Assessing the impact of risk allocation on sustainable energy innovation (SEI)

Abstract

Purpose – The allocation of risk among project participants is an important determinant of innovation success in construction projects. The purpose of this paper is to examine the capacity of risk allocation to encourage the implementation of environmental innovation, particularly sustainable energy innovation (SEI), within the private finance initiative (PFI) project delivery model. Design/methodology/approach – A four-case qualitative research methodology is adopted within the context of the UK government’s building schools for the future programme. Findings – The findings identify that SEIs are encouraged on the innovative projects by the perceived clarity, appropriateness, and manageability of the risks associated with the project’s energy performance on the PFI contract. The main SEIs were largely developed as strategies to manage long-term energy performance risks allocated to private sector actors and safeguard their long-term commitment to the project. However, the findings indicate that excessive perceived innovation-related risks, particularly capital cost risk, may restrict further SEIs to be implemented. Research limitations/implications – The qualitative case study approach adopted may limit the generalisability of the findings. Practical implications – The study and provides practical guidance to policymakers and project managers in developing strategies to support the implementation of SEI in PFI projects. Originality/value – The study attends to a significant gap in knowledge as there is a lack of conceptual and empirical work on managing innovative processes for sustainable energy in PFI projects.