Developing a Business Case for Renewable Energy at Airports (2016)

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54 This chapter presents a model business case for airport renewable energy that readers can use to conceptualize and develop their own business cases. This model presents how an airport might make the business case for a solar photovoltaic project. Solar photovoltaic was selected due to demonstrated success in its application at airports; however, other technologies can be filtered through the same business case process. In this chapter, it was determined to model the hypothetical case in which an airport is evalu- ating a solar project to be self-funded and owned—the decision for the airport to own the sys- tem is arrived at during the fatal flaw screening step as described below. While the technology and ownership structure may not be that which is being pursued by all readers, the informa- tion required and process of evaluation will be similar for all renewable energy projects being explored by airports. Furthermore, the cost of electricity and evolving technology is dynamic and the numbers used throughout this chapter are a snapshot in time. What remains unchanged is the process of developing the business case and the information required to support that case, an example of which is presented in Figure 6-1. 6.1 Setting up a Business Case The basis for any project starts with identifying a problem and solution, preparing the project vision, and outlining the business case process for evaluating the proposed solution and alterna- tives. In this model, we lay the foundation for pursuing an airport solar project. The text box in this section provides some fundamental resources that should be referred to. 6.1.1 Problem Identification The business case starts with a problem and a proposed solution. 6.1.1.1 Problem Statement The primary problem identified by the airport is volatile and escalating electricity prices. With energy representing between 10% and 15% of an airport’s annual operating budget,32 gaining control over these costs is an important factor in effectively managing the airport’s budget. Controlling costs has been increasingly important in the current era of dynamic and potentially volatile airline business, where airports need to diversify revenue sources, cut operating costs, and stabilize expenses to support an offer of competitive rates to airlines to attract their business. Furthermore, the airport is drawing on the electrical grid at peak periods when electricity is most expensive (summer afternoons). In this case, the airport had performed a number of energy audits and subsequent conser- vation and improvement projects to reduce energy demand, primarily in the terminal. While C H A P T E R 6 Reviewing a Model Business Case

Reviewing a Model Business Case 55 these were successful in reducing the demand for energy, the forecast of increasing passenger activity, rising energy costs, and volatility of prices were concerns for future airport budgets. Increasing energy costs in the terminal translate to increasing airline costs; so the airport management thought that the airlines would generally support measures that helped control those costs. 6.1.1.2 Proposed Solution On-site generation could produce compounded cost savings by reducing electricity demand from the grid when the electricity prices are peaking. It could also benefit the airport by modern- izing the airport’s energy infrastructure for long-term operational efficiency, power reliability, and increasing business resiliency. The proposed solution is to develop an on-site solar PV energy facility to generate a meaning- ful portion of the airport’s electricity demand during daylight hours when airport peak energy use and utility rates are high. Figure 6-2 shows how electricity will be produced on-site and exported to the grid during overproduction, while electricity will be purchased from the grid when the sun is not shining. Solar provides for stable long-term electricity prices due to low operating costs and no need for fuel, the latter of which drives the unpredictability of future electricity prices. Alternatives to the proposed solution are other methods to generate electricity on-site and limit the airport to risks associated with the volatile price of electricity provided by the utility from the electrical grid. Specific siting and design elements are developed once the business case for the technology selection has been confirmed. Figure 6-1. Business case decision flow.

56 Developing a Business Case for Renewable Energy at Airports 6.1.2 Project Vision The project vision communicates the primary purpose of the project and its guiding principles. 6.1.2.1 Purpose The purpose of this project is to develop a solar PV facility to generate a meaningful amount of electricity at a long-term stable price for airport use. The facility could be owned by the airport or developed by a private third party. Suitable sites may include airfields, roof tops, or carports. An initial plan to develop the project concept, including project ownership and a compatible site, is assessed as part of the fatal flaw analysis. Fundamental design elements that affect the capabilities of the system, namely battery storage, are also considered in the fatal flaw screening. Key references: In walking through the initial steps of setting up the business case, the airport should become familiar with a few fundamental references. • The U.S. Energy Information Administration (EIA) generates independent statistics about energy prices and forecasts for the future. • The Database of State Incentives for Renewable Energy (DSIRE) managed by the North Carolina State University is a central reference for up-to-date financial incentive programs for renewable energy and energy efficiency. • The National Renewable Energy Laboratory provides basic information on how renewable energy technologies work as well as ownership and financing models. • ACRP generates research publications that are specific to the interests of airports including ACRP Report 108 and ACRP Report 144 on renewable energy. • While not specific to the airport industry, a good example of a renewable energy business case is available from the National Association of College and University Business Officers: The Business Case for Renewable Energy: A Guide for Colleges and Universities. • The airport utility bill which specifies where meters are, the cost of electricity, and the pricing structure for time and season. Figure 6-2. Preferred solution to generate electricity on-site from solar.

Reviewing a Model Business Case 57 6.1.2.2 Guiding Principles The guiding principles for the project are as follows: • The airport has experienced escalating and volatile electricity prices in recent years. Forecasts of energy prices from the EIA suggest that electricity prices will continue to increase. There is an added risk associated with increasing regulatory requirements on fossil-based fuel, includ- ing new environmental protection technologies such as carbon sequestration. • Renewable energy generates a steady and predictable electricity supply corresponding with peak usage times and production levels and electricity prices that are stable for 20 years or more. • Renewable energy provides ancillary benefits including investment in the airport infrastruc- ture, emissions reductions, and community and industry leadership. 6.1.3 Business Case Process The business case is a decision-making process for evaluating feasible approaches to a given problem and selecting the option that best suits the airport’s circumstances and needs. This process is summarized here as the model business case of a solar PV project at an airport. Details of the model case are given in Sections 6.2 through 6.5. 6.1.3.1 Options The proposed solution to the problem is to develop, own, and operate a solar PV electricity generating facility on an airport property. There are several alternatives to the proposed solution that need to be evaluated as part of the business case process. They include: • No-build. No action is taken to address the identified problem. The current situation is unchanged and the effects of no action for the future must be evaluated. • Conventional energy generation. This option proposes to generate electricity on-site using the most feasible conventional fuel-based technology. • Renewable energy alternative. This option proposes to generate electricity on-site using the most feasible renewable energy alternative to solar PV. 6.1.3.2 Fatal Flaw Analysis Each development alternative must be subject to a high level fatal flaw screening analysis to address fundamental issues with its feasibility prior to undergoing the more detailed review using project evaluation criteria. This analysis can be undertaken by the airport in conjunc- tion with basic research about the proposed technology. By engaging environmental, planning, financial, operations, and development staff in this initial analysis, a broad understanding of capabilities and options can be developed. The fatal flaw analysis may rule out an option as its label suggests. However, in most cases, the fatal flaw analysis identifies factors that may pose practical or financial challenges and associated risk. The relevant fatal flaw factors are: • Airspace and airport operations compatibility. All projects and activities proposed on an air- port property must be compatible with an airport’s primary mission of facilitating air travel. • Passenger demand capacity. If Part 139 is certificated, the airport must have existing and future passenger demand capacity projections to justify and fund the project. • Energy resource availability. The energy generation technology, whether fossil or renewable fired, must have access to a reliable fuel supply to be viable. • Infrastructure adequacy. Energy generation technologies must be able to interconnect with the existing electrical infrastructure. • Government incentive screening. The ownership structure of a renewable energy project is often dictated by the availability of federal and state financial incentives for renewable energy.

58 Developing a Business Case for Renewable Energy at Airports • Energy storage. Adding energy storage capabilities may advance the airport’s objectives but also introduces potential costs and performance risks. Details of the fatal flaw analysis applied to solar photovoltaic and alternatives in this model business case are given in Section 6.3. 6.1.3.3 Evaluation and Ranking An evaluation and ranking system has been developed as part of the report (discussed in Chapter 3) and is used in this model business case. The evaluation and ranking system creates a framework that must be fine-tuned to the airport’s needs, objectives, and environment. The airport uses the evaluation and ranking tool provided with this report to facilitate its assessment of the proposed solution and alternatives. The default ranking weights are generic and should be reviewed and customized by the airport to ensure that they accurately reflect the airport and its goals. The value of the evaluation criteria in identifying the alternative that best meets the airport’s objectives is also dependent on avail- able information. The report includes some proxy answers that may be used in the evaluation process to reflect the airport’s intent in lieu of accurate information specific to the project. In this way, the evaluation and ranking system is used early in project planning to identify informa- tion needed to make good decisions about the proposed solution and alternatives as well as for supporting the selection of a solution. That is, when the user first engages the ranking system, it may elicit more questions than answers. As the airport identifies the questions and compiles the answers during the development process, it can go back to the evaluation and ranking system and reassess the alternatives based on new information. As such, the evaluation and ranking system must be regularly revisited throughout the project development process as part of the ongoing process of developing the business case. Details of the application of the evaluation and ranking applied to solar PV and alternatives in this model business case are given in Section 6.4. 6.1.3.4 Development and Implementation As stated above, the evaluation and ranking system sets the framework for project planning and decision making which is then integrated into the development and implementation pro- cess. That process includes: • Project evaluation through the master planning process • Project review with airport stakeholders • Focused, detailed studies • Agency permitting and approval • Financing • Procurement • Design and construction • Commissioning and operations Throughout the development and implementation process, the airport is regularly identifying issues triggered by the evaluation and ranking criteria and collecting information to accurately assess the proposed project and alternatives against the criteria. 6.2 Defining Options For this model business case, four options are evaluated and described. In defining each option, some assumptions had to be made relative to facility ownership and fundamental design elements to evaluate the business case. The business case process could be used to assess

Reviewing a Model Business Case 59 alternative ownership and design elements if desired. Those presented below provide readers with credible examples. 6.2.1 Preferred Option The preferred option is a solar PV electricity generating system on the airport property and owned by the airport. The selection of an airport-owned project versus a third party owned facility was informed by an initial assessment of the federal and state incentives for solar renewable energy and a determination that state incentives are not lucrative enough at present to drive interest from the private sector. The system will generate electricity to be consumed directly at the airport and thereby reduce the corresponding quantity of electricity that would otherwise be purchased from the utility provider and the electrical grid. The cost savings through avoided electricity pur- chase is the financial metric for assessing the airport’s return on investment or simple payback. To meet the objective of generating a meaningful supply of electricity to positively impact the airport’s long-term budget, the system is assumed to be sized to meet 25% of the airport’s peak electricity demand during daylight hours. In targeting peak demand, the solar facility will maxi- mize the quantity of electricity displaced, as well as potentially the most expensive electricity, thereby providing a faster payback. To meet 25% of the airport’s peak demand for most small hubs and larger, the airport will require a minimum of 10 acres of solar panels with a nameplate capacity of 2 MW. Nameplate is the rated capacity of the system whereas actual electricity gen- eration will vary based on climatic and seasonal conditions. Given the required size of the array, the project should be located on the ground as opposed to on building rooftops, though a combination of ground and rooftop designs could be considered. The suitable location will be land that is outside of FAA-prescribed airfield and airspace safety zones, not required for aeronautical uses, and proximate to existing electrical infrastructure on the airport, preferably near the terminal. [A particular project site within an approved FAA safety zone may be viable in some cases, but the model business case looks to minimize risks, including those associated with aggressive siting.] While there are several land use types that may be options, the most common option would be carports covering surface parking that would provide the supplemental benefit of sheltered parking. Recent examples that best exemplify this preferred approach are the 1 MW solar facilities at San Jose International Airport (constructed on the roof of the adjacent parking garage) and Tucson International Airport (constructed over surface parking adjacent to the terminal). An initial budget figure for building these types of facilities would be $6m for a 2 MW solar facility, but would vary based on the size of the airport and the corresponding size of the proposed solar facility to be constructed to meet the airport’s objectives. Costs are subject to change and the installed cost presented is an average generated by the PVWatts Calculator of the National Renewable Energy Laboratory. A benefit to building the solar array over surface parking is the additional revenue derived from covered, as opposed to uncovered, parking. A survey of on- and off-airport surface parking at airports across the United States identified an average differential rate of $2.70 per day for covered parking. Tucson Airport charges $5.00 per day more for solar panel covered parking than for uncovered parking. The airport would need to evaluate its current parking rates by location as well as off- airport parking rates, to set a reasonable differential parking rate. The additional revenue could help finance the debt associated with the canopy construction or pay for maintenance of the structure and parking area. Covered parking is generally perceived as a higher level of service to passengers. The primary disadvantage of solar is as an intermittent electricity source that is not available at night. While battery storage can be added to the project design to expand its capabilities, for this business case battery storage was not included as it would increase the overall cost of the project and reduce its cost-effectiveness. [Another business case could include battery storage given a greater

60 Developing a Business Case for Renewable Energy at Airports weight applied to benefits of power reliability, or increasing cost-effectiveness as markets develop.] The project’s electricity production is also limited by variable performance in changing seasonal and weather conditions. The airport was able to utilize online planning resources from the National Renewable Energy Laboratory and ACRP Report 141 to understand the solar potential and variability. The benefits of the project as proposed for cost savings from displaced electricity demand are not applicable to airports that are relatively small consumers of energy. The preferred project for general aviation and similarly sized small airports would be as host of a privately-owned and financed solar PV facility which would compensate the airport with an annual lease payment. The small airport solar PV development scenario is not specified in this model business case but the same business case processes can be followed to evaluate it versus alternatives. In this case, the airport investigated the current federal and state solar incentives and deter- mined that a lack of state solar policies and associated private market suggests that the airport should pursue self-ownership funded by federal grants. There are several potential sites for the PV facility on airport property that are not expected to interfere with airspace or operations. The airport facilities staff is capable of maintaining a solar PV array with some training and technical guidance. The airport is located in a geographic area favorable for solar power, and other PV projects have been developed by the local utility. An initial evaluation of the electrical infrastructure suggests that there are viable interconnection options. Based on this analysis, the airport staff identified an airport-owned solar PV project as the preferred alternative. 6.2.2 No-Build Scenario The no-build scenario is a review of the existing conditions and the risks and benefits of not acting on the identified problem. The life of the preferred solution is conservatively 20 years and therefore the evaluation of the no-build and associated inaction would consider the risks and benefits over a similar timeframe, though variations might consider delaying action for shorter periods of time, such as 5 or 10 years. Under the no-build scenario, electricity is acquired from the utility provider as in the current condition. The airport is able to invest the money and staff resources otherwise required to construct the solar facility into alternative projects. In this case, the airport would be subject to the identified problem of escalating and volatile electricity prices and would not accrue other potential benefits associated with modernizing on-site electricity systems, mitigating emissions impacts, and showing community and industry leadership. While the electricity generation source mix varies in different regions of the country (e.g., the Midwest having a higher percent- age of coal while the Northwest is dominated by hydropower), the no-build scenario assumes a national average generation mix which is served by coal and natural gas. 6.2.3 Conventional Alternative The conventional alternative is defined as an electric generating system that is powered by con- ventional fuels such as diesel or natural gas to address the problem of escalating and volatile elec- tricity prices. Like the preferred alternative, the conventional system would generate electricity to support on-site demand and therefore displace energy that is purchased from the utility service pro- vider from the electrical grid with the financial benefit being the avoided cost of future purchases. A conventional system would consist of a small-scale electricity generating station of com- parable size to the preferred solution (e.g., 2 MW). Such a system would be relatively compact, occupying an area of about 10 ft3 and therefore could be located inside or outside a building. Like the preferred alternative, the system would need to be located in close proximity to existing electrical infrastructure, with the preference being relatively close to the terminal building given

Reviewing a Model Business Case 61 the size of load. Given the relatively small size of the system, this is expected to be achievable. A picture of an on-site electricity generator fueled by diesel is provided in Figure 6-3. A unique benefit of the conventional alternative is that the system could operate as a certain and controllable electricity source with availability determined on demand, with sufficient fuel supply, whereas the preferred alternative would generate electricity only during daylight hours with per- formance variable depending on season and weather conditions. Furthermore, the conventional alternative could also be equipped with co-generation components that capture and store waste heat from the electricity generation process and provide hot water for heating purposes. The primary disadvantage of the conventional alternative is that the price of energy produced remains tied to the dynamic commodity prices of the fuel that fires the system, which is incon- sistent with the project’s objective. Whereas the renewable systems have an initial capitalization cost and very low operating costs, conventional systems have both a capitalization cost and oper- ating costs affected by continuous fuel purchases. This limits the extent of benefits associated with maintaining steady long-term electricity prices. The conventional project also produces air emissions, which complicate environmental permitting, particularly in a non-attainment area, and eliminates the opportunity to exhibit sustainability leadership. This alternative also requires reliable delivery of fuel for continued operation. During a significant weather event or regional emergency, fuel delivery may be suspended for a time, leaving the system vulnerable to outages. For the conventional alternative used in this business case, the researchers have proposed diesel primarily because the reference cost data includes it and diesel is most commonly used for fossil fuel on-site generation. Natural gas units for on-site generation have only recently come into favor due to decreasing cost of fuel supply and increasing regulation on diesel and petroleum-based fuels. However, diesel is a suitable proxy for considering natural gas and asso- ciated issues that would need to be addressed. Diesel must be delivered to the site by truck while natural gas is often available through an underground pipeline. Energy storage is not needed for a conventional fuel project and is not proposed. 6.2.4 Renewable Alternative There are several viable renewable electricity alternatives including wind, biomass, and fuel cells, none of which is obviously superior, and all have been of limited use at airports to date. However, given its promise to provide broader infrastructure benefits at airports in the long-term and its mar- ket potential for on-site generation, fuel cell is the selected renewable alternative applied to this busi- ness case model. The fuel cell generates electricity through chemical reactions illustrated in Figure 6-4. Figure 6-3. Conventional on-site electricity generator.

62 Developing a Business Case for Renewable Energy at Airports The fuel cell that is currently commercially available and being deployed by business and gov- ernment is a 200 kW unit that is about 30 feet long by 9 feet wide and 7 feet tall. Five to 10 of these units would need to be installed to match the capacity requirements of the other alternatives, making the space requirements less than for solar but more than a conventional fossil fuel–fired generator. The fuel cell system would produce electricity on-site and displace electricity that is otherwise purchased from the grid. The fuel cell provides base load power like the conventional generator and also requires an outside fuel source to catalyze and sustain the chemical reactions that generate electricity. Natural gas is typically used as a fuel due to its widespread availability, and biogas is used where carbon mitigation is a priority. Hydrogen fuel cells are a zero-emission technology; however they are not a cost-competitive option. Like the other technologies, it needs to be located proximate to existing electricity infrastructure to keep costs down and is best located near the terminal building, which is the airport’s largest electricity consumption center. Benefits of the fuel cell technology are in its reliability and power quality with high availability, assuming that fuel delivery providing the catalyst is not severed. While commercially available units supported by natural gas generate air emissions, those fueled by biogas are considered to be sustainable due to the use of a renewable fuel. No energy storage is needed as fuel cells serve as a consistent and reliable electricity source as long as the catalyst supply is available. The pri- mary drawback for fuel cells is high initial capital cost. However, access to the catalyst fuel source may also be a concern if uninterrupted service is required during a significant weather event. Additionally, finding a suitable location for an installation this size near the terminal building may be a challenge. 6.3 Fatal Flaw Analysis Prior to the detailed analysis using the evaluation criteria, each of the alternatives must be screened through several fatal flaw metrics. The following sections describe the fatal flaw analy- sis for each alternative and identify any resulting considerations for the analysis and evaluation screening. Table 6-1 summarizes the results. Figure 6-4. Fuel cell.

Reviewing a Model Business Case 63 While future passenger capacity is listed in the fatal flaw analysis to recognize that airports with sufficient levels of business will be capable of capitalizing such projects, the sections below do not revisit this condition. Likewise, infrastructure adequacy is generally sufficient for airports given their land use intensity. The key for these projects is to site the facility near existing infra- structure to limit development costs, which is generally more of a challenge for solar PV than the conventional or renewable alternatives but not an excluding factor. The fatal flaw step should also review available financial incentive programs for renewable energy systems that may affect the most appropriate ownership structure to pursue. For this business case, it is assumed that the proposed solar project is located in a state and utility service territory with limited market-based financial incentives, suggesting that an airport-owned facility would be the most cost-effective strategy. This business case process could be used to evaluate a third party owned facility where the airport purchases the facility’s renewable electricity output and its varying financial structure. 6.3.1 Solar PV 6.3.1.1 Airspace One of the reasons why solar PV has been widely implemented at airports is because it can be integrated into the airport environment in a compatible manner. This is primarily due to the modular nature of solar facilities allowing them to be located within existing development (e.g., on buildings, over parking areas, in airfield). Solar panels are also low in profile, which keeps the structures from causing a physical penetration of airspace. This provides the opportunity to site facilities in areas where many other land uses are excluded due to height and occupancy by people. However, one impact area that has been identified in recent years is the potential to produce glare that can visually impact air traffic controllers and pilots. The FAA has developed a glare modeling tool that can readily be used during the conceptual design process to determine if a particular area and design could produce glare on the air traffic control tower or on pilots arriving for a landing. The FAA requires the use of a glare tool to evaluate any project proposed on airport and demonstrate compliance with an ocular hazard standard. Any project implementing solar must evaluate candidate sites for potential glare impacts and select an alternative design or site to avoid impact. 6.3.1.2 Availability of Fuel Another reason for the broad success of solar PV projects at airports is that solar energy is available and generally economical everywhere in the continental United States. For other renewable sources such as wind and hydro, proximity to an identified resource area is critical to being able to generate a sufficient amount of electricity. Solar, however, can be generated most anywhere although the capacity of a particular area compared with another can vary widely, shaping the cost-effectiveness of a project. Alternative Airspace Capacity Fuel Availability Infrastructure Adequacy Conclusion Solar PV Design for glare Airport specific Sun available Confirm during siting Must design for glare No-Build No issue Airport specific No issue No issue No issue Diesel Generator No issue Airport specific Conventional fuel expected to be available Confirm during siting Issues to consider in design Fuel Cell No issue Airport specific Catalyst fuel expected to be available Confirm during siting Issues to consider in design Table 6-1. Overview of fatal flaw analysis.

64 Developing a Business Case for Renewable Energy at Airports 6.3.2 No-Build 6.3.2.1 Airspace Many airports have existing airspace obstructions that require mitigation. These vary from trees that penetrate airspace to obstructions on the ground that temporarily block controllers’ view. The issues are typically identified in master planning and programmed for correction. In the no-build condition, any existing obstructions will remain and any potential obstruction from an alternative will be avoided. 6.3.2.2 Availability of Fuel In the no-build condition, fuel availability for existing energy needs is not expected to be an issue. If it is, then it should be identified as a problem to be addressed. 6.3.3 Diesel Generator 6.3.3.1 Airspace The diesel generator is likely to occupy space either inside of or next to existing buildings. Its size will be comparable to existing development and therefore airspace is not expected to be an issue. 6.3.3.2 Availability of Fuel The on-site generator considered in this case is fueled by diesel, though gas and liquid biofuel are feasible options. The selection of the fuel will be affected by a number of factors includ- ing availability of the fuel source and siting requirements associated with the various types of sources. Diesel must be delivered to the site by truck and therefore could be limited by a region- wide event. The broad prevalence of infrastructure to support supply of gas makes it a more reliable fuel source for many customers. 6.3.4 Fuel Cells 6.3.4.1 Airspace As with the conventional generator alternative, airspace will not be an issue for fuel cells due to their relatively low profile and siting within existing buildings and other development. 6.3.4.2 Availability of Fuel Fuel cells also require a tie to a continuous fuel source, which typically means natural or bio gas. Due to the wide prevalence of natural gas infrastructure, availability of fuel is not expected to be an issue. If it is, then it will be identified early in the project and may be a factor toward excluding fuel cells for particular sites. 6.4 Evaluation Criteria Analysis A set of evaluation criteria has been developed to incorporate sustainable objectives into the business case and provide decision-making value to environmental and social factors in the business case. As such, the evaluation criteria can be used to compare conventional and renew- able energy projects using economic, self-sustainability, environmental/social, and other factors. The evaluation criteria were previously presented in Chapter 3. The evaluation and ranking tool is a baseline model that can be deployed by all airports assuming a generic airport condi- tion. As one of the first steps in using the criteria, the user should review the weighting system

Reviewing a Model Business Case 65 and customize it as necessary to reflect the individual airport’s characteristics and priorities. In this case, each set of criteria was weighted evenly at 25%. In addition, the criteria should be used not only to analyze alternatives and produce a result but also to identify information necessary to accurately evaluate the alternatives and build a business case for a project. Thus, the early stage use of the criteria may expose a lack of information to make an informed decision. The user can refer to the proxies and sources of information included in Chapter 3 to assist an initial evaluation. The following analysis is provided as an example for using the evaluation criteria to assess a solar PV project and the no-build, conventional, and renewable alternatives. These four options have been individually assessed relative to the ranking criteria and scored on a high, medium, and low scale. A high score strongly meets the criterion and receives 20 points; a medium score partially meets the criterion and receives 10 points; and a low score does not meet the criterion and receives a score of 0. The scores reflect a broad assessment across 21 different criteria. The final score is indicative of the degree to which the option meets the renewable energy business case. As explained in Section 6.4.1, for this analysis, diesel generation is the specific example being used for conventional fuel. Table 6-2 provides a summary of the combined results. 6.4.1 Economic The economic evaluation relies on industry-generated data of the cost of various technologies and the existing cost of energy. The financial information presented below comes from Lazard’s Levelized Cost of Energy Analysis—Version 8.0, dated September 2014.33 The key assumptions are included on pages 16 to 18 of the Lazard Analysis. These data are a guide for initial proj- ect evaluation. The airport will want to, if possible, generate site-specific information to help improve the accuracy of the evaluation for local cases. This could include replacing the existing energy cost information presented for metropolitan areas below with information from the airport’s utility bills. The airport could also invite technology providers and industry experts to prepare cost information for the local airport case. The Lazard data uses the following categories: solar PV utility-scale crystalline (10 MW), diesel generator (2 MW), and fuel cell (2.4 MW). While the solar PV size category is larger than the 2 MW example, it can be simply scaled down to provide comparable numbers. For the con- ventional fuel option, diesel was selected, as its size (2 MW) fits the proposed size for airport on-site generation, whereas Lazard used gas generation units at utility-scale grid load (100–250 MW) that are not representative of the model. Smaller on-site gas units are available, but the diesel information is reasonably representative of other on-site fossil fuel generation, with the variable being fuel cost. The Lazard data is provided as a range reflecting various project locations, incentive avail- ability, and fuel costs. In general, this case uses the median number for comparison. Rankings are listed in Table 6-2. Each entry in the evaluation criteria template includes an explanation of the criterion and examples of how the ranking could be applied. Application of the economic evaluation criteria for this case is presented in the following paragraphs. Because the no-build alternative provides limited benefits (likely through avoiding new short-term expenditures), including limited cost benefits (resulting from negative consequences including increasing costs of operations and maintenance), it is not described in the analysis. A ranking value of 0 has been applied to all categories except for capital cost, which has the benefit of preserving capital invest- ments for other projects. Capital cost: cost to construct project from conception through commissioning The capital cost data was taken from Lazard. The numbers used for this model are the aver- age for the range presented. Diesel is the cheapest and achieves the highest score (20). Solar is

Evaluation Factor Solar photovoltaic No-Build Diesel Fuel Cell f Economic (25% weighting) Capital Costs 10 20 20 0 Leveraging 20 0 20 20 O&M Costs 20 0 20 0 Life-Cycle Costs 20 0 0 10 Revenue/Savings 20 0 0 10 Benefit/Cost 20 0 10 10 Energy Costs 20 0 0 10 Weighted total 32.5 5 17.5 15 Sel -Sustainability (25% weighting) Meet Energy Demand 15 0 15 15 Resiliency Benefits 10 0 10 10 Facilitate Future Expansion 10 0 0 10 Enhance Future Benefits 10 0 10 10 Weighted total 11.25 0 8.75 11.25 Environmental/Social (25% weighting) Meet Local Policy/Goals 20 0 0 10 Job Creation 10 0 10 10 Limit GHG Emissions 20 0 0 10 Improve Air Quality 20 0 0 10 Enhance Customer Experience 10 0 0 0 Consistent with Sustainability Plan 20 0 0 20 Weighted total 25 0 2.5 15 Other (25% weighting) Consistent with Master Plan 10 0 10 10 Ease of Implementation 10 10 10 10 Construction Impact Concern 10 10 10 10 Elevated Project Risk 10 0 10 10 Weighted total 10 5 10 10 TOTAL SCORE 78.75 10 38.75 51.25 Table 6-2. Evaluation of proposed project and alternatives.

Reviewing a Model Business Case 67 the middle cost with the corresponding middle score (10). Fuel cell is the most expensive and receives the lowest score (0). • Solar: $1,625/MWh • Diesel generator: $650/MWh • Fuel cell: $5,650/MWh • No-build: No cost Capital cost leveraging: effectiveness of leveraging non-airport funds for the project Capital cost leveraging for an airport-owned project assessed in this model is limited to gov- ernment grants. While complete guidance has not been released by the FAA, it is anticipated that the Energy Efficiency Program established under Section 512 of the FAA Modernization and Reform Act of 2012 is one potential source. Other grants may be available at the local or regional level. Without specific local information, the capital cost leveraging for this example is anticipated to initially remain equal across the board. As a result, each was applied an average score of 10. • Solar: Section 512 Program • Diesel generator: Section 512 Program • Fuel cell: Section 512 Program • No-build: No leveraging Operations and maintenance: measure of long-term O&M burden of the project The O&M data was obtained from Lazard. The average of the range provided was used. O&M costs for solar and diesel are fixed while the fuel cell estimate is variable. After annualizing the fuel cell O&M, its costs turned out to be significantly higher than the others, which are reflected in the ranking scores: solar (20), diesel (20), and fuel cells (0). • Solar: $16/kW-year • Diesel generator: $15/kW-year • Fuel cell: $40/MWh • No-build: Calculated based on cost accrued through inaction (e.g., changing price, increasing inefficiencies) Life-cycle costs: measure of all costs throughout the 20-year life of the project Life-cycle costs are also measured by the levelized cost of energy. In the Lazard data, each of the three technologies is considered to have a project life of 20 years. The scores are applied rela- tive to each other with solar having the lowest cost of energy (20), fuel cells being second (10), and the diesel generator (0) being most expensive. • Solar: $61/MWh • Diesel generator: $315/MWh • Fuel cell: $129/MWh • No-build: Calculated based on cumulative cost accrued through inaction (e.g., changing price, increasing inefficiencies) Cost savings or revenue enhancement: financial value that could be generated by the project As an airport-capitalized and airport-owned project that will use energy on-site rather than sell to another customer, the financial benefit to the airport in this business case is in energy cost savings. The potential for energy cost savings will vary by project location and cannot be analyzed in the generic example. However, we have listed the average cost of electricity in the top 10 metro- politan areas in the United States as reported in Lazard to show how each of the technologies would compare to potential cost savings in each market (see Table 6-3). Solar would provide

68 Developing a Business Case for Renewable Energy at Airports cost savings for a number of the cities in the east, garnering a score of 20. For cities with lower electricity costs, no-build would score best, followed by solar. However if the problem identified is an aging electrical infrastructure and energy price volatility, then the no-build alternative does not align with the project objective. Potential for revenue generation would also be considered in scoring. Diesel is not close to providing cost savings, resulting in a score of 0. Fuel cell also does not demonstrate current cost savings, however, it is much closer than diesel and expected to see additional decreases as the fuel cell market matures, warranting a score of 10. It is important to note that additional savings may be accrued in areas where time of day pricing is in effect and peak prices can be avoided. • Solar: $61/MWh • Diesel generator: $315/MWh • Fuel cell: $129/MWh • No-build: Cost savings from deferred spending Benefit-cost: assessment of economic benefit of the project versus cost to develop and operate This category of benefit-cost combines the scores of cost categories above (capital, O&M) and compares the scores with the benefit categories (life-cycle costs, cost savings). Solar scores the highest (20) with relatively low capital and O&M costs and the potential for cost savings and low life-cycle costs. Diesel generator scores on the mid-range with a low capital cost but a high life-cycle cost. Fuel cell scores the lowest, at 0, with high capital and O&M costs, and limited cost savings potential. • Solar: capital (10), O&M (20), life-cycle (20), cost savings (20) • Diesel generator: capital (20), O&M (20), life-cycle (0), cost savings (10) • Fuel cell: capital (0), O&M (0), life-cycle (10), cost savings (10) • No-build: dependent upon existing conditions Energy cost: effect of the long-term cost on the airport’s energy Long-term energy cost is an important driver for the proposed project and, therefore, the ability to provide both long-term low and stable costs is valued in this category. Solar scores highest (20) with no fuel costs and low O&M, resulting in a stable long-term energy price. Diesel generator scores lowest (0) with its dependency on unpredictable fuel commodity price. Fuel cell garners a mid-level score (10) given its limited requirement for fuel, which promotes a relatively stable long-term cost. • Solar: $61/MWh, plus no fuel and low O&M, resulting in a stable price • Diesel generator: $315/MWh, with low O&M and volatile price influenced by cost of fuel • Fuel cell: $129/MWh, with high O&M but relatively stable electricity cost • No-build: generally low costs increasing over time due to increased inefficiencies 6.4.2 Self-Sustainability The self-sustainability criterion is a measure of factors that support the long-term self- sustainability of the airport business. These factors generally have a logical economic connection to the airport business; however, it is often difficult to quantify their economic benefit. The direct benefit of each factor is in limiting risk to the organization. Like an insurance policy, the airport proceeds with some investment to minimize a potential long-term risk to the organization. NYC LA CHI DAL HOU PHL WDC MIA ATL BOS $99 $86 $46 $36 $36 $90 $93 $48 $39 $93 Table 6-3. Cost of electricity in top 10 metropolitan areas in the United States ($/MWh, 2013 data).

Reviewing a Model Business Case 69 Because these factors are less quantitative and more dependent on the airport’s sustainability objectives, the following analysis is more qualitative than for the economic criterion above. In some instances, like the first one, the criteria are more of a guidepost to help design a project that meets the airport’s objectives. Meeting energy demand: extent to which the project has a meaningful contribution to meeting the airport’s energy demand Each technology can be sized to generate an amount of on-site electricity that is sufficient to meet the airport’s objectives. For all three technologies, they can generally be sized in a modular fashion to meet the design objectives. The ranking value should be applied once the project is designed and it is confirmed that the project meets the standard of providing a meaningful amount of energy to provide the associated project benefits. • Solar: 1 MW = 5 acres, size potentially limited by available land area • Diesel generator: modular units that can be located within developed spaces • Fuel cell: similar to diesel, though requiring somewhat more space • No-build: airport is tied to the grid, which meets its demand Business resiliency: benefit of the project on the airport’s resiliency in the face of unexpected disaster Each technology has its advantages and drawbacks as a component in an airport’s energy resil- iency plan. Solar has value as a generating technology that requires no outside fuel, a key factor should regional networks shut down. Its downside is that it is only available during daylight hours and its capacity is affected by seasonal and daily weather conditions. Diesel generators are cus- tomarily used for back-up power, which demonstrates their utility. However, the diesel must be delivered, which requires the surface transportation network to be functional during a disaster. Gas is a somewhat a more reliable fuel option, since underground pipelines are protected from storms though still susceptible to disruption in seismically active areas. Fuel cells have the advantage that they run reliably for long periods, though they require a stable connection to a gas network. • Solar: provides daytime power; requires battery back-up to expand temporal resiliency • Diesel generator: diesel is dependent on truck delivery, gas is dependent on the protection of pipelines • Fuel cell: dependent upon the protection of pipelines • No-build: risk that grid will shut down and airport will be vulnerable Mitigate obstacles to future development: create credits to facilitate future airport expansion The ability to mitigate for impacts as a credit for future expansion is predicated on provid- ing an environmentally protective alternative. An example is the requirement that the San Diego County Regional Airport Authority (SDCRAA) design and construct a green terminal to minimize potential impacts of expansion. Solar and fuel cells score for meeting this objective. Diesel does not. • Solar: yes • Diesel generator: no • Fuel cell: partial • No-build: does not address the issue as source is often fossil fuel power Facilitate compounded opportunities: project represents an initial phase with greater benefits in future The value of this criterion is to expand the proposed project to generate broader benefits in future. An evaluation of this criterion depends on the design of the final project. It is conceivable

70 Developing a Business Case for Renewable Energy at Airports that there could be broader benefits associated with any of the technologies but that should be evaluated and scored after the project is designed. • Solar: yes, as part of a larger energy plan • Diesel generator: yes, if combined with co-generation to also generate heat • Fuel cell: yes, as part of a larger energy plan • No-build: no compounded benefit 6.4.3 Environmental/Social Environmental and social benefits accurately provide enhanced weight for renewable energy projects. This is reflected in the following criteria and the associated scores. Consistent with environmental and sustainability goals: project will contribute to meeting local/regional policy and goals The airport should review its environmental and sustainability goals relative to the proj- ect. In general, solar and fuel cells would score high in the potential to advance environ- mental and sustainability goals. Switching from oil or diesel to gas could provide some improvement. • Solar: meets renewable and clean air objectives and goals • Diesel generator: gas replacing oil or diesel could provide an improvement over existing conditions • Fuel cell: contributes to lower emissions • No-build: does not contribute to sustainability goals Job creation: project will create construction period and permanent jobs Each technology could provide some benefit to job creation. The extent of this benefit would need to be calculated and scored based on the final design. • Solar: yes, particularly where green jobs is a focus • Diesel generator: yes, as much as any other construction project can • Fuel cell: yes, particularly where green jobs is a focus • No-build: does not create jobs GHG emissions: project will limit greenhouse gas emissions As a carbon free generating source, solar will score highest for this category. It is followed by fuel cells, which require a limited amount of fuel to catalyze and maintain the chemical reaction. Diesel or any other fossil fuel–fired alternative produces GHG emissions and therefore cannot obtain credit in this category. Under the no-build alternative, electricity is provided from a mix of generation sources, which will vary in GHG emissions by region but are generally dominated by fossil fuel–based generation with the exception of the Pacific Northwest (hydro) and pockets near nuclear plants. • Solar: yes • Diesel generator: no • Fuel cell: partial • No-build: typically existing sources are contrary to this goal Air quality benefit: project will provide broader air quality benefits The air quality category recognizes the challenges faced in many urban areas of the country that have elevated levels of air pollutants beyond GHG pollutants, including particulates. As highlighted in the previous category, solar produces no emissions and therefore is a valuable

Reviewing a Model Business Case 71 electricity generator in air quality impaired areas. Fuel cells also limit emissions significantly while diesel and other fossil fuel generators augment the pollution. • Solar: yes • Diesel generator: gas replacing oil or diesel could provide an improvement over existing conditions • Fuel cell: partial • No-build: typically existing sources are contrary to this goal Enhances customer experience: potential for the project to have a positive impact on the customer The potential for an energy project to enhance a customer’s experience is a difficult benefit to assess. However, we know that renewable energy has broad appeal and can be found in popular advertisements from car companies to consumer products. Solar also has the poten- tial to provide quantifiable benefits such as in the case of shaded parking. Fuel cells are not as visible as solar and wind in this regard and are unlikely to provide similar positive appeal. A conventional diesel or gas generator project is not expected to influence the customer’s experience in any way. • Solar: yes, renewable energy is broadly supported by the public and the shaded parking design provides benefits • Diesel generator: not expected • Fuel cell: not expected as the fuel cell technology lacks visibility and is not widely understood • No-build: no existing visible benefit Consistent with an airport’s sustainability plan: extent to which the project matches the exist- ing strategic sustainability plan The sustainability plan may or may not include a renewable energy component though any such plan could. Therefore, the airport should review its individual plan or goals to determine if the renewable energy project is consistent and affords benefits. A diesel or gas generation project will not be consistent with a sustainability plan. • Solar: yes • Diesel generator: no • Fuel cell: yes • No-build: not consistent 6.4.4 Other The other criterion addresses logistical issues associated with energy generation projects. As with some of the less quantifiable criteria identified above, many of the following cannot be fully incorporated into a generic business case and require local analysis. However, these should also be reviewed and considered part of project formulation to ensure that the final design measures positively with each category. Consistency with the master plan and/or sustainability master plan: extent to which the project is consistent with the airport master plan The airport will be incorporating the business case for renewable energy with the typical air- port planning process. Moving the preferred project and alternatives through the master plan- ning will formalize the project validation. • Solar: expected that the project can be located and built in a manner that complements the master plan

72 Developing a Business Case for Renewable Energy at Airports • Diesel generator: expected that the project can be located and built in a manner that comple- ments the master plan • Fuel cell: expected that the project can be located and built in a manner that complements the master plan • No-build: expected to be consistent with the master plan Ease of implementation: measure of how difficult it may be to implement the project Another practical consideration that could also translate into the relative cost of development is the relative ease of project implementation. For example, projects that are politically risky or engender local opposition may create new obstacles during the development process and lead to additional costs to resolve. These issues should be considered early and potential risks evaluated as the project proceeds from concept into planning. • Solar: expected that the project can be implemented easily; modify if local circumstances sug- gest otherwise • Diesel generator: expected that the project can be implemented easily; modify if local circum- stances suggest otherwise • Fuel cell: expected that the project can be implemented easily; modify if local circumstances suggest otherwise • No-build: expected to be easily implemented as long as there is no system failure Potential impacts from construction: potential for project to have negative consequences on normal airport operations during construction The potential for disruption during construction is a second look at project compatibility with a focus on the construction period. Some considerations for impacts of construction may be made during the fatal flaw analysis. However, as construction logistics are further evaluated, impacts need to be avoided to minimize safety issues and potential costs. Consideration may be given to the displacement of revenue-producing functions during construction. For example, public parking would need to be temporarily vacated during the construction of solar panel supports within the parking area. • Solar: expected that the project can be constructed without impact; modify if local circum- stances suggest otherwise • Diesel generator: expected that the project can be constructed without impact; modify if local circumstances suggest otherwise • Fuel cell: expected that the project can be constructed without impact; modify if local circum- stances suggest otherwise • No-build: expected to have no impact unless there is a system failure Project risk: potential for project to run into unforeseen development or operational problems This is a difficult issue to identify in advance as the very nature of the occurrence is that it is “unforeseen.” If the project is a first of its kind in the region or if the technology is new, the risk of the unknown will be higher than if many similar projects have been previously undertaken and some experience developed. However, airport staff should revisit the evaluation criteria regularly during project development as part of the continuous process of building the business case and be mindful of potential project risks that were not previously predicted. Updating a risk analysis for the project will help ensure that planning and design recognize and mitigate risks to the extent possible. • Solar: expected that the project will avoid unforeseen risks; modify if local circumstances suggest otherwise • Diesel generator: expected that the project will avoid unforeseen risks; modify if local circum- stances suggest otherwise

Reviewing a Model Business Case 73 • Fuel cell: expected that the project will avoid unforeseen risks; modify if local circumstances suggest otherwise • No-build: expected to have no impact unless there is a system failure 6.5 Summary Conclusion and Next Steps The initial review of the preferred alternative—an on-site solar PV electricity generating facil- ity that is financed, owned, and operated by the airport—scores favorably against the other alternatives in meeting the airport’s objective of stabilizing long-term electricity rates. The solar PV project scored as the best alternative in each of the three categories of the evaluation criteria: economic, self-sustainability, and environmental/social. The Lazard data, particularly that which is related to the levelized cost of energy over the 20-year life of the project, provide important evidence to show that solar PV can be cost-effective when looking at the cost of electricity over the project term. These data use assumptions for the future cost of fossil fuel that come from credible sources (e.g., the EIA) but are by no means certain. However, they support the premise that solar PV, with its low operational and main- tenance costs and no need for fuel, helps to spread the investment cost over time and stabilizes annual electricity rates. Given the project purpose of stabilizing electricity prices and reducing dependence on fossil fuel generating sources whose prices are not stable or predictable, the project purpose sets a standard for the project characteristics served by renewable energy. Users of the ranking criteria can readily reference these benefits and use them to describe how the project meets the airport’s business case. Many of these benefits, included in the self-sustainability section, support the long-term viability of the airport organization and not a specifically “green” agenda. However, for constituents expecting to see the airport’s sustainability leadership, the “green” business case points are included in the environmental/social section and their value included in the decision- making process. Any business case must consider the no-build scenario. It can end up being the preferred solution if, through the fatal flaw analysis, the airport determines that the capacity levels that fund the airport business do not support an investment of $10 million. Otherwise, the no-build case is a means of establishing a baseline for reviewing each of the alternatives. No-build alone cannot address a problem that is part of the existing condition and requires action to be solved. With the initial analysis identifying the project and its goals, comparing it and several potential alternatives to a fatal flaw screening, and evaluating a set of criteria that incorporate the economic, self-sustainability, and environmental/social weights, the preferred project can proceed through the planning and development process. With each step, new information will be identified and factored into the evaluation criteria. In this way, the criteria are regularly used to identify infor- mation needs and evaluate project design, and further bolster the business case for renewable energy at airports.