Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
3 Renewable energy holds a broad appeal for its environmental and local benefits. A Gallup poll conducted in 2013 showed that 76% and 71% of those surveyed expressed a desire to see the United States develop more solar and wind power, respectively.1 Advances in technology, which have benefited greatly from the revolution in materials science and the digital economy, have improved system performance and the capacity to generate power. In addition, govern- ment polices to incentivize demand for renewable energy resulting in increased manufacturing have dramatically decreased energy production costs, which has led to expanding markets. As an example, the cost of manufacturing a solar panel decreased by 60% between 2010 and 2012.2 Airports, like much of society, have been active participants in deploying renewable energy, but their approach to evaluating such opportunities has been haphazard. In the current practice, airports are typically presented with an opportunity to pursue a renew- able energy project based on the availability of grant funding programs or inquiries from private entities. In such circumstances, it may not be possible for airports to engage in a thorough inves- tigation of the alternatives to the proposed project and reach an informed decision that optimizes all the benefits including financial, operational, environmental, and social. An effective, objec- tive business case evaluation would assist airports embarking on renewable energy projects to advance future airport planning that targets economic, environmental, and social objectives. Given the range of sustainable measures that can be undertaken, renewable energy has often been diluted and de-prioritized due to its higher upfront capital investment requirements when compared with other sustainability options. Yet, as climate change awareness increases, renewable energy becomes the only realistic action available that allows economic growth while reducing greenhouse gas (GHG) emissions. The objective of this research was to produce a report to help airports develop a business case to take advantage of renewable energy opportunities. â¢ Chapter 1 lays out what a business case is, why renewable energy is important, what renewable energy technologies should be considered and when, and what a business case for renewable energy at airports looks like. â¢ Chapter 2 describes how the airport can justify its renewable energy project by identifying key objectives and how the project fits into the airportâs vision. â¢ Chapter 3 reviews the criteria used to evaluate a renewable energy project and presents a system for weighting each factor, including long-term self-sustainability and environmental/ social considerations, based on the airportâs particular objectives. â¢ Chapter 4 describes how the airport should integrate the proposed project into its standard master planning and capital planning process. â¢ Chapter 5 identifies the key internal and external stakeholders whose participation is central to successful implementation. C H A P T E R 1 Introducing a Renewable Energy Business Case
4 Developing a Business Case for Renewable Energy at Airports â¢ Chapter 6 walks through a model business case and evaluates each of the factors fundamental to the renewable energy business case. â¢ Chapter 7 provides examples of similar renewable energy business cases from both the air- portâs perspective as well as other perspectives of other industries and the lessons learned. â¢ Chapter 8 guides airports in evaluating diverse funding opportunities. This project builds on recent research sponsored by the FAA and implemented by TRBâs Airport Cooperative Research Program (ACRP): â¢ ACRP Report 108: Guidebook for Energy Facilities Compatibility with Airports and Airspace â¢ ACRP Report 85: Developing and Maintaining Support for Your Airport Capacity Project â¢ ACRP Report 141: Renewable Energy as an Airport Revenue Source This guidance will provide airports with a practical and systematic way to evaluate the full benefits of renewable energy to the airport business. 1.1 Business Case A business case is a systematic process for solving a problem.3 It evaluates the various alterna- tives available to address the problem and assembles the evidence to support the proposed solu- tion. The product of the business case is a presentation of the solution and why it is superior to other alternatives considered in promoting the long-term health of the organization. When the business case for a proposed project has been effectively made, its value will be clearly evident and the process of approving and implementing the project should then proceed efficiently. The five steps of a business case evaluation are presented in Figure 1-1. A business case is rooted in recognizing a problem, identifying a solution, and assessing the solutionâs benefit to the business. The following excerpt is from the research scope for this project as prepared by the ACRP panel. A business case explores all feasible approaches to a given problem and enables airports to select the best option. The objective business case evaluation would assist airports embarking on renewable energy projects to advance future airport planning that targets economic, environmental, and social objectives. Figure 1-1. Five steps of a business case process.
Introducing a Renewable Energy Business Case 5 The research scope is consistent with the core purpose of a business case in that it seeks to evaluate various alternatives and arrive at the best option. However, it assumes that renewable energy projects have unique characteristics that could advance the economic, environmental, and social objectives of the airport business. The guidance below identifies and substantiates those unique characteristics and provides airports with the relevant information needed to develop the renewable energy business case. 1.2 Business Case for Sustainability Sustainability, as defined in U.S. Federal Law under the National Environmental Policy Act of 1969, is âto create and maintain conditions, under which humans and nature can exist in produc- tive harmony, that permit fulfilling the social, economic, and other requirements of present and future generations.â The three pillars of sustainability are economic, environmental, and social and its objective is to maximize associated benefits4âthis concept is often referred to as the âtriple bottom line.â5 Figure 1-2 illustrates the triple bottom line concept which relies on a balancing of economic, environmental, and social factors. Each factor contributes some âcapitalâ that must be used effectively and efficiently. The success of each factor can be measured by a clear metric: cost of ownership with the objective of keeping it low and comparatively competitive; jobs that measure well-being and quality of life; and emissions which must be limited. Where one of the three fac- tors is deficient, a corresponding challenge will be easily identified. There are a number of independent ranking systems for sustainability and the associated fac- tors that are measured. The U.S. Green Building Council in its Leadership in Energy and Envi- ronmental Design (LEED) program defines the categories as sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environmental quality.6 The business case for sustainability has been presented in recent years based on evidence prepared by management consulting firms. Goldman Sachs reported that the stock price of firms identified as sustainability leaders outperformed the rest of the field by 25%.7 An extensive survey of 766 world CEOs by Accenture showed that 93% indicated sustainability as crucial to business success.8 As the potential business risk from climate change and geopolitical unrest has been increasingly studied, the value of sustainability in mitigating risk has become a primary and pragmatic driver. A report published by Price Waterhouse concluded that businesses that are Figure 1-2. Three pillars of sustainability referred to as Triple Bottom Line.
6 Developing a Business Case for Renewable Energy at Airports dependent on resources controlled by organizations located in unstable geopolitical areas have a tremendous opportunity to be successful if they endorse sustainability.9 A useful summary of studies that prove the business case for sustainability was prepared in 2012.10 The drivers for sustainability that are communicated in the compendium include: â¢ Natural resource, energy, and operational efficiency. Reduce input and overhead costs, militate regulatory sanctions, hedge exposure to volatile prices and supply chain disruptions, mitigate environmental degradation, and conserve capital for implementing a long-term growth strategy. â¢ Human resources management. Retain experienced workers, prevent the loss of corporate knowledge, lower training costs, reduce employee absenteeism, improve worker productivity, and recruit the best talent. â¢ Financial operations. Increase market capitalization and stock growth, improve investor rela- tions, lower insurance premiums, decrease borrowing costs, and improve access to capital. â¢ Marketing and communication. Expand customer base, differentiate products, improve brand image, and secure customers that are less sensitive to price, have greater brand loyalty, and purchase more frequently. â¢ Collaboration with non-governmental organizations and the government. Gain access to new markets, develop better supply chain management, strengthen regulator and community rela- tions, improve brand image, mitigate risks to brand reputation, and militate government sanction. Renewable energy is a central component of a broader sustainability program given its business benefits supporting the triple bottom line. Energy consumption is a primary indi- cator of economic development and social stability as evidenced by the fact that 25% of the worldâs population that lives in industrialized countries accounts for 70% of the worldâs energy consumption (Pasternak 2000).11 Use of non-renewable energy sources leads to increas- ing resource scarcity and economic and social instability as well as climate change and envi- ronmental degradation. Replacing non-renewable energy with renewable energy leads to a re-balancing by focusing economic and social benefits locally and restoring and preserving a sustainable environment. 1.3 Basics of Renewable Energy The U.S. Energy Information Administration (EIA), which is a part of the DOE and the nationâs primary source of energy data, defines renewable energy resources as âenergy resources that are naturally replenishing but flow-limited (i.e., not always available). They are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. Renewable energy resources include biomass, hydro, geothermal, solar, wind, ocean thermal, wave action, and tidal action.â Renewable energy resources are described below in detail (see also Figure 1-3).12 â¢ Biomass technologies burn fast-growing carbon-based fuels from plants to generate electricity and heat. â¢ Hydro technologies convert the kinetic energy in moving river water into electricity. â¢ Geothermal technologies either tap directly into heat sources emanating from the earth or use the constant temperature of the ground (or a water body) to store energy that can be made useful during other seasonal conditions (referred to as Ground Source Heat Pump or GSHP). â¢ Solar photovoltaic technologies convert sunlight into electricity. â¢ Solar thermal technologies capture and use the sunâs heat for on-site heating needs or for gen- erating steam to power a turbine in a central plant (referred to as concentrating solar power or CSP).
Introducing a Renewable Energy Business Case 7 â¢ Wind power converts the kinetic energy from wind into electricity. â¢ Ocean thermal uses the heat energy stored in the earthâs oceans to generate electricity. â¢ Wave power converts the kinetic energy in waves into electricity. â¢ Tidal power converts the kinetic energy in ocean currents propelled by the tides into electricity. Renewable energy (sometimes referred to as âgreenâ power) may be developed and used on-site, developed on-site and exported for use off-site, or acquired from a remote off-site source. Renew- able energy technologies are those that convert renewable energy resources into a usable form of energy for heating, cooling, and electricity. This report does not address renewable transportation from batteries and biofuels though these elements can be integrated into a more comprehensive energy plan. Energy in the form of heating, cooling, and electricity is a fundamental requirement for com- merce and quality of life. Conventional electricity (sometimes referred to as âbrown powerâ) is delivered from central power plants primarily produced from combustible fuels like coal, oil, and natural gas to customers through the electric grid. Other large components of the electricity gen- eration system that do not produce emissions include nuclear and hydroelectric. Heating is typi- cally produced on-site (in a home furnace or commercial boiler) and generated from combustible fuels such as oil, propane, and natural gas. Cooling is typically powered by electricity, but can be powered by on-site combustion. Many renewable energy resources are intermittent, meaning that they generate power only when natural energy is available. Solar power is produced only during daylight hours. Wind power is generated only when the wind is blowing. Therefore, a fully operating energy system powered by renewable energy must manage and dispatch power among a variety of different generating sources operating at different times and conditions. The feasibility of doing so while maintaining a constant and uninterrupted flow of power requires the integration of storage tech- nologies such as batteries, flywheels, and compressed air. Fuel cells are a generating technology where electricity is generated through chemical reactions within the fuel cell. Fuel cells require an outside source to trigger the initial chemical reactions, and this is often provided by natural gas, meaning that it is not entirely renewable. Hydrogen fuel cells are an emissions free alternative system, which is technically feasible but difficult to make commercially viable. Renewable energy technologies have increased in efficiency and are being developed at a greater scale for both on-site generation and as a source to the electrical grid. There are utility- scale renewable energy power plants that directly feed the grid using biomass, hydropower, geothermal, solar photovoltaic (PV), solar thermal, and wind power. Each of these technologies can also technically supply on-site electricity, though some, such as concentrating solar power, are not cost-effective on a small scale. GSHP and solar thermal technologies can be built on-site to supplement or replace existing heating systems. Figure 1-3. Renewable energy is produced by natural systems.
8 Developing a Business Case for Renewable Energy at Airports As an alternative to building oneâs own renewable energy technology on-site, organizations can purchase green energy from remote, off-site sources. These are paper transactions where money is paid to procure power from a remote source but the actual electron flow is unchanged because once electricity is on the grid, its âgreenâ or âbrownâ origin cannot be distinguished. Proof of the renewable energy transaction is formalized through renewable energy certificates (RECs) that are provided by power brokers and regulated by law. Alternatively, an organization can enter into a contract with the owner of a specific renewable energy facility to buy power output through a long- term contract or power purchase agreement (PPA) that sets the price to be paid for the electricity. The commitment either through RECs or a PPA to buy renewable energy serves as a financial guarantee to the developer to help finance design and construction. Organizations like utilities can meet their renewable energy purchasing mandates by either building facilities or purchasing from others, which helps drive demand for new projects. Corporations customarily demonstrate their sustainability commitments in part by purchasing renewable energy from off-site producers with the RECs serving as the guarantee that the holder bought green energy. 1.3.1 Unique Characteristics of Renewable Energy Renewable energy is fundamentally different from non-renewable energy in that the power source is provided by natural systems. Many characteristics of renewable energy provide unique benefits to energy consumers that are central to making the renewable energy business case. Airports whose organizational objectives align with these unique benefits will be able to develop an effective renewable energy business case. The specific characteristics of renewable energy include the following: â¢ Energy source is essentially free for most technologies (biomass is the exception in that it requires a feedstock), resulting in a long-term, stable price for the power produced; â¢ Energy source is local (i.e., domestic), providing a measure of control and surety of supply; â¢ Energy production is entirely independent of commodity markets, which reinforces its stabil- ity benefits; â¢ Energy produced is, in most cases, emissions free, and in other cases, emissions reducing; and â¢ Energy provides broad environmental and societal benefits that enhance its value. A key step in making the business case for renewable energy at airports is documenting and communicating the inherent benefits of renewable energy. This research reviewed airport and non-airport renewable energy projects and evaluated the decision-making process and associ- ated drivers for implementing the projects. Chapter 7 provides a summary of some of the busi- ness cases that were reviewed. Each organization listed the same inherent benefits of renewable energy and then emphasized which benefit was geared toward solving specific problems based on the particular objectives of the organization and the interests of their constituents. The inher- ent benefits of renewable energy are presented in Table 1-1. 1.3.2 Documenting Benefits of Renewable Energy To effectively make the renewable energy business case, one needs to access supporting infor- mation on the benefits of renewable energy. The following section provides a context for each of the renewable energy benefits listed in Table 1-1. 18.104.22.168 Stabilize Long-term Energy Costs The EIA, which is a key agency of the U.S. Federal Statistical System, is a critical source for energy generation and price data. Their website can be searched to obtain national data or data by region or state to show the variability across regions of the country. It provides historical data to show the changes in energy sources over time and also makes long-term forecasts of energy production and
Introducing a Renewable Energy Business Case 9 consumption patterns into the future. The EIA also provides data separately by generating technol- ogy and information on the decreasing cost of installing renewable energy systems. The EIA Short-Term Energy Outlook (STEO), which is produced monthly and available on its website, provides current statistics on energy usage in the United States.13 In its September 2015 edition, it states that the retail price of electricity to the residential sector in the United States is projected to increase 1.3% higher than the average price last year with the largest price increases projected to be in New England, where residential electricity prices are forecast to increase by 10.8% in 2015, as electricity distribution companies recover higher generation and power pur- chase costs incurred during 2014 due to extreme cold weather and associated high demand. The September 2015 STEO also provides graphical information on electricity prices. Figure 1-4 shows the annual cost of electricity in a line graph and the percentage change in price from the previ- ous year. The bar chart shows the volatility in cost per year that can occur, represented most clearly in the 2005 to 2009 period. The example shows the average across the entire United States, though regional statistics are more useful for assessing specific project considerations. The bar graph shows the increase in energy prices in the mid-2000s prior to the recession in 2007â2008 and the subse- quent reduction in prices. The lesson is that while prices have not increased significantly in recent years and are not forecasted to increase substantially in the next year, the volatility of energy prices as a result of fluctuating commodity prices is a fundamental characteristic of contemporary energy markets that can be hedged by acquiring long-term, stable renewable energy. 22.214.171.124 Avoid Inflated Energy Prices during Peak Usage Utilities are increasingly looking to distributed generation, energy conservation, and demand response as a means to shift and reduce peak demand, defer capital upgrades to distribution Problem Solution Benefits Electricity price volatility and uncertainty Build an on-site renewable energy project or procure its electricity through long-term contracts Allows for accurate forecasting and budgeting of future electricity costs Inflated electricity prices during peak usage times Reduce use from the grid during high demand periods through on-site generation (also referred to as peak shaving) Allows utility customer to avoid high demand charges applied during peak use High electric utility prices Renewable electricity can be a cost- effective alternative to other generation sources Renewable energy may provide short-time price parity and long- term savings Tight operating budgets due to increasing costs and challenging market conditions Host a renewable energy facility and purchase the electricity to reduce costs, or simply act as a landlord and receive regular lease payments Improvement of the business bottom line either through savings or a new revenue source Challenging regulatory environment for new construction Provide advance mitigation for future impacts through renewable energy Facilitates future development and expansion Aging electric network decreases reliability and control of electricity supply, posing risk to airport operations Invest in generation and distribution projects to improve system reliability, which may include renewable energy for back-up generation and battery storage Advance airportâs future operational reliability consistent with resiliency and climate adaptation Over-reliance on particular types of energy Procure energy from a diversity of sources including renewable energy Spread out the operational and financial risk associated with a single energy source GHG and renewable energy policy goals and mandates need to be met Procure clean renewable electricity Achieve policy goals Desire to build a credible green brand Generate or purchase renewable energy Will be able to promote green successes and image Table 1-1. Core benefits supporting renewable energy business cases.
10 Developing a Business Case for Renewable Energy at Airports infrastructure, and minimize wholesale energy demand charges.14,15 At times of peak power usage (such as a hot summer afternoon or winter cold snap), more energy resources need to be deployed to meet the demand. The independent system operator (ISO), whose purpose is to manage elec- tricity dispatching and ensure reliability, must access during these peak times generating sources that are not operational for most of the year but rather stand ready to produce during peak periods. By its nature, the power produced is very expensive and the cost of energy use during peak periods escalates. Energy users are encouraged by the market (i.e., high prices) to decrease their power con- sumption during peak periods and minimize their power costs. Utilities and so called âdemand responseâ companies provide additional monetary incentives to large users that make advance commitments to reduce their power consumption during peak periods, which both decreases aggregate energy costs and ensures that there is adequate supply for customers. Any distributed generation source that generates power locally during peak demand periods, including renewable energy, will provide both local and grid-wide benefits. For example, if an airport has a solar facility that is generating electricity on a hot summer afternoon and the airport is consuming that electricity on-site and thereby not purchasing electricity from the grid, it will be avoiding paying for the highest priced electricity and maximizing cost savings while also reducing demand on the grid. This effect is illustrated in Figure 1-5. And because renewable energy is fuel free, it is protected from price peaks associated with the energy markets. This is often referred to as âpeak shaving.â 126.96.36.199 Increase Cost Competitiveness Public policy incentives, such as renewable energy purchase mandates and federal and state grant funding, have increased the demand for renewable energy. As production has increased to meet the demand, competition among manufacturers and installers has led to increased efficien- cies as companies seek to expand their business and gain market share. Private capital is invested into research and development to bring a better product into the market, which has led to Source: Short-Term Energy Outlook, September 2015 Figure 1-4. Residential electricity prices in the United States, 2003â2016.
Introducing a Renewable Energy Business Case 11 increasing power generation efficiency. All of these factors have resulted in a dramatic decrease in the cost of producing power from renewable energy sources. The economic opportunity of using renewable energy is perhaps best represented by solar PV. A report released by the North Carolina Clean Energy Technology Center in 2005 showed that in six of the largest metropolitan areas (in Massachusetts and California), the cost of solar electricity for residential customers is equal to or less than electricity provided by the utility. Over the next 5 years, solar will reach parity with conventional electricity in many other electricity markets including New York, Chicago, Las Vegas, and Dallas, assuming a modest 2% annual increase in electricity rates and a decrease in installed solar costs of 7% annually.16 The implication for airports is that cost should be a factor in considering renewable energy today when planning for the future. 188.8.131.52 Diversify Revenue Sources To attract aeronautical businesses, airports regularly evaluate opportunities to diversify rev- enue streams to improve their cost structures. The commercial aviation business is dynamic and airports need to be adaptable to new challenges and opportunities. In addition, many airports have land and structures that may be assets for attracting alternative revenue generators.17 ACRP Report 141: Renewable Energy as an Airport Revenue Source provides detailed informa- tion on how renewable energy has become increasingly cost-effective and describes how past projects have resulted in revenues and cost savings.18 Often, the best opportunity for new airport revenue is to identify land that has no or little value for alternative uses and lease that land to a pri- vate entity which will provide the airport with compensation. The Indianapolis Airport Authority has leased approximately 150 acres of airport land for a solar farm and receives approximately $500,000 each year as rent. Solar power is particularly suitable for such applications as it can be sited in areas relatively close to runways where other uses are not allowed due to height limitations and prohibitions on human occupancy. 184.108.40.206 Mitigate Future Development Risk Many large development projects, including those undertaken by airports, are subject to com- prehensive review under federal and state environmental laws. As part of its obligations associated Figure 1-5. Solar energy generation reduces grid purchases during peak demand periods. Source: NREL/BR-520-31179, September 2001
12 Developing a Business Case for Renewable Energy at Airports with the National Environmental Policy Act (NEPA), the FAA must ensure that projects funded by them âuse all practical means to create and maintain conditions under which man and nature can exist in productive harmony.â Many states have enacted similar broad scale legislation for state permitted projects (e.g., California Environmental Quality Act [CEQA] in California, State Environmental Quality Review Act [SEQR] in New York). As part of federal and state environmental reviews, agencies and the public are invited to pro- vide comments on project alternatives that will minimize environmental impact. Sustainability measures including renewable energy have become a project alternative that minimizes impact on the environment. The Massachusetts Environmental Policy Act is an example of such an author- ity and, combined with a statewide Greenhouse Gas Policy, gives the Massachusetts Energy and Environmental Affairs Secretary substantial authority in the absence of a specific carbon regu- lation. Legal action under state law may be taken to mitigate the air quality impacts of future development as a condition of an approval. This was the case for a settlement that the San Diego County Regional Airport Authority (SDCRAA) reached with the Office of the California Attorney General, which facilitated state approval of airport expansion plans. Another example comes from projects under the FAAâs Voluntary Airport Low Emission (VALE) program. VALE requires air- ports to obtain emission reduction credits from the EPA and state air quality regulatory agencies as part of the implementation of emission reducing projects funded under the program. Airports can use the emission reduction credits to fulfill mitigation requirements for future airport expan- sions reviewed under NEPA. The regulatory risks of inaction may be difficult to assess. The cost of implementing renewable energy projects voluntarily today versus the cost of being required to do so as part of project per- mitting in the future can be estimated if certain assumptions are made. There are also the broader benefits of acting voluntarily versus not acting, and the potential project delays (and costs) that result. For example, states that have been investing in cleaner energy under voluntary carbon trading markets (such as the Regional Greenhouse Gas Initiative in nine states in the Northeast and Mid-Atlantic regions) will not be affected significantly by the Clean Power Plan recently adopted by the EPA. The long-term business benefits suggest making investments to avoid future regulatory risk is a prudent business decision. 220.127.116.11 Improve Reliability of Aging Electrical Infrastructure The U.S. electric grid is a patchwork of transmission lines and generating systems with some components still in operation that date back to the 1880s. A variety of organizations that use and manage the grid make annual investments to improve the infrastructure and promote its reli- ability. However, a recent report card from the American Society of Civil Engineers indicated that the aging grid is subject to regular disruptions that severely affect business and the quality of life.19 More recently, there has been a focus on distributed generation and smart meter technology that not only decentralizes power generation and distribution, but improves delivery and reliability. It is in the long-term business interest of airports to review how power is delivered and to consider the risks of grid disruption. One option that may make sense for some airports is investing in an on-site âmicrogrid.â After a power outage disabled San Diego International Airport (SAN) for a 5-hour peak operating period in September of 2011, the SDCRAA began making investments to generate electricity on airport property and upgrade the local electrical distribution network to create a self-contained 12 kV microgrid that will allow the airport to continue to operate even when the regional grid is down. The SAN microgrid, which is still being developed, is shown in Figure 1-6. The SDCRAA has completed the wires part of the project, which closed the campus electricity infrastructure loop, allowing for the microgrid to be physically separated from the regional grid. It has been install- ing large solar PV electric generating facilities within the microgrid to provide on-site electricity.
Introducing a Renewable Energy Business Case 13 Future elements needed to make the microgrid functional will include some type of electricity stor- age and on-site base load electricity generation sources which will allow the grid to be operational 24 hours a day. 18.104.22.168 Introduce Diversification of Power Supply Diversification reduces risk as any retirement investment professional will state. The same holds true for energy. To reduce potential risks of supply scarcity and price shocks, energy consumers should have access to a variety of energy sources. An example comes from the New England region of the country. ISO-New England, the regionâs grid manager, has warned of the disproportionate amount of energy in New England that is tied to natural gas and the risk of gas supply scarcity and price spikes, and the associated economic and quality-of-life impacts. This analysis supports prac- tices that increase the diversity of energy sources. While airports have little control over how their energy is supplied from the electric grid, deploying on-site energy generation provides benefits of diversification and a supply that can be generated on demand and without the need to purchase and import fuel. This logic demonstrates how renewable energy can be part of a risk management program to minimize potential effects of regional energy scarcity. 22.214.171.124 Pursue Renewable Energy Policy Goals Government policies requiring an increase in renewable energy supply have increased the demand for renewable energy and supported GHG emission reduction policies. Renewable portfolio standards (RPSs) have been the primary mechanism driving renewable energy markets and demand for RECs. RPS programs are established by state laws and require utilities to pur- chase a specified percentage of their electricity from certified renewable energy sources. These Figure 1-6. San Diego Airport microgrid.
14 Developing a Business Case for Renewable Energy at Airports transactions provide producers of renewable energy (including government entities if they own the facility) with an opportunity to obtain additional value through the sale of RECs. In other cases, federal, state, and local governments as well as private entities may establish renewable energy procurement goals which are not tied to a specific law but are commitments that have been communicated publicly. To avoid any negative public consequences of not meeting their own established goals, these entities are motivated to procure renewable energy and gain the public benefit associated with attaining such an objective. National climate policy has yet to be enacted by Congress. However, carbon trading and regu- lated reductions have been achieved on a regional basis in the Regional Greenhouse Gas Initiative and the California Cap-and-Trade Program. In August of 2015, EPA launched the Clean Power Plan, which requires states to reduce carbon emissions. With the increasing awareness of the poten- tial impacts of climate change and new mandates and incentives to convert to cleaner generating sources, there will continue to be financial and political drivers for airports to pursue renewable energy. 126.96.36.199 Build a Credible Green Brand There are many testimonials and rationales from private companies communicating the rea- sons for pursuing renewable energy including those listed in Table 1-1. The rationales cross the full spectrum from very specific and quantifiable short-term financial benefits to very broad and sometimes idealistic concepts such as âbeing a good neighborâ and âtaking care of the planet.â Corporations can readily obtain public relations benefits from their programs because renew- able energy is widely viewed by the public in a positive way. Airports also see a broader benefit to their organizations by deploying new technology and being industry leaders. Airports are gateways to a region and there is mounting political and economic expectation that the airport should present a first impression for excellence that will reflect well beyond the airportâs boundaries. As government entities, airports are subject to broad public over- sight, which is why they need to develop a business case for renewable energy projects. The business case must outline the costs and benefits, and also demonstrate the value of renewable energy to improve the long-term interests of the airport business. 1.4 Business Case for Renewable Energy 1.4.1 Examples of Renewable Energy Projects Considering that airports are only one type of business that develops renewable energy proj- ects, this study investigated the application of renewable energy in other types of industries including health care and higher education. The manual Developing the Business Case for Renew- able Energy: A Guide for Universities and Colleges was referred to as a model for this report.20 The project team identified renewable energy leaders from other industries and selected a group of non-aviation examples that could provide insight on airports. These examples, discussed in Chapter 7, include representatives from higher education, health care, and technology. This research found that each industry identifies the same inherent benefits of renewable energy in developing the business case, but then applies greater emphasis on some aspects over others based on the mission of the organization and the interests of its constituents. For example, the higher education sector emphasizes the role that universities and colleges play in conducting new research and being leaders in society to advance a public good. Health care businesses want to promote a healthy future as part of their overall mission, and renewable energy is consistent with that. Because renewable energy is a relatively new area with new technology that is helping to solve broader public problems, the universities and hospitals place considerable weight in their business
Introducing a Renewable Energy Business Case 15 case that they should be demonstrating their support for renewable energy as leaders in society. Airports may also perceive benefits from being societal leaders. However, given their mission of facilitating safe and efficient air travel, airports are more likely to emphasize cost savings, revenue generation, power diversity, and increase in reliability offered by renewable energy. A further pub- lic relations benefit may be achieved through green branding, since large airports are visited by millions of travelers each year. A perhaps less obvious difference in evaluating the business case for renewable energy will occur between organizations in the same industry with generally the same mission. In the airport indus- try, these differences are influenced by geographic location, airport characteristics, and resource capacity all the way down to personal preferences and management style. Some airports have aggressively embraced renewable energy while others have avoided it. In some cases, an inter- nal champion with an interest in renewable energy has been the catalyst in the development of a renewable energy project. At other times, an airport responds to an unanticipated opportunity that makes a project a clear low risk choice. This is why developing the business case is ultimately a systematic planning process that draws on the inherent benefits associated with renewable energy and applies them to a particular airportâs situation. 1.4.2 Renewable Energy Projects at Airports As the renewable energy industry has grown and matured across the United States and the world, airports have actively participated by integrating renewable energy into their improvement projects. Figure 1-7 provides a map showing renewable energy projects that have been developed and are now operating at airports across the United States. Solar PV has been the dominant tech- nology deployed; however, biomass, geothermal, and wind have also been developed at airports. Airports have also demonstrated their commitment to renewable energy by purchasing RECs from remote generating sources. The purchase of RECs helps renewable energy developers finance their projects. Particularly, given the dramatic reductions in the cost of wind energy, there has been a large supply of renewable energy available for purchase at prices equivalent to market rates for traditional power. EPA lists the top renewable energy users in the United States on its Green Power Partnership website, which is updated on a quarterly basis.21 Airports cur- rently listed on the EPA website include the Dallas/Fort Worth International Airport (DFW), Dane County Regional Airport (MSN), and Los Angeles World Airports (LAWA). Deployment of the airport renewable energy projects shown in Figure 1-7 has been driven by a wide variety of factors. In some cases, renewable energy has been integrated into new airport construction projects where the airport has sought to showcase sustainability design (see Outagamie, Portland Jetport, San Diego). In other cases, airports have taken advantage of federal grant opportunities to help fund projects (Manchester, San Antonio, Tucson). In some other cases, strong state or local solar incentives attracted a private developer market to build projects at airports (Denver, Indianapolis, and Newark). In each case, airports have been able to make the business case for the projects by pointing to the economic, self-sustainability, environmental, and social benefits. 1.4.3 Drivers for Existing Renewable Energy Projects at Airports Initial communications with airports about the renewable energy business case suggested that airports did not formally consider the business case when developing their projects. However, airports developed renewable energy projects for different reasons, and understanding these reasons would be useful in identifying the drivers that supported the airportâs business case for renewable energy.
16 Developing a Business Case for Renewable Energy at Airports To collect data on airportsâ decision-making process and the drivers for undertaking renew- able energy, the project team prepared a simple web-based survey using Constant Contact. To improve response success rates, the survey was limited to 10 questions to make it easy for recipi- ents to respond. This approach was appropriate as only general information was sought. The survey was directed to airports that had completed renewable energy installations. In addition, the survey was sent to only one contact from each airport to avoid receiving multiple responses for a single installation. Since researchers had worked with the airport respondents on other related industry initiatives, it was anticipated that response levels would be relatively high. A compilation of the survey results provided through Constant Contact is included in Appendix A. The survey was sent to 91 airport contacts and 22 responses were obtained for a 24% response rate. Here are some of the key findings. Energy source: â¢ Solar = 64.0% â¢ Geothermal = 20.0% â¢ Solar thermal = 8.0% â¢ Wind = 4.0% â¢ Biomass = 4.0% Figure 1-7. Renewable energy projects at airports in the United States.
Introducing a Renewable Energy Business Case 17 Source of initiative: â¢ Internal staff = 44.0% â¢ Organizational strategic planning = 24.0% â¢ Outside private party = 16.0% Leader of initiative: â¢ Director = 29.2% â¢ Facilities = 20.8% â¢ Other = 41.7% Primary driver: â¢ Economic = 40.9% â¢ Environmental = 40.9% â¢ Political = 9.1% Secondary driver: â¢ Environmental = 42.8% â¢ Economic = 33.3% â¢ Social = 14.2% Most important factor (average score on a 1 to 5 scale): â¢ Reducing cost or generating revenue = 4.9 â¢ Demonstrating industry leadership = 4.6 â¢ Locking in long-term price stability = 4.0 â¢ Diversifying energy supply = 3.4 â¢ Meeting local/state renewable energy policies = 3.1 â¢ Achieving GHG emission reduction targets = 2.6 â¢ Meeting demands from investors and customers = 2.1 â¢ Mitigating permitting obstacles to future expansion = 1.5 Degree to which the project has had a broad positive effect on the airportâs bottom line: â¢ Low = 47.6% â¢ High = 19.0% â¢ Undetermined = 19.0% â¢ Medium = 14.2% Degree to which the project has had a broad positive effect on the airport and its business: â¢ Medium = 42.8% â¢ High = 23.8% â¢ Low = 19.0% â¢ Undetermined = 14.2% The information in the responses is somewhat conflicting in that it indicates economic fac- tors are the most important drivers for the projects but the economic benefit realized was not as strong. Environmental drivers are also strong. A key response is the importance of being an industry leader, which is an indicator of the importance of airports as a gateway for economic development and environmental leadership. The empirical information from the survey provides evidence that the inherent renewable energy benefits discussed above were drivers for past projects and that they support the airportâs business case for pursuing renewable energy.