Alternative Fuels in Airport Fleets (2017)

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12 CHAPTER THREE OVERVIEW OF ALTERNATIVE FUEL USE IN AIRPORT FLEETS HISTORICAL USE OF ALTERNATIVE FUELS AT AIRPORTS Airports that responded to the online survey reported having launched alternative fuel vehicle programs as early as 1991. Over the subsequent 25 years, greater numbers of airports began to use alternative fuels in airport-owned and airport-contracted vehicles (see Figure 4). Note that this figure indicates the number of airports using alternative fuels, not the volume of alterna- tive fuels or their environmental benefits. Today, across the 33 airports surveyed for this report, the most common alternative fuels are compressed natural gas (CNG) and electricity. Of the airports surveyed, 71% use CNG; 64% use electricity. Bio- diesel and liquefied petroleum gas (LPG) are less common—48% of the airports use biodiesel; 42% use LPG. The remain- ing fuel types included in this study—renewable diesel, renewable natural gas, and hydrogen—are used at less than 5% of responding airports. FIGURE 4 Growth of alternative fuels used at airports participating in the online survey (n = 31); y-axis shows the number of airports using alternative fuels over time. (Figure does not reflect the total fuel volume used at the airport. Figure omits airports that did not know what year they began using alternative fuels.) Figure 5 provides an image of which fuels are used at which airports. Please note that this figure indicates which fuels are employed but not the volume of alternative fuels or their environmental benefits. DRIVERS OF ALTERNATIVE FUEL USE AT AIRPORTS Airports were asked to rate six factors—petroleum reduction, local air pollution reduction, GHG reduction, image of envi- ronmental conscientiousness, cost savings, and compliance with regulation—according to importance in driving a decision to shift to alternative fuel vehicles. Responses varied from “not important” to “extremely important.” The results are shown in Figure 6. Maintaining an environmentally conscientious image was rated “extremely important” by the highest percentage of respondents. These airports are willing to pay a premium and to accept reduced travel range, cargo and passenger capacity,

13 and refueling opportunities, to acquire vehicles and/or use fuels that they believe convey an image of environmental stew- ardship. GHG reductions were also widely considered important. Compliance with regulation was the factor least frequently rated “extremely important.” ROLE OF AIRPORT DECISION-MAKING PROCESS The survey and interviews highlighted the large number of personnel, airport departments, and airport partners needed to successfully implement alternative fuel programs. Respondents discussed the innate challenge of coordinating across multiple decision makers including vehicle operators, fleet procurement officials, infrastructure decision makers, maintenance person- nel, environmental managers, and senior airport management. Additionally, at some airports, the local municipality or port authority serves as the final decision maker on issues related to vehicle and infrastructure procurement. FIGURE 5 Alternative fuels used at airports in online survey. FIGURE 6 Drivers of alternative fuel use at airports (n = 33).

14 Sperling and Nesbitt (2001) offer a valuable framework for understanding how administrative differences between airports affect alternative fuel vehicle adoption. The authors classified vehicle fleet decision making using a conceptual map along two dimensions: formalization and centralization (Figure 7). Formalization is the extent to which formal rules govern fleet deci- sion making. Centralization is the degree to which fleet decision making occurs within a single office or organization. From this structure, four quadrants emerge: hierarchic, autocratic, bureaucratic, and democratic. FIGURE 7 Vehicle fleet decision-making conceptual map (Source: Sperling and Nesbitt 2001). These structures vary in the degree of ease with which airports can begin a new alternative fuel program. For example, in bureaucratic vehicle fleets (high formalization, low centralization), decisions are dispersed among several individuals or departments. Addressing broad societal or environmental problems such as greenhouse gas emissions or petroleum depen- dency becomes “someone else’s problem” and often goes unaddressed. As a result, uptake of alternative fuels or vehicles may be slow or even impossible without a strong and/or clear government mandate or policy. On the other hand, hierarchical structures (high formalization, high centralization) tend to place decisions in the hands of a small number of decision makers who possess the authority to pursue promising emerging fuels. Sperling and Nesbitt (2001) argue that hierarchical structures are the most effective circumstances for the adoption of alternative fuels because the few individuals with power can directly align the other levels of decision making to a single set of objectives. In the case of alternative fuel adoption, the objective of fleet managers is to use vehicles with the lowest cost and shortest payback periods, whereas upper management’s objectives are broader and include air quality and public relations. Airports that participated in this survey vary considerably in their formalization and centralization. Using a set of survey questions and typology similar to those used by Sperling and Nesbitt (2001), the survey revealed that decision making in airports fleets is most often bureaucratic or, somewhat less often, hierarchical. Few airports were classified as democratic, and in only one instance was an airport classified as autocratic. Table 6 summarizes the approach used to categorize airport decision making. (Note: Respondents who answered “Don’t know” to questions in Table 6 were removed. As noted previ- ously, hierarchical decision-making structures have been observed to be the most conducive to alternative fuel adoption.) TABLE 6 SURVEYED AIRPORTS’ APPROACH TO VEHICLE PROCUREMENT Question Types Question* Percentage of Airports Responding “Yes” Percentage of Airports Responding “Somewhat” Percentage of Airports Responding “No” Formalization Questions Formal written rules guide vehicle procure- ment decisions? (n = 22) 64 27 9 Detailed cost analyses are used before vehi- cle procurement process? (n = 19) 53 37 11 Emissions analyses are used before vehicle procurement decisions? (n = 22) 32 45 23 Final vehicle choices are made after solicit- ing bids? (n = 21) 67 24 10 Centralization Questions Vehicle procurement decisions are made by only 1 or 2 individuals? (n = 22) 36 18 45 Senior management decides which fuels and how many vehicles are procured? (n = 24) 54 38 8 Source: Analysis of survey results. *Respondents who answered “Don’t know” were removed from the total used to calculate percentages.

15 PROCUREMENT OF ALTERNATIVE FUEL VEHICLES Airports, cities, and port authorities typically have dedicated pro- curement offices that write specifications for each vehicle based on usage requirements, and then post a vehicle procurement for bidding by vendors. Of the 33 airport respondents, 67% operate in this way. During the interviews, several airports mentioned that it is standard practice for them to take the lowest bid vehicle option without accounting for fuel price differences. This tactic proves problematic for alternative fuel powertrains, which tend to have higher upfront costs but lower operating costs that can offset the purchase cost premium over the course of the vehicle’s lifetime. Payback periods vary based on fuel type, vehicle usage characteristics, and many other factors. It is important for air- ports to consider lifetime costs, but not all airports do. Many airports reported financing as a barrier to using alternative fuel vehicles. To overcome the higher upfront costs typi- cal for an alternative fuel deployment, many airports pursue external or alternative funding approaches including rebates, tax credits, and grants. As noted, ACRP Synthesis 24: Strategies and Financing Opportunities for Airport Environmental Pro- grams (Molar 2011) can serve as a useful resource for airports looking to fund an alternative fuel initiative. Figure 8 reflects data on the form and sources, respectively, of funding used by the airports surveyed. FIGURE 8 Locality of funding for alternative fuels (left) and source of funding (right). During the interviews, multiple airports also acknowledged the advantages of VALE grants but noted the significant time and cost associated with the detailed application process. FAA’s Zero Emission Vehicle Pilot Program is considered to have an easier application process, with only a five-page checklist application. Beyond financial barriers, airports reported administrative impediments. Several airports noted difficulties in pro- curing alternative fuel vehicles because the procurement process was entirely controlled by a separate municipal entity. Airports have unique vehicle operating characteristics and needs, and the nuanced way in which an alternative fuel can benefit an airport may be unfamiliar to an external procurement office. At least two airports also cited the stipulations of the Buy America Act as limiting their vehicle options in the already narrow alternative fuel vehicle market. Other airports commented on the cyclical nature of vehicle procurement and grant offerings and their effects on attempts to implement alternative fuels. In many cases, the cycles do not line up—for example, an airport needs a new vehicle but the grant is not being offered, or funding is available but there’s no immediate need for a new vehicle—resulting in needs going unmet or opportunities being missed. Minneapolis–Saint Paul International Airport Fleet Planning As part of its new fleet management strategy to target efficiency, Minneapolis–Saint Paul International Airport (MSP) is using a formal process to determine when to adopt a new alternative fuel. This system incorporates a return on investment (ROI) calculation based on the expected vehicle, fuel, infrastructure, and maintenance costs. The predetermined ROI threshold triggers the purchase of an alternative fuel vehicle when a given fuel’s ROI reaches the threshold. For example, MSP seeks fuels with ROIs of 7 years or less.

16 VEHICLE AVAILABILITY When airports consider adopting alternative fuels, they often follow a basic three-step process: (1) identify viable vehicle makes and models, (2) assess the costs of those vehicles versus a conventionally powered vehicle, and (3) identify external funding sources and methods for leveraging existing infrastructure. Near-term consideration of an alternative fuel vehicle is possible only if a vehicle type is readily available on the market. Figure 9 shows the vehicle-fuel combinations that existed in the 2016 U.S. vehicle market. Green indicates the vehicle is widely available. Orange indicates limited availability or use in demonstration projects in the United States. Red indicates no availability. FIGURE 9 Vehicle availability types in the United States. FUEL AND INFRASTRUCTURE COST Fuel delivery is one of the great barriers to alternative fuel adoption. Government estimates of the cost of new refueling stations vary widely—from $12,000 to $18,000 for electric charging stations (DOE 2016a), up to more than $1,000,000 for new hydrogen stations (CARB 2016). Notably, some fuels, such as renewable diesel, are drop-in fuels; therefore, they do not require new infrastructure. This compatibility helps airports avoid the cost of new infrastructure. A key strategy for reducing infrastructure costs is to leverage the existing refueling infrastructure in the region. In the United States today, there are almost 17,000 refueling stations for biodiesel, renewable diesel, CNG, liquefied natural gas (LNG), hydrogen, electricity, and propane/LPG, of which approximately 15,000 are electric charging stations. However, (Green) (Orange) (Red)

17 airports in the online survey reported using existing refueling stations only 13% of the time, suggesting that either airports are too far from many of the existing refueling stations or fleet managers prefer having their own dedicated refueling stations. Airports have also relied on external grants to help fund alternative fuel infrastructure. For example, Congestion Miti- gation and Air Quality Improvement funding is not restricted to vehicle acquisition; it can also be used for infrastructure development, parking facility construction, and related activities. VALE grants have also been used to fund infrastructure construction or improvements, such as the upgrades to existing CNG stations at Albany International Airport. Table 7 pro- vides a brief list of federal/national funding programs that can be used for alternative fuels in fleet vehicles at airports. TABLE 7 FUNDING PROGRAMS AVAILABLE FOR ALTERNATIVE FUELS IN AIRPORT FLEET VEHICLES Program Name Funder Clean Diesel National Grants U.S. Environmental Protection Agency FAA Voluntary Airport Low Emission Program Federal Aviation Administration Congestion Mitigation and Air Quality Improve- ment Program Federal Highway Administration and the Federal Transit Administration. Funds are distributed locally through metropolitan planning organizations. Department of Energy, Clean Cities U.S. Department of Energy Zero Emissions Airport Vehicle Program Federal Aviation Administration VW Settlement Zero Emission Vehicle Investment Volkswagen AG Fuel price is a major component of the total cost of vehicle ownership. A key advantage of alternative fuels is that they are less prone to dramatic price fluctuations. However, because many alternative fuels have not reached market maturity, costs are uncertain and often higher than those of conventional fuels. Table 8 shows airport response results to the question of whether the alternative fuels used at their airports had become less or more expensive compared with conventional fuels over the past 2 years. TABLE 8 SURVEYED AIRPORTS’ ALTERNATIVE FUEL COSTS (RELATIVE TO CONVENTIONAL FUELS) Total Responses Less Expensive About the Same More Expensive Don’t Know Biodiesel 14 14% 29% 14% 43% Renewable Diesel 1 0% 100% 0% 0% CNG 15 80% 0% 13% 7% LNG 0 n/a n/a n/a n/a LPG 6 17% 33% 0% 50% Renewable Natural Gas 1 100% 0% 0% 0% Hydrogen 1 0% 0% 100% 0% Electric 17 35% 12% 12% 41% The higher fuel costs of many alternative fuels and the upfront cost of infrastructure pose challenges to airports. Fuel costs can account for a major portion of the total cost of ownership of conventionally powered vehicles when annualized over the vehicles’ lifetime. Airports were asked to estimate whether the alternative fuels used at their airports were less or more expensive than conventional fuels, or about the same. Unsurprisingly, the two fuels that the highest percentage of respondents said were less expensive were CNG and electricity, at 80% and 35%, respectively. Table 9 gives the average costs of fuels for each of the alternative fuels in this report. Last, another strategy for financing alternative fuel infrastructure is partnering with airport tenants. Forty-two percent of airports in the online survey reported either having a joint airport-tenant alternative fuels program or engaging tenants in some way on alternative fuels. The most common activities are to team with tenants on grant funding or to co-host vehicle demonstrations. Additionally, multiple airports reported having programs with ground transportation operators, such as Clean Taxi programs and alternative fuel requirements for shared-ride vans. Overall, airports stated they had more influence over ground transportation than airline GSE.

18 TABLE 9 NATIONAL AVERAGE FUEL PRICE BETWEEN OCTOBER 1 AND OCTOBER 31, 2016 Fuel Cost Source Diesel $2.48/gallon (DOE 2016a) Gasoline $2.22/gallon (DOE 2016a) Biodiesel (B20) $2.46/gallon (DOE 2016a) Renewable Diesel* ~$0.15/gallon above petroleum diesel (Ernst 2016) CNG $2.06/gasoline gallon equivalent (GGE) (DOE 2016a) Renewable Natural Gas No data No data LNG $2.43/diesel gallon equivalent (DOE 2016a) LPG $2.68/gallon (DOE 2016a) Hydrogen $13/kg or $5.3/GGE** (DOE 2016c) Electricity $0.13/kWh or $1.45/GGE*** (DOE 2016a) *California only in 2016. **Assumes 2.5 times higher efficiency of hydrogen fuel cell electric vehicles compared with internal combustion vehicles. ***Assumes 3.0 times higher efficiency of electric vehicles compared with internal combustion vehicles.