National Academies Press: OpenBook

Revolving Funds for Sustainability Projects at Airports (2019)

Chapter: Chapter 5 - Phase 3: Operations GRF Project Implementation and Ongoing Management

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Suggested Citation:"Chapter 5 - Phase 3: Operations GRF Project Implementation and Ongoing Management." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Suggested Citation:"Chapter 5 - Phase 3: Operations GRF Project Implementation and Ongoing Management." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
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Page 45
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Suggested Citation:"Chapter 5 - Phase 3: Operations GRF Project Implementation and Ongoing Management." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
×
Page 46
Page 47
Suggested Citation:"Chapter 5 - Phase 3: Operations GRF Project Implementation and Ongoing Management." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
×
Page 47
Page 48
Suggested Citation:"Chapter 5 - Phase 3: Operations GRF Project Implementation and Ongoing Management." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
×
Page 48
Page 49
Suggested Citation:"Chapter 5 - Phase 3: Operations GRF Project Implementation and Ongoing Management." National Academies of Sciences, Engineering, and Medicine. 2019. Revolving Funds for Sustainability Projects at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25567.
×
Page 49

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44 Once investments are being made and new equipment is in place, performance needs to be tracked. Managers of the GRF will need to monitor individual projects, and periodically assess how the entire GRF is functioning to make improvements as necessary. The steps associated with this operations phase, highlighted in Figure 13, are as follows: 5.1 Step 8: Implement Projects 5.2 Step 9: Track, Analyze, and Assess Performance 5.3 Step 10: Optimize and Improve 5.1 Step 8: Implement Projects 5.1.1 Planning and the National Environmental Policy Act: Identifying Potential Projects and Environmental Requirements and Considerations As with all actions at airports, projects must also comply with planning and environmental review requirements. For planning, projects need to comply with the Airport Layout Plans (ALPs) and Master Plan documents. New projects that have already been approved in existing plans may not require additional planning consultation with the FAA. If actions do not change the airport current or future usage for a specific space or area, then it is less likely that the FAA will require revisions to the ALP before implementation. Any changes to the planned functional land or buildings will require revisions to the ALP and Master Plan. See the FAA Advisory Circular 150/5070-7 for more details regarding airport planning requirements. All federal actions must follow procedures for the National Environmental Policy Act (NEPA). NEPA pertains to all federal actions that may create “significant” impacts. Federal actions are defined as projects that receive federal funding or occur on federal land and involve construction or management activities. In the case of airports, projects that occur entirely within an existing developed “footprint” (e.g., replacing existing equipment) might not constitute a significant action. However, actions must be assessed to determine if they do not require extensive environmental analysis and can be exempted through the granting of a Categorical Exemption (CE). Revolving fund projects C H A P T E R 5 Phase 3: Operations—GRF Project Implementation and Ongoing Management

Phase 3: Operations—GRF Project Implementation and Ongoing Management 45 that involve upgrading infrastructure that is already in place without any impacts to land (e.g., swapping out an indoor boiler unit) will likely fall under a CE designation. Projects that include construction impacts to undeveloped land (e.g., new ground-mounted solar installa- tion), may trigger the more time intensive Environmental Assessments (EAs) or Environmental Impact Statements (EISs). The FAA’s NEPA Implementing Instructions for Airport Actions (Order 5050.4B) provides additional support on this topic. In addition to federal requirements, airports must review and comply with relevant state and local environmental regulations. If there is any uncertainty, it is suggested that airports consult with FAA designated planning and environment airport contacts for additional guidance regarding airport planning and NEPA requirements. 5.1.2 Prioritizing Project Opportunities Project Selection It is important for airports to clearly specify their procedure for reviewing, evaluating, and selecting GRF projects. Fund managers may select projects non-competitively or put out an open call for proposals to all airport staff. For example, they may compile a prioritized list of potential projects identified via an energy audit and select projects from this list. If using this approach, it is advisable to have a representative from the airport’s operations and maintenance department either on the management committee or in close contact with the committee to Figure 13. Phase 3: GRF operations—GRF project implementation and ongoing management.

46 Revolving Funds for Sustainability Projects at Airports streamline this process. Projects may also be identified from previously existing lists, such as a deferred maintenance list. Project Criteria When assessing potential projects, it is helpful for fund managers to work from a specific set of project criteria. These criteria may include both hard requirements and preferred attributes. Some common project criteria include the following: • Payback duration • Capital required • Specific environmental benefits such as resource conservation or GHG reduction • Cost-effectiveness metrics such as GHG reduction per dollar of capital invested • Potential for community engagement and collaboration • Educational benefits Project criteria should be selected based on two factors. First, they should promote the mission of the fund. A GRF that is focused on maximizing operational efficiency might have aggressive payback requirements. Second, criteria should be tailored to the actual portfolio of projects that are available for investment. Consider incorporating flexibility in project requirements at the discretion of the fund man- agers. They may need to adapt as the portfolio of available projects changes over time or as unique opportunities arise. In addition to specific criteria, projects should also be prioritized in a way that best allocates limited resources while accounting for the feasibility and timing of projects given other constraints, such as staff availability. 5.1.3 Implementing Projects Implementing the initial round of projects will inevitably lead to challenges and unexpected obstacles. There may be difficulties with fund transfers and accounting, changes in mainte- nance plans that disrupt an anticipated project pipeline, projects that underperform once imple- mented, and other potential issues. See the FAQs in Appendix A regarding specific challenges often encountered and strategies for overcoming them. One approach to reduce these risks is a soft launch in which the first round of investment targets prioritizes projects that are expected to be straightforward and implements them with trusted project managers. Keeping stakeholders informed about likely obstacles and recognizing how those obstacles are handled will set the tone for future operations. Be sure to include all relevant airport stake- holders in the troubleshooting process. Despite the pressure to produce successes and prove the GRF model, work through challenges carefully taking as much time as necessary. Publicize successful projects to place any challenges in the context of the broader GRF program and continue to justify the use of capital for the fund. Fund managers should be in close contact with the facility managers, engineers, or contrac- tors who implement the projects and can therefore provide on-the-ground perspective. This will allow problems to be identified and resolved effectively. Monthly or quarterly progress reports may be useful for this purpose.

Phase 3: Operations—GRF Project Implementation and Ongoing Management 47 5.2 Step 9: Track, Analyze, and Assess Performance Once the fund is operating, tracking the performance of individual projects and the entire GRF portfolio over time is the next important step. First, determine the selected method to be used to measure savings from individual projects (see Appendix D). Airports may decide to measure energy savings [e.g., kilowatt hours (kWh) or therms] instead of cost reduction, given price fluctuations for electricity and fuel. Next, install any required submeters and establish baseline data before project implementation, then create a spreadsheet or use a web platform to manage this data over time, see Appendix D, Part 2. Thorough project tracking will involve recording the specifications of technology installed and estimating expected savings; comparing those estimates with usage rates determined early on via energy monitoring to ensure that projects are operating correctly; and confirming savings conclusively by comparing sub metered data with the baseline the airport has established. Note that even if an airport determines project repayments based on estimated savings only, conducting some measurement and verification (M&V) of individual projects will confirm that they are operating as expected. Find a balance between what is necessary for project trouble- shooting and determining payback, and what is feasible given staff capacity and budget. Second, develop a system for tracking and analyzing the overall activity of the airport’s GRF project portfolio. Airports can also use spreadsheets built from scratch, specialty GRF software, or accounting software for this purpose. Verify that overall GRF performance is consistent with the forecasts conducted in Step 3. If there is a discrepancy, determine its cause. It is often helpful to conduct forecasts that are updated each year to chart a path forward for the fund and manage expectations. It is also advisable to benchmark the performance of projects, buildings, and the fund against those of other airports. In cases where the projects perform below original estimates, take the opportunity to identify the underlying causes and learn from peer airports. The GRF model relies on capturing cost savings to replenish the fund, so the method by which those savings are measured is crucial. There are two main strategies that fund managers may use to calculate savings from projects to determine repayment amounts. First, fund managers may use front-end savings estimates based on engineering analysis. This method relies on technology specifications and assumed usage patterns to predict future performance. This is the most straightforward and inexpensive approach, but it will not capture any deviations in the event that a project performs better or worse than expected. Second, fund managers may retroactively calculate savings based on actual performance. This entails using an M&V approach to directly meter savings while accounting for conflating factors like weather and usage patterns. This approach is more accurate but also costlier and more labor-intensive (see Appendix D). An airport may perform rigorous building energy modeling based on submetering data, or it may measure pieces of equipment individually and extrapolate for the full set of equipment installed. Another option is to conduct a less rigorous assessment of whether utility costs are decreasing over time. This will not be sufficient to calculate project repayments, but it can help verify that a project or portfolio of projects is decreasing costs broadly.

48 Revolving Funds for Sustainability Projects at Airports An airport could realize a best of both worlds approach in which the loan approval and repay- ment schedule are based on estimated savings, but M&V is then performed to verify that the project is functioning according to projections. Other airports might prefer to perform both upfront and retroactive M&V on larger projects and use project specifications and engineering estimates for smaller ones. See Appendix D for more details on M&V. 5.3 Step 10: Optimize and Improve 5.3.1 Continuous Improvement While some of the benefits of a GRF are stability and longevity, it must still adapt to chang- ing conditions. Even after launching, the fund’s design and management should be dynamic and adaptable. The most successful funds periodically reassess their performance and optimize accordingly. Some funds undertake a formal strategic review of their charter and governance every few years. It is important not only to address aspects of the fund that are performing poorly but also to reassess more foundational aspects of the fund, such as which stake holders are involved, how cost savings are measured and revolved, the fund’s mission and project criteria, and how the fund interacts with broader airport initiatives and goals. One crucial area for monitoring and optimization is project performance. Key questions to consider include the following: • Which types of projects are performing especially well both within the specific airport and among similar airports? Consider using these as a model for new projects. • Are the original project criteria still effective for guiding the fund managers’ decisions? They may benefit from adjustments as opportunities are exhausted or new ones emerge. • If the fund is performing well, could it be expanded with more capital infusions? Leverage the data on project performance collected in Step 9 to answer these questions and adjust the airport’s fund strategy and the associated documentation. Adjustments may include expanding or narrowing project criteria (e.g., relaxing short payback requirements as the most cost-effective projects are exhausted), pulling in new airport stakeholders or staff to help identify or track projects, and adjusting the fund’s accounting procedures. 5.3.2 GRF Internal Guidance Questions for Management The following questions are provided for airports to evaluate their GRF internally approxi- mately 6 to 12 months after implementation. Process of Fund Management • Have any issues arisen that were not addressed in the fund charter? – If so, consider updating the charter to identify these issues and outline solutions. • Is there enough communication between the departments that manage the GRF? – Is project data being shared with all who need it? • Is there enough staff (or staff time) dedicated to fund management? – Do roles need to be reevaluated or changed?

Phase 3: Operations—GRF Project Implementation and Ongoing Management 49 • Have all stakeholders in the GRF process been formally incorporated? – If all GRF stakeholders identified in the charter are not involved in fund management, make a plan to incorporate them. • Are stakeholder needs being met? – Are these expectations reasonable in practice? Project-Related Topics • Have the GRF projects met the project criteria described in the fund charter? – Are the project criteria too narrow, preventing the consideration of important projects? – Are the airport’s original project criteria still effective for guiding the fund managers’ deci- sions? (They may benefit from adjustments as opportunities are exhausted or new ones emerge.) – Has the airport considered bundling projects with longer-term and shorter-term payback periods to achieve deeper efficiency upgrades while maintaining the desired ROI? • Which types of projects are performing especially well (i.e., displaying resource reduction or financial returns beyond the thresholds in the GRF charter) both at the specific individual airport and among peer airports? Consider using these as a model for new projects. Fund Finances • Has the majority of GRF capital been utilized, or is significant funding consistently unused? – If the latter, what is the cause (e.g., not identifying enough projects)? • Have the GRF’s finances flowed smoothly and been tracked accurately? – If not, should the fund’s accounting practices be changed? • Has the airport adhered to the repayment schedule outlined in the fund charter? – If not, what is the cause? – Does the airport need to reduce the percentage of project savings repaid prior to the full repayment of the project cost? • Are certain projects infeasible because of the total GRF size? – If so, are there available capital sources to expand the fund? • If the fund is performing well, are there available capital sources to expand the fund? • Has the fund been fully independent of annual budget decision-making to date? Measurement and Verification • Is project data (cost, payback period, etc.) being tracked effectively? • Has the airport adhered to the M&V guidelines established in the fund charter? – Do these need to be updated? This may be useful if the capacity, budget, or expectations for M&V have changed. Fund Achievements • Have the projects undertaken through the GRF helped move the airport toward its sustain- ability goals? • Has the GRF garnered the desired amount of public attention? If the fund is running well, it might be worthwhile to feature it in the airport’s annual reports or website or develop other campaigns to inform a larger audience.

Next: Chapter 6 - Conclusions »
Revolving Funds for Sustainability Projects at Airports Get This Book
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Airports continually balance demands to improve infrastructure within the realities of available budgets. Green revolving funds (GRFs) offer an alternative approach for investing in projects that generate operational savings. These funds work by tracking verified cost reductions from implemented actions, and then transferring those savings to a reserve that provides capital for future qualified projects such as energy system upgrades.

A number of universities have managed GRFs for over a decade. Municipalities are starting to adopt them as well. ACRP Research Report 203: Revolving Funds for Sustainability Projects at Airports includes several non-airport-related case examples that have managed GRFs and two airport-related case examples. Airports require a modified GRF approach because of financial structures, Federal Aviation Administration (FAA) regulatory requirements, airline agreements, and the wide range of tenant roles.

This ACRP report provides guidance to determine whether this innovative funding approach is suitable for a particular airport and instructions on how to deploy it. Airports that have the ability and determination to launch a GRF will gain a robust method for advancing their sustainability goals.

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