the markets starting to mature in ways that are creative and interesting. And no two projects are the same, and every one is custom tailored.
I think the most effective projects I've engaged with the client has gone through some period of self reflection and hopefully planning that leads to this is what we think we want from a project.
In this episode, I'm joined by three experienced voices from the world of campus, energy, public private partnerships, Mike Walters of Sals O'Brien, Leslie fangham of Fang and Associates and David braslov of neresco, each brings a unique perspective, technical, contractual and strategic on how P threes are evolving. We explore where these projects have struggled, what makes for a great project, and how progressive P threes are, opening the door to a more flexible, collaborative partnership, whether you're trying to modernize your thermal plant, explore new financing tools, reach sustainability targets, or understand how data centers and other emerging technologies might fit into the future of campus energy. This conversation will give you plenty to consider. I hope you enjoyed this conversation, recorded in June 2025
you Mike,
Leslie and David, it's great to have you on the podcast today. Thanks, Dave, it's great
to be here. I'm really excited
about the conversation. Yeah, thanks, Dave. I think there are lots of interesting things to talk about today, so looking forward to the discussion.
Yes, Dave, thanks so much for having very excited. I always love to talk about this conversation, so it's great to have the four of us together.
Great. Well, thanks again for joining me. I wanted to pull this group together because I know you've all been living in these types of energy. P3 projects from different angles, some from development, from technical advisory, client side strategy. Before we get into the substance of the topics today, let's just take a minute to ground folks in who you are and why you're showing up on this podcast today. So Mike, maybe we'll start with you. You know, I know you, you and I have known each other. What 15 years now, it's kind of hard to believe. And you've been supporting institutions, really, from a technical lens, I guess I'd like talk to us a little bit about your concept of p3 how you got here, but tell us who you are first.
Yeah, thanks, Dave. So Mike Walters, I'm a principal with Sally so Brian. Have been in the sustainable energy space for about 25 years now, primarily doing a lot of energy master planning, climate action planning, and eventually leading that work more towards implementation and development work, which was, you know, really focused on design, build, own, operate, maintain, types of contracts. And I think the industry just seems to like the term p3 is a easier thing to say than all that. So that's kind of where, where it's ended up. That's great. Leslie, I know you've been on both sides of public private partnerships, both on the developer side and now, you know, on the owner side sometimes, but tell us a little bit about who you are and how you got into this work.
Yeah, Leslie fengman, president of thingman and Associates. And for the last 30 years, I've been doing infrastructure design build work, but the last 10 of those really with a focus of energy infrastructure and in the p3 space. And yes, I've had the design builder hat on the developer hat, and now the owners representative hat as well. So and I've operated systems. So it kind of gives me a unique lens to really make sure that you know whether you are design, building, it, operating, financing, whatever the deal structure is, there's those things are all tied with a very nice thread, and so one thing certainly affects the other. And so I enjoy these deals, as you well know, and they're just fun. And you know they say in the p3 space, if you've worked on one p3 you've worked on one p3 so they're always different and changing, which is why it's so fun to work on
these. Great to have you, David, I know you you, and I've been speaking for a couple of years now, and I've really appreciated your ability to think through the contractual obligations in these deals and how these deals are structured, and kind of the complexity of the lawyers and the engineers and the financing kind of all playing together, so maybe. Give us a quick intro and looking forward to talking
with you today. Yeah, thanks, Dave. David braslow Nesco is vice president of project structuring and financing, and you really hit the nail on the head. What I'm responsible for is is sitting at the intersection of that technical, financial, contractual Nexus and trying to align everybody's interests and optimize the contractual and financial structure of the project. Neurosco is an energy services company. We've been doing these kinds of projects for, you know, 40 plus years, and I've been doing it for that long before these projects were called P threes, they were sometimes called D booms, design, build, own, operate, maintain. So you know, it's it's really interesting to see the markets starting to mature in ways that are creative and interesting. And Leslie, I share your opinion that these projects are a lot of fun, right? Because no two projects are the same and everyone is custom tailored. That's a term I like to use, right to try to meet the expectations of all the stakeholders. Well,
let's maybe we should start with, you know, broad, strokes. I know I've done a previous podcast on energy p3 so we don't need to define it soup to nuts. But just to kind of set up today's conversation, I thought it might be helpful in your intros. You're already starting to talk about it. I know Mike, you say you tended to call it D boom. P3 is more general, maybe by way of talking about how things are shifting. We can define where they were and where they were, where they're going. So maybe Leslie, I'll start with you, like you've been doing this work for a while. Can you just kind of, how did you used to describe the concept of energy? P3 where is it going now? I mean, just high level, just to get to set up the conversation.
Yeah. I mean, I think that, you know, David just hit on something that is very interesting, on to kind of where it was going to, where, where it's going now, and I know we're we'll dive into this in a little bit more detail. But these energy projects are so different, right? You know, P threes in the traditional infrastructure space, right? Building roads and bridges were fairly simple or straightforward, maybe, if you will. And I think the energy P threes tried to take that model, and the reality is, is, because they're so customized, and because they're so different, there's not a one size fits all. I mean, with the federal D, o, t, the states kind of had a guiding principles for roads and bridges and how that looked. And I'm not saying that those were some kind of easy those are some very interesting P threes itself, but the energy space, because you're talking about reliability, resiliency, sustainability, goals, different technologies and the climate is so different. You know, you can't build in Washington as you can in New Orleans and vice versa. And so you really want a more partner right? Is really the important part of the p3 and it is a more partnership deals that are going forward. And yes, they contractually have to be right, and most importantly, everybody needs to understand those contracts. You want sophistication on both sides of the coin, because that's how you really have a good partnership, but it's not I think some of the original P threes were so focused on the design build, because that's where everybody started from. And knew that when you're starting sign a 20 or 40 year contract, right? You need to make sure that your KPIs are aligned across the board, so that if you and I do a deal, Dave, you know we're not gonna be around for the totality of that contract. So how do you make sure that both sides are aligned going forward, not just from a technical standpoint, but really from a community and goals? So I think that progressive p3 and that partnership is where it's going and heading.
That's great. Yeah, David, I guess you know, you've been doing these deals for a long time. What? What are they? What were they? What are they becoming? How would you answer that
question? Yeah, I guess I would add to what Leslie said. You know, there's been a shift in focus, right as as more projects are contemplated and people understand sort of what the benefits and what the risks are. So, you know, the early energy p3 is largely focused on asset monetization. People were looking at them and viewing them as as great big pots of gold at the end of the rainbow. And there were big, big checks that were written that had nothing to do with energy or decarbonization or sustainability, and then there was a transition towards sort of large design build projects, where the institutions already knew what they wanted to do and were intrigued by this. Idea of p3 largely because it involved leveraging somebody else's money, and now I see the focus shifting to much more collaboration. The projects are earlier in the development stage. Customers are less sure about what the solution is, and more interested in picking a partner who can collaborate with them in an open and interactive nature to develop the solution that best meets the institution's needs yet is still viable from a contractual and financial approach,
yeah, Mike, again, I know we've engaged together on some fog shaping projects, as well, as, you know, helping with some implementation projects. So you've kind of, from a technical perspective, seen all angles of this. How, how would you answer this question?
Yeah, I think, you know, Leslie's response made me think most about the risk aspects of this and the breadth of technology that's applied, particularly when you compare it to the traditional p3 of roads and bridges, kind of simple infrastructure. This dynamic infrastructure has so many different kinds of risks associated with it. I think the partner that is picked on both sides of the table, be it the you know the provider or the institutional side, you know you as a provider, have to pick the right partner too that wants to own some of the risks that they, in fact, ought to own and manage most effectively. And I think that's where the the opportunity space really is in the selection, and selecting, you know, people to do this mostly on qualifications, because you're, you're in it to, it's a marriage, right for a long time, and you have to figure out, well, if you're going to do gas turbines with biofuels, or if you're going to do, you know, some other kind of technology in a weird portion of the country that has a lot of risks associated with commodity costs, for instance, who's going to manage those risks? And how best do you actually contractually align everybody's interests over the long term and provide some flexibility? Because we all don't know how the world's going to work in 25 years. So what possibilities there are to change things. I think that's the kind of the dynamic and really interesting part of where the space is going.
Yeah, maybe just to back up for one second, because I think we jumped ahead, because this is a great group. It's been thinking about this for a long time. Can you describe, just like, what are we talking about? Physically, like, if you had to describe a project to your, you know, brother in law to Thanksgiving dinner. Like, maybe just give a quick description of that, because I like to build on all the things you guys just said. But I think if we're a little too ethereal, I may lose some folks on the listener side. Maybe Mike, I'll start, yeah, I'll start with you. Like, what? What are you building? Like, what's the thing that's getting built in these projects? It's not a road, it's not a bridge. What
is it? It's not a road, it's not a bridge. But, you know, maybe most simplistically, it's a central utility plant, or utility plant of some kind that is providing, usually thermal utilities and sometimes thermal utilities with electricity production, right? And so in its simplest form, it might be all new infrastructure that is being provided for a new development or a new portion of a campus in an institutional setting, but in a lot of cases, right the existing assets are part of the puzzle too. So you might be renovating some buildings, you might be replacing some distribution infrastructure in a district energy situation, and you might be replacing production assets on the thermal or electric side to meet other objectives, like sustainability objectives, to decarbonize a large campus. So you could be talking about boilers, chillers, cooling towers, distribution system, turbines, PV panels, wind turbines, the gamut of energy supply could be a part of the broader system. Okay, very technically accurate. I don't know that my cousin Lenny at the Thanksgiving table would have picked up most of that, but I'm sure Leslie can help us out here, because she's really a good communicator.
I'll try. I mean, yes, Mike's Mike's answer was spot on, and certainly all resonates with us, but when I'm usually describing it to my brother in law at the Thanksgiving dinner table, and what do you do? And it's We. We. I deal in projects that on a campus size scale, thermally heat and cool so much like your HVAC system or your heating system in your house. I'm just doing it with multiple buildings interconnected, and I've so far gotten back to the point of district energy was it really is just water, right? It's whether it's steam, hot water, chilled water, you're just moving water underground to then thermally heat and cool buildings using a variety of technology, some that's familiar to folks like. Like boilers and chillers or solar or some that are not so familiar to folks, like sewer heat recovery or geothermal, but the technology we really doesn't matter as much as the fact that we're utilizing water to heat and cool buildings. So I don't know if that hit the mark for you.
That's good. No, it's great. So I'll switch it for you, David, just because you have to explain this to attorneys and finance people, how do you describe these projects? When they say, Well, what are we building here? What are we buying?
Yeah, when I try to distill it down to like, one or two sentences, right, what I tell people are that we're designing, implementing and operating energy generation assets right that include improvements to the distribution system and improvements to the end use energy to optimize energy efficiency, to reduce operating costs and to transfer risk when it's appropriate, from the University to the to the p3
operator. All right.
Well, well, hopefully, I don't know. I think I switched it from a brother in law to a cousin somewhere in my metaphor. So, well, we'll leave it there. All right. Well, that helps. Let's talk a little bit about where this hasn't been working like, you know, I know, you know, we work as an advisor, so we're often on the university side or a higher ed institution side, or even a public school side, trying to help them prepare for such a deal that we just discussed. I know in the market there's been, you know, some missteps, some things that haven't gone very well. Maybe where, you know, from your different perspectives, maybe Michael start again with you like, maybe from a technical side, like, you know, these are complicated projects. How have you seen these maybe not going so well in some of the deals that have gone on, because there's been a lot of things that have just failed. Like, it maybe, is that technical, or is there other reasons for we can get into that. But from a technical perspective, where have you seen these not go the right way?
Yeah. I mean, in the interest of protecting the innocent here, uh, I'll try to be as direct but ambiguous as possible. You know, I think, I think, generally speaking, the market is trying very hard to make these projects successful. And I mean the market on all sides of of the project, right? But, but they are complicated projects, right? We just, it took three of us to try to describe what they are, let alone to, you know, how many people there are to implement these projects on every side, on the finance side, on the operation side, on the on the design side, on the legal side, and I think the where they, you know, there are technical challenges for sure, but really, where they seem to fall down is that there are so many subject matter experts that are required to communicate well with each other and to be effective in their own subject matter and inquisitive enough in everybody else's subject matter to, you know, be willing to ask the right questions, to step into the gap and say, I don't understand this about what you're doing. Why do you care so much about that thing or or, and why do I care so much about the things I care about and share those and I, you know, I think that skipping that step or that step often in the project maturation is what leads to to gaps, and where all these risks that we've begun to talk about start to infiltrate into the projects and rear their ugly heads. You know, we we often see that there will be things as simple as the startup of a project just doesn't happen exactly how it should. And for instance, we're helping a client right now, you know, that's engaged in a p3 kind of get to the finish line on some of its construction work, and just flushing and purging the distribution system that's going to be connected to some new buildings was not done correctly. And, you know, they essentially flushed and purged a murky new distribution system into an existing building, which has a lot of problems for that existing building. You know, it can be as simple as just skipping one of those steps, and then the fingers start to get pointed in every which direction. And, you know, it's left looking like it's a technical fault, you know, problem with the project. But it really was a process and a startup in the beginning of the operation aspect of it that you know is not a designer or a constructor issue necessarily, or certainly, I could say a lot more, Dave, but I guess I'll leave it there for Matt, no, I think that's helpful. But I mean, it sounds like it's so there's technical complexity in the projects generally, but it's like, not until you build it, do you even know what you didn't know, and if you weren't thinking about it more from a process flow perspective, not, it's not that the engineers didn't know that. It's just that nobody was like the project manager was supposed to make that thing happen. Didn't know that that was even on his list or her list, or whatever. Yeah. I mean that just the scale of the complication of the projects. There's, you know, their their district energy systems, often with multiple. Energy sources, lots of buildings attached to them, some of which are new, some of which are, you know, 50 or 100 years old. There's, there's just many potential avenues for problems, and you have to have a real, confident, qualified team that's at each stage of the process in order to, you know, move them forward effectively.
Yeah, it makes sense. I mean, I maybe David, I'm gonna go next to you. I know a lot of your job is to contemplate all the terrible things that could happen and make sure the contracts think about how they'll be dealt with. So I suppose you're kind of thinking through the types of things Mike's explaining. Is that a good place to start, but I'll let you take it wherever you want.
Yeah, and kind of taking it up a level from the technical complexity, which is a whole realm in itself. We spend a lot of time thinking about this, because when we make a decision to pursue a project, we're committing to spend a significant amount of money at risk, and we want to make sure right that there's a high likelihood that the project's ultimately going to get awarded to somebody. We recognize that, that somebody might not always be us, but as long as it's viable and can be awarded to somebody, then it's something we're interested in pursuing. And there, there are three things that we think are really key from a success perspective. The first is that there has to be a project champion on the customer side. So there needs to be somebody at a high level who's empowered to make decisions and determine that the project is ultimately going to proceed. If it's decision by committee. It's not going to work. Yeah. The second is that the risk transfer needs to be equitable, and when I say that, what I really mean is it's entirely appropriate to transfer risks to the p3 developer that the p3 developer can control. Don't try to transfer risks that are outside of their ability to control, for example, changes in, you know, the energy commodity market that the customer would be exposed to to begin with. And then the third thing that we're seeing, more and more is a disconnect between the expectations of the customer around sort of the scope and scale of the project, how big the central energy plant is going to be, what level of redundancy it has versus what they can really afford, right, right, oftentimes, right. That the comparison isn't doing the same project themselves. It's what the customer has been doing for the last. You know, 1520, 25 years, which might very well be operating with half of their staff positions unfilled. It might be with control systems that are held together with bailing wire and and duct tape. Yet what they're demanding in the p3 Project is an order of magnitude improvement versus their current operations, but they haven't thought through how they're going to pay for it.
Yeah. I mean, is that the order that you'd think them in? I'd almost think he'd, you know, the project champion seems like it is the first one, but it seems like that your third point is probably the like, what are you comparing it against? Like, why do you need this? Is that essentially the essence of
that? Yeah, and you know, you're, you're very aware of this, sitting in the advisors role, the advisor plays a key, a key role in trying to help the customer understand the value of money, right for the for the p3 transaction, and establishing that comparison point is critical in that, in that discussion.
Yeah, that's great. So Leslie, I know you have, I mean, I've always been impressed when talking to you as you have the ability to sort of think about things both at a human scale and at an engineering scale and as a contractual I mean, similar to David, I think you kind of run through all those simultaneously. I mean, all three of you have those capabilities, which is why you're here talking to me today. But I'd be interested in your perspective, because I know you were on more on the developer side previously, going after a lot of so you must have seen more deals. And you know, maybe you and David probably have seen more deals than anybody I
would imagine. But yeah, sure. I think that David and Mike make, obviously, great points. I would say, though, while you need a project champion on the institutional side, you need that project champion on your p3 side as well. And what I mean by that is, of course, one of my favorite projects to talk about is National Western. And my counterpart, Brad buchannen, we would both say, if you walked into a room during any phase of the project, you would never know who was signing whose paycheck. And I can talk just as confidently about the National Western Center's mission, vision and value, and he can talk just as confidently about the central utility plant and sewer heat recovery and part of that. Is really, you know, not to jump ahead. I know we're going to be talking about this in more depth, but was because it was a progressive p3 and I was sitting on my side, and he was seeing on his side, and we were the only two people that were in every single work stream, right? Because with these projects, you have a commercial terms work stream and a financial terms work stream and a technical work stream and a design build work stream and an O and M work stream. And both of us were great people, because we knew enough about everything that if you pulled this lever over here, what's it going to do over there? But we were both not so egotistical to be the experts. So I would say, David, I need you to tell me this legally. I think this is something wrong, because Mike's over here, technically doing something. And I think this is going to affect the commercial terms. Let's get in powwow and talk. And that's really important to do that, because you you need to have people that understand that while you have these multiple work streams, none of them are in a box, but not everybody can attend everything, and you have to then also, you know, have the grace and the ability to say, I don't know this technical answer, but I'm going to call Mike because he's going to tell me, because I think something that Dave is writing up in the contract is going to screw with this. And I've got good and bad answers on both sides of the equation of how this has worked, well and not. But to Mike's point, to protect the innocent, we'll talk. Try to keep it in more general terms, but it is making sure that everybody is educated and understands, if the financial guys don't understand, I think where you've seen this go bad is, you know, a lot of these upfront payment projects, right? And people thinking that p3 is funding. It is free money. It is a financing tool, not a funding tool, and that's where you can get into a lot of trouble. But if people don't truly understand that, it's like, I always say, Okay, well, if I give you an upfront payment, that's your first mortgage. But what my company, who's like, do winning the rate of return really wants it on the modernization, so now you have to come up with a second mortgage, and what does that look like? Oh, okay, okay, right. So you still have to have money in your bank account. Now good teams, really well put together, teams will be able to also help figure out some of that funding portion, portion of it, like I've always said, sometimes an energy project is a need, but maybe that's not enough. Maybe you need to tie it to student housing or parking or something else that's generating funding, and that's why you need to understand all of those components. And Mike answered it early on in your question, and I'll just kind of reiterate it. It's about on both sides of the partnership, having the right advisors and expertise. I mean, let's face it, the lawyers are the ones who really make the money. Because if David Mike and I are all on a team, right, we each have our own internal or external lawyers, plus we've created one for the special purpose vehicle, plus they've created one for the design build, and they have it on the other side of the equation. So whatever. Don't think that internally, if you're on the university side, that you necessarily have the resources, and even when putting together development partners, don't necessarily think that you have you need the to right size the team for the project and bring on those external advisors and lawyers and technical expertise as you need them now,
that's, that's great. So, I mean, coming back to David's list, I guess it's champion at the university. I think I heard mission alignment, Leslie kind of been somewhere in there, something about a true partnership like that. There's actual it's treated like a partnership, not like a transaction. I'm trying to think there was, it's, it's financing, not funding. That's a key point. Maybe we can dig into that. Maybe before we get in, I want to get into the progressive p3 concept, because I think that's kind of how we think a lot of this gets addressed collectively. But before we do, David, you mentioned sort of the last one was making sure that any of the penalty or the risk sharing is reasonable. Can you speak? Let's take a beat on that one for a second. Chris, a second, because I think that's an important
concept. Yeah, so I think this goes along with some of the other discussions we've had about trends over the, you know, the last decade for these projects, right? If you look back at the first of the projects that were implemented, the number of KPIs, key performance indicators that were identified in those contracts that required that they be tracked and reported, and each of which had an associated financial penalty, they were in the 50 to 100 you know, number range of individual indicators that were being tracked.
So they were using 50 to 100 things to say whether or not you got paid, basically, whether
or not you got paid, how much you got paid, and whether the project was successful or not. And logically, when you start to think about it, that you can't even step back. We. And and get the big picture, because you've got so much discrete little detail that said, well, there was this problem over here. So then the the next group of of projects, maybe five years ago, distilled that down somewhat to what was really important and what could be actually measured, right? And what you could actually associate a financial impact to the KPI. So think an availability event where the developer, the p3 developer, is unable to meet the cooling load, you know, at the customer's facility, well, that has a financial impact. And you know, if sustained would require bringing in a temporary chiller, you can associate a cost with that similar. Similarly, if there's an efficiency target and you don't meet that, you can calculate what the resulting increase in the energy costs
are, yeah, so if you promise to save me 10% of my electricity, and you only save me two, we can say, like, here's what the 8% that you didn't save me cost, yeah, for example,
and and here's how we're going to adjust the payments under the contract to reflect the fact that you as the developer, guaranteed that you were going to to save me that money, and it was on that basis that we made the decision to proceed with the
project. Yeah, no, that makes a lot of sense. And I know University just getting a thing through a procurement is brain damage enough so to have a deal that has 100 different things that they have to track. That just seems, I mean, that makes a lot of sense to me. All right, well, maybe that's a whole nother podcast, but let's I'd like to maybe move into, maybe I'll throw it back to you, Leslie, because you started there anyway. Let's go into this concept of progressive p3 I mean, maybe I'll play a similar game. We won't use cousin Lenny or brother or whatever his name was. I can't remember from my previous metaphor. But how would you describe progressive p3 in your own words? What does that mean to you? Because I know that's another term that you know, like p3 versus D, boom and all this stuff. It can kind of mean whatever we want
it to mean, yeah. And I'm a huge fan of the progressive P threes, because I've worked through so many successful ones, so I will note my biases right from the beginning. Yeah.
Well, maybe, maybe, maybe describe what's not a progressive p3 what is that? What is it alternative,
right? So the alternative would be to have an RFQ and an RFP, where the RFP is awarded based on a firm fixed price, right, just like a design build would be. And so you go in with a lump sum of whatever it is, and this is your scope. And you know, There better not be a change order, because you're not change ordering a design build contract. You're change ordering a financial mechanism over 2030, years. So conversely to a progressive p3 you are awarded on quals. Now there may be some indicative pricing tied to that. You know, some financial institutes will have a, sometimes even a dummy project that you would build on, bid on, I should say, um, because, you know, cost is sometimes embedded in theirs, but you're basically awarding on quals, and you're awarding to the group or the team only the exclusive right to negotiate. You're not even awarded a project, really, in its purest sense, you're awarded the right to negotiate. Usually, there's a timeframe tied to it, and that timeframe can be extended. For example, it was nine months for National Western and COVID and a lot of other things. We extended it to 18 to get on the other side of that. But what does that mean? Exclusive right to negotiate? Well, they had an idea for a project, and we worked through risk mitigation, the KPIs, the technical solution, the commercial terms and the financial terms as a team, and that was really important. I'll give you two quick examples of traditional p3 versus a progressive p3 and why the cone of silence can really hurt you on these complex projects. One project was an airport, and we was a RFQ at an RFP firm price, and we were playing telephone with the airport to the airlines, because an Airport's customer is not you and I. It's united. It's southwest. Those are their customers, and they want to make their customers happy. But because we were in the typical cone of silence, we could not talk to the airlines. So when we presented the plan that include all of those KPIs, we're chatting and all of those things, the airlines were like, Oh no, no, no, we don't want that. And of course, we had based it on that, that okay, so that that was very difficult, as you can imagine in the second example, right? A progressive p3 Well, it was in the National Western. And while the National Western is where my contract. Eyes, I've got to talk to their version of the airlines, which was CSU national, Western Stock Show Association, city and county of Denver, right? They're in building users and customers. And so because I wasn't in a cone of silence, I was only awarded the exclusive right to negotiate. I could then talk to their customers, and then I could also talk to everybody they had intergovernmental agreements with, and I'll tell you, it certainly affected the deal in all the right ways. So we got to the right sizing for the project. So that's why this progressive p3 if you think that, you know, when it's complex and very difficult, and there are lots of parties and there's lots of technology, you want to work shoulder to shoulder. And that's another reason why those teams usually are so tight and connected and have such a good partnership, is because they've been working in the trenches for nine to 18 months, usually before they even get to the real contract. And so goals are very, very aligned, and a lot of them, you know, you've only got maybe 10 or 15 KPIs, not the 50 or 100, right? And they're measurable. They're based on risk, and they're based on alignment. And that's where you start to see even sometimes, you know, of course, there's always the technical KPIs, but I'm starting to see more community based KPIs, and yes, energy efficiency, KPIs, and that's people agreeing that, yes, this is going to add money to the contract, but it's going to keep us aligned in year 1015, and 20. Right? As this, as the people that were at the table today maybe are no longer there.
That's great. Yeah, Mike, I don't if you want to talk a little bit about progressive p3 from your world, I know, again, I've, I guess one story I'll tell is I was on a project where I was in the advisor seat. There were, I know you were, your team was on the other side of the table, working for the developer. And then we got to a key moment. We were talking about a very technical thing, and we had a key meeting, and we showed up, and guess who was on the universities? Oh, we'd like to bring in another engineer from Mike's firm to negotiate against a guy from Mike's firm. So he's, I've worked with Mike on the same project at the same time, like negotiating against himself, even though he wasn't directly involved. But anyway, go ahead. You know, I was just negotiating against myself yesterday. Again, it's like, how does this keep happening? This is ridiculous. They did really well, by the way. They were, like, really fought the good fight. But to Leslie's point, came to a good example. So, but go ahead.
Yeah. I mean, I, my perspective really, on the progressive p3 is, is it does get you to the the the alignment on KPIs and the risk transfer piece in a much more effective way. Otherwise, everybody's sort of trenching into what protects their business interests over the long term, and they don't try to lean into what's best for the project, either if it's a community based measure, if it's an energy efficiency based measure, if it's a sustainability or carbon based measure, I think that's where the real opportunity shines. I mean, we we are often doing pretty complex, advanced modeling on our projects to project how really dynamic energy sources and sinks are going to work with a dynamic load over a long period of time. And we're, you know, hoping we're going to get very high energy performance on these things so we can drive sustainability metrics. And frankly, at the end of all that, if I convinced an owner that, you know, this is the system for them, and we've modeled it correctly, and like, I should own that risk long term. If I convince them that they this is going to perform that way, I ought to take that risk on. And yes, there, there should be some understanding around I thought the loads were going to be this the way the loads are going to be. And if those change, you know, we need to change everything else accordingly, but, but that's the, I think that's the opportunity to help people get to a point where they can innovate on these projects and innovate to everybody's best interest and community. You know, community's broader success, right? If, if I can take a risk with a partner, I can, I can trust then, then we can do something exceptional for a change, as opposed to just say, well, the least risk averse thing I can think to do is x. So I'm going to do X and make sure I got a good lawyer to back me up so I don't ever get sued on just do an X, you know. And that's where I those are just not very interesting projects. And I think all the people you know in this conversation particularly want to do interesting projects that are effective in the world. And that's where, you know, it's, it's, it's really fun to do these p3 projects, because you do have people who are bringing financial innovation to the project. You have legal innovation that happens sometimes. You have the technical side, which is certainly always interesting to me. And allowing that, you know, group of experts to kind of sing together really makes a unique song, long term for the project.
Yeah. David, back to you, I guess we, we started this by kind of describing the, you know, the 100 KPI, kind of worst case scenario. You know, maybe start there is the progressive p3 give you another avenue to really whittle that down. Or is there you take it anywhere you want to
go? Yeah. So I think you're right. Right? The progressive p3 allows that discussion to happen earlier in the in the development, and that's one of the key benefits of the progressive p3 we've talked about the process a little bit, and by shifting the point at which the competitive phase phase is over, and the teams are working together. That happens much earlier in the process with the progressive p3 and done right that time savings translates to a savings in the overall project timeline. So now the teams are collaborating together earlier in the process, they're able to jointly develop things like the KPIs and evaluate, understand, test the sensitivity of those KPIs against the impact to The project and done right, the ultimate output is a project that shifts risk equitably, but lowers the cost of the overall project compared to that firm bid approach that Leslie described that used to be the the p3 energy standard.
Yeah, so I'd be interested in an example of that, because I know you and I have talked quite a bit about that. There are scenarios where, if not done right, and more of a hard bid approach, or even a semi progressive, but maybe not progressive enough p3 approach, you end up with these scenarios where, from your proceeds, from the person who's going to have to guarantee this, it just becomes untenable. Like, you know it's not going to be affordable. Can you give some specific examples of how that plays out? Like, not necessarily naming the names to protect the innocent, as Mike said, but right of avoiding
the pitfalls of various NDAs. So there have been projects that I've been involved in that have taken two years to go through a conventional p3 firm bid procurement only to get to the point where all of the bidders are proposing projects that exceed the customer's affordability limit. So now you've got four or six teams that have spent more than a million dollars, likely in developing a firm bid for a project that the customer now is unable to proceed with because they can't afford it. Yet. Through that process, there hasn't been the kind of back and forth collaboration to test the various impacts as a result of the customer saying, Well, I want this, and I want this, and I want this, and I'd really like to have that. And before you know it, you've built something that simply, although it addresses all of the customer's needs, is something that's no longer viable. Yeah,
that doesn't sound like a good idea,
and because now perhaps six competitors have all spent money that translates to higher costs across the entire industry. Right in the progressive design build approach, there's a commitment from the institution to pay for the development efforts. The development is in phases or stages, right? And there are appropriate off ramps for both the developer and the institution. So if you get part way down the path and discover that your goals are incompatible, or the institution discovers that what they really want to do they can't afford, there's an equitable way to either shift direction, and that's the ideal approach. Shift direction to something that meets as many of those needs as possible, or, in the worst case, provides an off ramp that allows the developer to be paid at least a portion of the cost that they've incurred through that development effort
and ideally associated with the work that they delivered, like designs or things like that, absolutely
right? Yeah, there's a tangible work product might be an Energy Master Plan, might be a preliminary design. Might be a, you know, a pipe flow analysis that's been completed that identifies that focusing on the central energy plant might not be the immediate solution, because there are problems elsewhere on campus that need to be addressed first.
Yeah, so, I mean, I guess one question, I think it would be helpful for people that are new to this space to hear is just how much risk is the industry willing to take. And it sounds like, you know in your description, just there, David, that they don't want to keep going down the road you just described that sounds really painful, really expensive, but, but they are willing to take risks. Can you each speak to that? Because I, I don't think people appreciate that aspect of this market, especially in the early stages. Yeah,
to finish the thought that I started right, and this ties back to my earlier. Comment about a project, champion a realistic expectation around affordability. We evaluate all of those things. When we make a decision whether or not to pursue an opportunity, we're always willing to pursue good opportunities with some semblance of risk, with the expectation that there's some probability that we're going to be able to recoup a reasonable portion of the costs that we incur. If that evaluation indicates that the risks are too great, either the development cost is going to be too high compared to the cost of process, or the customer is too dysfunctional, which we've seen in a few cases, then, you know, we might make the decision not to participate in the in the
procurement process. You mean you choose your customers just like your customers choose you? David, we do. Yeah. Okay, yeah. Leslie or Mike, I don't know if you want to take that. You want to take
that one, yeah. I mean, I think that it's really about and I know Mike has mentioned this already, and David right sizing the risk, right? So, for example, to be very specific, on a couple of projects that I can talk about because they're on the other side of NDAs, I remember getting a call from the owners at National Western, and this is well into operating in the system for over a year and a half. And one of the questions was, why is not one of why is one of the KPIs not you have to use that shark unit 85% of the time as designed by, you know, you're engineers. And I said, because I don't control the sewer flow, and it took a while for that to resonate, but let me run that out for you. If Metro needs to do something upstream, which was happening at the time, to work on their pipes and they shut flow down to me, then that is not an option for me to use, and that is a risk I was never willing to take as a developer or as an operator, because I have no control over that. I mean, Metro has the most control over it, but even they didn't control the flows. They gave me their historical flows, but those changed post COVID, right? So that's a very specific one where it's like, you have to make sure that you can control what you're taking on, otherwise the costs become astronomical and every and it once you know, oh, okay, that that's right. I remember us even talking about that, right? I was like, that's why it's also in the contract that you have first right of refusal of the authority for any sewer heat recovery project upstream to ensure that you have temperature that you know, for for your project? Oh, okay, yeah, no. So there is rhyme and reason behind that. Another example, going back to what David was talking about as far as right sizing the project, we bid a project and and it included modernization of a steam plant as well as micro gridding. Well, it turned out that in this progressive p3 as we went through micro, gridding wasn't an option, because the utility wouldn't allow them to store the necessary battery, battery and generation, right? So that, in that case, it was a regulatory risk. And so that shrunk the project down to be something else where it's, you know, that could have caused huge problems. But then in the on the flip side, because it shrunk the project, they were actually able to do more on the modernization side because they couldn't micro grid. So again, it was both sides of the teams right sizing, the risk and the dollars to do as much as they possibly could with the pot of money that they had.
Yeah, that's beautiful. Mike. Anything else to add to this one?
I mean, sure, there's a lot to add, but you guys have covered it very well. The one thing I'll say is, you know, oftentimes when you're trying to manage the eventual operational risk associated with the KPIs, it comes back to the capital dollars and what gets put in the project from a reliability, from a redundancy, from a flexibility of operation system, right? So take Leslie's example of her shark system at National Western you know, if there's a cooling tower asset, or if there's a ground source heat exchanger, also is part of that system, and you're managing a KPI around overall system energy performance, as opposed to just operation of one of those energy assets. Yeah, you maybe could say, Yes, I will manage to a certain energy performance standard. But I'm not going to give you a runtime on Shark Unit Two for, you know, the summer, or something, you know, as granular as that. But it is. It comes back to you have an informed operator that's part of this, this, this dynamic p3 team, right? That says, Well, hey, I I'm used to operating this kind of system. I know I'm going to have a pump on the shelf over there, or a spare control board, or a whatever it is, so that if I'm down for two hours, that's all I'll be down for, and I'll still be able to meet my objectives. But you have to be willing to pay me to have that on the shelf over there at the beginning of this project if you're not going to do that. I can't sign on the dotted line where you would like me to. It's always this push and pull at every stage in the project, as more people understand it more fully. You know, the pushing and pulling gets less, and the balloon starts to hold a single shape. But it's, it's still a real conversation all the way along the way. Well,
maybe let's, let's switch a little over to money, because I think that gets into some of what you're talking about just there, Mike, which is you have to pay for somebody's got to pay for these things. And I think David's comment earlier, these are financing mechanisms, not funding mechanisms. So you still have to weigh of paying for it over time. It's, it's not free money. I mean, sometimes there's some, there are some revenue streams, or some value that can be realized that wasn't there before. And I would say, like, for example, maybe you can build a system that just requires less energy total, so you can avoid paying for that energy. That's a, that's a kind of a new money. Or maybe it's like you're already staring down the barrel of a big project that you've already priced, and this is a cheaper alternative, like, there's money there, there's incentives, there's there's other things, which I know right now with what's chaos in Washington. Who knows exactly where those are going to go, but regardless of what happens with the federal government, there's always incentives, wherever you are. What? How can we talk a little bit about just how funding and the financing mechanisms have shifted a little bit in this space. Like, what are you guys seeing out there? Now? What are you excited about? Now, I'm open to whoever wants to go first. On this
one, I can take that first. So two things come to mind, Dave The first, and maybe the most significant recent shift is this development of a 501 c3, financing model for energy projects. This is a model that has been used for a long time in the student housing world, where there's as part of the project team, there's a conduit issuer that's able to finance the project using tax exempt funding sources. So that's not something that, up until very recently, has been incorporated into energy projects. It certainly makes the project more complex technically and adds some regulatory hurdles. But as interest rates have risen and seem to remain high, there's less confidence that the Fed is going to reduce rates anytime soon, and less flexibility from the customers and waiting for rates to drop, they're looking for innovative solutions like this that allow the project to be financed with a lower cost of of capital. So that's that's certainly a significant current shift. The The other thing that we've seen change, and this goes back to something that that Leslie talked about in terms of the risk sharing, is the customers are much more willing to participate in the projects. So in the past there, there was almost a Chinese wall erected between the customer and the developer that said, Okay, Mr. Developer, you own everything associated with construction and operation of this plan. If it's inside this might be a literal fence, right? There might actually be a chain link fence around it. University is not going to go inside of it unless there is an emergency to now approaches that include some of the work being performed by university employees, just like they always have. So an example might be the day to day operations. So the boiler plant operators and the chiller plant operators, the people who are turning the valves and making sure that the equipment is operating as efficiently as possible might still remain university employees, but the p3 developers providing now the oversight over that operations to make sure that it's done most efficiently, as well as taking on the obligations for the Long Term preventative maintenance, repair and replacement life cycle activities that really bring value to the institution.
Yeah, so in this case, I'm hearing it used to be almost more of like an outsourcing or just a, you know, you take this over it, treating it almost like a traditional utility, right? Like, like we think of our local utility giving us electricity or cable for that matter, right? But now it being more kind of integrated within the operations of the institution overall. So partnership, not outsourcing. Yeah, very inspiring. Motor. So great. Leslie, you want to go
next? Yeah? I mean literally, I think I was just getting ready to speak as David did the words out of my mouth that five when. 3c financing mechanism is very interesting, and you could probably Dave do a whole nother podcast on that. So he hit that very well, as well as, obviously the partnership piece of it. So the only other thing that I can really add to it would be to say the willingness of institutions to not only turn over the operations, but potentially the ownership. And I'm thinking of two particular examples. A lot of times, you know, you've got a concession arrangement where they still own the asset, right, and you're just taking over the operation and maintenance. But in some cases, what I've seen is that them actually selling it outright to a third party, then allows something as far as revenue stream, right? So, for example, a university, we actually bought their system because they could not sell their thermal energy to third parties, but we purchasing it could. And so then we broker a deal with the city to connect city assets. We knew that the sewer was going to be getting moved because of a federal highway project that gave us the opportunity to say, okay, city, we know you want us to thermally do this affordable housing. We'll do it if you sign up your assets, bigger revenue stream. The tariff of the original University goes down, and then we're able to meet the modernization goals that they wanted for their system, to get start to wean off of natural gas. So I know that's kind of a one off, but I think it goes back to what David was speaking about. Is it's a willingness to go into a true partnership, to say, Okay, well, we don't quite have all the funding, all right, but if you sell us this asset and we can go get more customers, which is what district energy folks do all the time. Then we can solve the funding source as well, because we're willing to take on the risk of operating the system and expanding it, which is something that they couldn't do. But it goes back to that willingness to have an open book discussion about all the assets, and then what is the best way to
get there? Yeah, it really flips the head on what you're doing there, because, right? Because in that case, the university is the person selling something, as opposed to the, you know, the developer selling something to the university. Exactly, sense, which is kind of makes your head explode. But go ahead, Mike, any thoughts on this?
Well, for the most part, I'll beg off of financial discussions. They play the role of the
engineer. But one of the things I guess I would be interested, because I know I've run into, including your firm, a lot of engineering firms, being willing to put equity into deals in ways that I don't, you know, basically putting up your own money into a project as an engineering firm. Can you speak about that a little bit? I mean, just generally, in the broad strokes?
Yeah, I think that's, you know, back to a little bit, back to feeling comfortable owning risk on project, right? If you really want to own risk, maybe you actually want to own a part of the project, right? You would really want to participate in the in raising the level of confidence around what you're actually suggesting is the right solution for a project, and saying, I'll put my money where my mouth and my calculations are basically right, and saying, Yeah, I think this is a good idea for the long term. I like to be a part of it. And I, you know, that's, that's not been a short conversation inside of our firm. And I'm, I'm sure inside of many firms that are, you know, essentially, you know, we're professional services firms. We're not sitting on a mountain of money that is ready to invest in a bunch of different projects, but for the right kinds of projects that fit, you know, the fit the kinds of things we're talking about, meet sustainability objectives, meet the kinds of systems we'd like to see in the world. And we think we're, you know, development experts on, yeah, we'll, we'll probably take that risk on, and frankly, would be a better source of financing for it, because we perceive the risk as being lower to us than than somebody else might perceive the risk to being so that's been something we've been stepping into slowly over, I'd say, the last five years. And you know, we, we, we were doing D boom projects with third party developers and getting to know their development staff and some of those folks now work for us, and sort of, we embedded some of that skill set inside of our professional services firm, and are kind of looking back out into the world for the right projects, not only to help potentially fund but also to operate where they're, you know, we just feel like we're they're not giant projects, right? Where you're going to get a utility kind of scale operator to operate them, but a few, a few 1000 tons of geothermal system and a few other different unique energy sources that the client side is not ready to operate that kind of system, and we should necessarily, kind of stick with it for a period of time and minimally own it, operate it, and de risk it, Say, for 567, years, and then maybe contractually turn the system back over to the the institution or the development of the end user? Yeah. I mean, I guess one follow up there, just for clarification, is a genuine question, but I think I know the answer. I mean, in a case like that, a firm like yours, you're largely a professional services firm, not You're not a bank, you're not a developer, so to speak. Like, would you put up all of the money for a project like that, if it was, I guess, if it was really small, maybe? Or would you, like, partner with somebody that would bring money but you were taking the risk? Or, like, how does that work? Yeah, if I were a king for a day, I might put up all of the money, but I'm not ever going to be king for a day. So it's very likely that we're going to put up a small portion of the overall capital stack to, you know, fund the project, and we'll, we'll, we'll go, we'll find the rest of the money, right? We'll find the right partners to be the the capital, the player in the in the project, right? And get the right capital structure so the deal can make sense. But yeah, we'll have partners
just to add on. Since I had, I have set in that seat as a design builder who's contributed a minority part of equity, the owners really like it from this, having skin in the game, feel of it, right? And for us, we were only going to, you know, we had it written in with our agreement with major equity that we would be, you know, contributing with the option to sell at the warranty period, because, as a contractor, right? Money that's tied up in a deal is money that I can't then go get bonding against. So that's a little bit of a juggle as far as the contracting side of that. But I think it brings up another point. You know, the people that are bringing monies to this deal, they all have operating companies, or would set up an operating company with Mike, right? Because if you're going to have 20 years of an operating asset, that's how you protect your money, is by owning the operator. So the centrios and the angios and the vicinities of the world, right? Those companies exist because they've got big money that's banking on them being expert operators to protect their assets. But at the end of the day, right? They are, in fact, really just looking to protect their investment for their rate of return, which is why getting the KPIs set up properly for the risk that they're going to assume operating over those next years. And yes, those guys are all great operators, but at the end of the day, and make no mistake, they're there to protect the asset of these long term deals for the money. Yeah, yeah.
And maybe a counterpoint to that a little bit, is that that's been the traditional model, right, that there's 10% or so equity in the project. The developers got skin in the game. The equity is kind of last in the in the line for financial returns. And that was that was okay. I think when the the interest rates were low and the blended cost of capital still was pretty attractive from the customer's perspectives. But now that interest rates are higher and equity return expectations are higher, and smart customers are realizing that that equity approach is costing them money. It's costing them quite a bit of money over the long term of the project, particularly if it's 30 or 50 years. So we're starting to see more and more projects explore all debt approaches, particularly when you layer in tax exempt 501, c3, sources of funding, all that as being more cost effective to the customer. And there are already, you know, a whole bunch of layers of protection for the customer through the KPIs and other security vehicles to ensure that the developer has skin in the game. So crystal ball prediction is that this focus on equity is going to diminish.
Yeah, I think that's lines up with what we're seeing as well, and some of the deals that we have on the on the table right now. And I think that's yet another podcast we'll have. We'll probably have my colleague Katie Lutton, lead that one, since she's got, she loves a good capital stack. All right, let's move one. I got one more question, and then a wrap up for you. So there's, you know, we've been talking quite a bit. I think, Mike, you talked a lot about moving, you know, including things like decarbonization and and some of those things into these deals which maybe weren't there a while ago. I know on our bingo card right now is AI and data centers. And I know, I know Leslie, you're out somewhere in undisclosed location looking at one right now, or somewhere somewhere near a project like that. So that's certainly kind of come up for us quite a bit the idea of a data center asset, especially adjacent to a university, that's kind of a new concept that, you know, I probably thought about at some point in the last five years, but really didn't become, you know, people are calling us and like, have this as an idea that that would be one example. Are there anything else that people should be thinking about that's that? Like, what does the future of this look like, either from a technical or from a, you know, contractual or any of things we talked about today. It was kind of a winding question. So you guys can take it wherever you want it.
Well, I guess I'll jump into the fray here a little bit. I'm not sure what question you actually asked there, Dave, but I'm going to talk about something I think is interesting. That was kind of what I was setting up. Yeah. So that's good. So. Two things. One, your comment about AI and data centers generally made me think about one thing that I is kind of a negative for all of us right now, and it's just creating an awful amount of uncertainty in the industry around procurement and schedules and equipment availability, and frankly, we have run of the mill kinds of district energy projects, right? That are trying to get built and funded and operated and commissioned, that are running into all sorts of trouble. And it's kind of normal trouble, right? But it's because the data center market is taking all the oxygen out of the room, and everybody's attention is over there, and it's hard to get, you know, train or, you know, pick your pick your pick your favorite manufacturer to come and like, pay any attention to your project, because you're not a hyperscaler building, you know, throwing money at infrastructure right now. And so that is a, you know, a year ago, or maybe two years ago, that was a problem that none of us saw coming. And it's just, it's rearing its head on projects, which I think is something to for us all to be aware of that it's just, you know, it's impacting our schedules, the cost, the availability of technical resources. It's just kind of a weird world right now, on that topic, that's one random thought I have. The next random thought I have is relative to the schedule of getting these projects done, usually something that is p3, or D boom in scale is not insignificant in the amount of buildings or infrastructure. It's touching or changing. It's pretty large in its capital requirements, and so it takes a long time, and particularly if you're in an institutional setting. And we just started a project with a large university client, and they're just at the point of starting a chilled water project that they've been that it's taken them six years to get to the point of starting construction on. And it's like, if you have large environmental goals that are in the 2030 2035, 2040, timeframe, and you are just starting like, it's almost like you have to work at light speed in order to get that to even happen 1010, years from now. So that's unsettling as well, given the uncertainty in the rest of the market in a variety of different ways. So I think that's that's pretty interesting to sort of think about, too. And then the last thing I'll say is, you know this idea of bolting a data center, you know, onto a university or a college campus. And you know the potential value streams that could come from CO locating those kinds of activities in a single spot or in a district energy network. And, you know, taking the waste heat off of all that electricity use and using it beneficially, that's super cool. There's lots of challenges there, I'm sure. But I also think that data center space has shined a relatively positive light on the possibility of a new generation of nuclear energy technology in this in this country. And I see, again, an opportunity for this district energy space, p3 opportunities, and the de risking that needs to happen as a part of those projects, and to co locate those near major centers of activity. There's lots of university clients that are looking to get rid of burning gas or using their large co generation plants and and frankly, I think there's a real opportunity with these big research communities that that could find some comfort with, with having this kind of technology adjacent to their uses, that I think we're, we're under pursuing that opportunity right now as a as a country, and in the district energy space, and it's, I'm happy data centers are kind of pushing it into the forefront, but now it's maybe an opportunity for many of us to kind of get engaged with. So you didn't ask me questions about any of those topics, but
there's close enough, man, I you know, it's been a long day, so I'll take it
well. And I mean, just to add on, those are all the things we're talking about in the industry, right? Modular nuclear solutions, how district energy can play waste heat from data centers, data centers themselves, data centers being revenue streams. I think to tie it back into university, and Mike, you touched on a little bit. The universities that can be open to really having those discussions are the ones that we all on the call want to work with right from all of our different avenues, because that tells us that they're open to different revenue streams, to different kinds of technology, to taking old things, aka their district energy system, and making them new and breathing them life while decarbonizing. But all of that points to a progressive p3 because that is a lot of sticky subject matter, right? I mean, most people in our industry know that most of the major universities have some kind of research reactor. Well, why can't these research reactors now actually go to the 2.0 version that's now actually even different technology than those you know, like what MIT is doing, but actually generate energy that then can help support it. And I agree with Mike, data centers are starting that conversation in a more positive light, like I've always said, Can't we get the smart people on the roof? To rebrand nuclear so that the common person doesn't think about Three Mile Island and Chernobyl, because this is completely different technology. But I think there too is a very good asset on why p3 for this can be helpful, Salus O'Brien, noresco, all the big companies that would come to play to this have PR firms, both internally and externally, that they work with that can help get it down to the Bite Size matter of why people should care about a project. When we were awarded emu, when I was with centrio, the college was like, Okay, so the very first thing we have to do is, why not solar? Well, because you're in this through Michigan, and you get 300 days of cloudy weather. That's why not solar. But how can you break that down to the community, internal stakeholders, faculty, students, anybody that might be a roadblock, so at the very least, they do not become a roadblock, and at the very best, they become a champion. Because if you can break that down and get and we had to do that at National Western, right, it wasn't a p3 sewer heat recovery project. It was an energy service heat transfer project. Now, of course, those are all the things that we celebrate about it, but we had to go in front of city council, and you've heard me say this before. Words kill projects. So while technically, Mike's right about all of those things, and these are the exciting things move the industry forward. When you get a progressive p3 partner, they can help you with those things, so that together, you are getting champions of these complex projects. Instead of somebody saying, I don't want to do biomass, it's going to stink. I don't want to do nuclear, it's going to that can't be in my backyard, it's going to, you know, meld the project, because those internal stakeholders and external stakeholder. Stakeholders can kill projects and to do all the cool technical stuff that Mike wants to do. You know, we need to make sure, and people need to make sure that they've got partners that can help them over that hump as well.
Yeah, and I guess I would add to that, Dave, that we've talked a lot about, sort of the upfront focus of these projects on constructing or reconstructing an asset, and we've talked a little bit about the risk transfer. And Leslie, I think you pointed out right, that this really is a partnership between the University and the developer. I'll take that one step further. That partnership extends not only for the two or three year construction period, like a typical design build or progressive design build project, but now for a 30 to 50 Year call it a concession period, right? Because it's really much more than just operating that asset that got constructed, but it's now thinking about all of those things that are going to change over the next 30 to 50 years. So, Mike, I think you talked about potential changes in fuel source, so being hydrogen ready, for example, you know what? About changes in battery technology that are going to allow battery storage to be an asset that can be deployed to campuses, that can be used to control load. The renewables world keeps on changing. What happens if the incentives change and it becomes more attractive, again, right? How do you layer additional renewable generation assets into the project, the overall structure of the relationship between the institution and the p3 developer needs to anticipate that enough, right? It doesn't need to know the answers, but it needs to anticipate in the structure the flexibility that will allow these things to be layered in or layered out, right? Because the same thing might be true, right? The university might get out of the Performing Arts business. That portion of the facility might get outsourced as an example. So what impact does that have on the on the
project? No, I think that's I have a vision of the future, and I have a structure that can can deal with that. I like that. All right, as we're wrapping up, I guess this for somebody who's listening to this cold My guess is they're more like our, you know, metaphorical uncle Lenny that we started with today. Where can people get started? I'd be interested from each of your perspectives. You know, maybe David, before they put an RFP out on the street. What do you need to be able to see in that? RFP, I think you talked about that a little bit earlier,
but, and I was really looking forward to Leslie's input on this question, but I think, I think you're right. The university needs to have thought through this enough that they have an advisor, a p3 advisor, who's had success and understands what works and what doesn't. They need to have a legal team, either in house or not, because, like it or not, these are really complex relationships, and if you can't figure out how to translate that complex relationship into some kind of contract, it's. Ever going to work. So if the RFP gets issued, and there's no indication that the customer has already started to think about these things, whether it's takes the form of a draft of the project agreement or maybe just a draft of the pre development agreement that shows some forward thinking, that would give me a much higher level of confidence that the project might actually happen Fair enough.
Lesley, you wanna go next? Yeah. I mean, David's right. You need to have the right advisors. But before you even get there, and I will make a shameless plug with ai, ai, there's such a value and wealth of information, and that would be a great place to start attend a conference, right? You know, when me knew that the city and county of Denver was going to be hitting their head on the funding that they got for the bond for National Western, just in general, we started pushing city and county of Denver folks to go to p3 Dallas, right? And there's the smaller conferences and everything. And they started speed dating all kinds of people getting all kinds of information, well, in two years in advance, before that RFQ came out, right? And so, and I'm not saying it has to be that long. But they were just trying to talk to, you know, folks like you, Dave and myself, and figuring out, okay, well, what advisors? What advisors do we need? Right? Can we get it all under one umbrella? Because, as you know this, that's your space, Dave. There are lots of different advisors and consultants out there. So what's the right flavor of the month for them. And then they brought on their advisors, and then they did an RFI to gage interest, which that's another great way before you put out a Q or a P, put out an RFI and try to gage things. But you know, you've got a sophisticated client when they will put a draft PDA agreement in a progressive p3 and that's, quite frankly, what the private side wants to see. Because then you know that they have got the right advisors. They have done and gone maybe through a p3 boot camp, which they're, you know, it doesn't have to be AIA, but there are several of them out there, because then you know that you've got an informed client and that they're, you know, using things even in their RFI, such as we're thinking about using an energy as a service, progressive p3 okay, well, you're talking the right lingo now, right? And, you know, I don't think it's necessarily where they have to know the technical solution. In fact, them being open to a technical solution is even better, because then that means they really want to work side by side with a partner, but they need to have strong mission, vision, values, and then the strong advisory services, is what I would say. And then that's how you know there's a good one out there that you're going to get a good group of us to respond to. That's
great. Same question to you, Mike, you can answer it either from somebody who might help get one of these on the street or somebody who might respond to this, yeah.
I mean, I think my response is the same in either seat. It's, you know, it's slightly different than what Leslie just said in that, you know, I agree you need to be open to a range of technical solutions, but I do think on the, you know, on the client side, they need to have some idea what they actually want. You know, sometimes you'll see we want to, we want to do a p3 and in, in there, it almost is, is back to people hoping there's free money in the world that they can just access for some for no apparent reason, as opposed to having some specific objectives, they're actually trying to accomplish that that, you know, eliminate points of pain that they have from how they want to operate in the world, be it they, you know, they don't have the right staff internally to operate things long term. They want to make a major energy transition. They want to, you know, hit real sustainability goals. I think the most, the most effective projects I've engaged with the client has gone through some period of self reflection and hopefully planning that leads to, this is the this is what we think we want from a from a project. Now it's can't be firm and fast and immovable, but it does need to be able to define it enough for the marketplace where they can bring their own expertise to it and say, Yes, we see what you're after. We see what you're trying to accomplish. We think we have enhancements to where you're headed with that, and we'd like to work with you on those enhancements. And that's that's really critical. I think we we see clients that that get too general and try to pursue, you know, in an RFI stage, the market, and you know, you get a pretty weird response from the marketplace when you're not signaling to them what you actually want and what you might be willing to do to engage in accomplishing your goals. So I you know, that's maybe a plug for a shameless plug, like Leslie said, for some energy master planning. But I don't think there's nearly enough energy master planning in the world for the scale of the energy issue. As we have in our sites. So that would be great for everybody to do more of Awesome. Well, I just want to say thanks to all three of you for, you know, navigating my sometimes non questions, that answering them better than I even asked them, also just the wealth of knowledge you guys have been able to share. It's been fun seeing kind of the three of you key off of each other and build on each other. So any final thoughts, jokes or resources you want to share last round? Mike, anything? Nope, I think this has been great. I really appreciated the time and didn't expect to have this much fun on a Friday afternoon having this conversation. So thanks,
everybody. Great. No, I couldn't agree more with that, Mike. I mean, I love talking about this stuff all day, and we could always do a version 2.0 and I'm sure that we could talk about find lots of different things to talk about, but I will agree with Mike, there's not enough energy master planning out there. And so I want to put a fine point on that, because I'm working with the college right now. They've got a master plan, but they don't have an energy master plan. And so they know that they have an issue, but they don't even have a direction. And so you know that that's a good shameless plug, Mike, I second that. Thank
you. Yeah, and I'll echo both of your comments. I mean, this has been a whole lot of fun, and it's clear that all of us have kind of similar passion around around this market. I've been making notes about things that we could talk about in the the next three or four podcasts probably got more more material than than one or two. I think one of the key things that we probably ought to talk about in the next discussion is just how, how decarbonization goals, and you know now the expectation that there is meaningful progress towards those goals sits into this p3 model as a whole.
Yeah, that's a big, big, big topic right there, but at risk of keeping you guys on for another couple hours, well, I guess we'll end it there, but thanks a lot for all your time today. I really appreciate it. Yes. Thanks. Everybody. That's it for this episode. This podcast is proudly produced by Brailsford and Dunleavy. This episode was produced by Allison brunes. A huge thanks to our sound editor, Kristen Crawford. Our theme music under the radar comes courtesy of Dallas based musician and arranger geo Washington Wright and his studio Big Band. If you haven't already, be sure to follow campus energy and sustainability podcast on LinkedIn or blue sky. You can do a deeper dive on past episodes at Campus energy podcast.com if you enjoyed the show, please leave us a quick rating or review on your favorite podcast platform. It's a great way to get the word out about the show as always. Thanks for listening. You
