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Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports (2021)

Chapter: Chapter 5 - Funding Opportunities and Mechanisms

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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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Suggested Citation:"Chapter 5 - Funding Opportunities and Mechanisms." National Academies of Sciences, Engineering, and Medicine. 2021. Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports. Washington, DC: The National Academies Press. doi: 10.17226/25677.
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51   Funding Opportunities and Mechanisms Airports have a range of funding mechanisms and sources at their disposal for emissions reduction projects. Each funding mechanisms or source has specific requirements for on-going airport administrative burden. This chapter provides an overview of each mechanism and source, as well as advantages and drawbacks referred to as pros and cons. Airports can also consult with the recommended resources provided. Chapter 5 divides funding mechanisms and sources into three categories: public, airport-based, and third-party (Figure 17). C H A P T E R 5 Section 5.1: Public Funding Section 5.2: Airport-Based Funding Section 5.3: Third-Party Funding Figure 17. Categories of funding opportunities and mechanisms. 5.1 Public Funding The public funding section offers a range of options that airports can use to generate fund- ing from federal and state grants. Some grant options may compete for conventional airport infrastructure projects. Public funding programs can change over time. The information presented below is representative of the funding sources available at the time of publication in 2021. Please refer to agency websites for the full and latest details on each of these funding sources. Voluntary Airport Lower Emissions Program FAA provides grants to airports specifically targeted at improving air quality in EPA-designated nonattainment areas (FAA 2017b). Grants cover a portion of the cost to install equipment that reduces aircraft auxiliary power usage while aircraft are parked at the gate. Using ground power, airlines can connect with electricity from the terminal and avoid using jet fuel for lighting and other systems. Airports can also supply cooling or heat to the cabin via flexible ducting carrying preconditioned air. Combining both of these measures can reduce 1% of emissions from the total flight. Voluntary Airport Lower Emissions (VALE) grants also cover direct emissions reductions from operations and actions that reduce fuel burn on the airport (FAA 2017b). Eligible projects include electrification of GSE, geothermal systems for building heat and cooling, solar thermal,

52 Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports Zero Emissions Vehicle and Infrastructure Program FAA’s zero emissions vehicle (ZEV) and Infrastructure Program offers funding for up to 50% of the cost for airport zero emissions vehicles and for equipment to recharge or refuel the cars, trucks, and buses (FAA 2017c). Vehicles could be electric or hydrogen powered. The grant’s purpose is to cover the price premium an alternative vehicle may carry and to address upfront investments necessary to power the vehicle. Airports in air quality nonattainment areas are given first priority for grant consideration. Pros Cons • Grant support can be significant for individual projects. • Magnitude of emissions savings versus cost is favorable. • Airport may not be eligible if air quality is not an issue in that region. • Grants are competitive, and airport could invest time pursuing an award without winning. Pros Cons • Grants can cover vehicles and infrastructure under same application. • Awards are made on a competitive basis with the possibility of an airport submitting an unsuccessful proposal. Airport Improvement Program and Passenger Facility Charges Airports could dedicate airport improvement program (AIP) and passenger facility charges funding to purchase either renewable energy or energy efficiency upgrades as part of a broader capital project. Potential opportunities to combine emissions reduction with an existing capital investment include terminal expansion, parking garage retrofit, new facilities, or other landside building projects. Pros Cons • These upgrades simplify grant application if emissions reduction components are contained within larger capital investment. • Upgrades make efficiency an integrated component of a building project. • Upgrades may reduce the amount of funding available for essential airport services. and installation of a fuel hydrant system for aircraft. Alternative fuel infrastructure for non- GSE vehicles, which includes electricity and hydrogen, also offer potentially viable projects. A document available for download at FAA’s website shows the purpose of VALE grants that have been awarded to airports and other details such as the amount of each award.

Funding Opportunities and Mechanisms 53   Energy Efficiency Grants In 2012, Section 512 of the FAA Modernization and Reform Act (Public Law 112-95) included a program for projects that increase the energy efficiency from airport power sources. This legislation made these projects eligible for AIP grant funding, without a dedicated special set-aside. Airport participation has been limited to date. Nevertheless, at least two grants in 2018 were valued at over $1 million each (FAA 2019b). This program includes power purchase agreement (PPA) requirements for solar installations within the airport fence line as well as requirements for obtaining and selling renewable energy credits (RECs). Pros Cons • Program provides authority for airport to pursue projects with the primary purpose of saving energy. • Funding proposal competes with AIP funding of all forms, and projects that support aeronautical uses of revenue will be prioritized. State Grants and Utility Rebates Airports can pursue incentives that include tax credits, grants, rebates, and bonds—options designed to encourage energy-efficient actions. Each state has adopted its own selection of programs for efficiency. On-site renewable energy generation is also incentivized in many states. States may have emerging grant options offered out of a clean energy office (such as those for microgrids). Multiple utilities also participate in public utility commissions and offer addi- tional rebates for efficiency and for conversion to lower-emissions equipment or vehicles. Given the vast breadth of options, it is recommended that airports search a reliable data- base to see which choices prove most appropriate. Databases are the American Council for an Energy-Efficient Economy (ACEEE) State Programs or the DSIRE Database of State Incentives for Renewables and Energy Efficiency (American Council for an Energy-Efficient Economy 2018; North Carolina Clean Energy Technology Center 2019), among others. Pros Cons • State and utility incentives deliver funding from an external source at the airport. • Many options are guaranteed and do not require a competitive bid. • Programs are often at a mature stage of development, and applications for subsidies or other types of incentives are streamlined. • The size of each incentive may be modest. Aircraft Fuel Taxes FAA mandates that taxes from aircraft fuel must be dedicated to airport capital projects (FAA 2017d). Each state decides how this funding will be allocated. Airports should speak with their FAA regional district office to determine which state agency currently determines

54 Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports how this funding is distributed. For most states, the group overseeing this funding source falls within the transportation group (e.g., the Aeronautics Division or the Department of Aviation), which supports small commercial and general aviation airports. Pros Cons • Taxes leverage an external source of funding. • Source will likely grow as air travel demand increases and alternatives to conventional fossil fuel are limited. • Smaller airports already receive these funds and use them for essential aeronautical purposes (e.g., runway expansion). Greenhouse Gas Markets There are multiple GHG emissions markets in the United States. California passed the Global Warming Solutions Act (AB 32) in 2003, which requires a cap on the total emissions and requires payment for firms that produce CO2 above a specified threshold. These fees are then redirected into the GHG Reduction Fund to pay for projects that reduce emissions via California Climate Investments. The payments cover allowances, which are created by entities that either reduce their own emissions below the required maximum level or generate direct emissions savings. In the Northeast, the Regional Greenhouse Gas Initiative (RGGI) operates in a similar way, and the following states participate: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. Airports could pursue projects that may be eligible to function as tradable allowances. Pros Cons • External source of funding dedicated to emissions savings. • Payment grows with the size of the emissions eliminated. • Allowances are generated by emissions projects offering the lowest marginal cost for reduction. • Airport-based projects may not be competitive with other sites that can be dedicated to renewable energy or other reduction projects. 5.2 Airport-Based Funding Mechanisms in this section rely on existing or new airport revenue and are subject to FAA grant regulations. Capital and Operational Budgets Airports may choose to fund emissions savings from their existing capital and operational budgets. For example, with a capital project, an airport may decide to upgrade the electrical

Funding Opportunities and Mechanisms 55   service for a building so that electric vehicle charging stations can be installed. Both the costs of increased voltage and the stations themselves could be funded this way. Similarly, an air- port may choose to replace a single, existing motor with a more efficient product in its heating, ventilation, and air conditioning system as part of its operating budgets. The difference in these two examples arises from the size of funding required, and that may be the single contributing factor between having to rely on the longer planning horizon for the electric vehicle project using capital funds. Pros Cons • Airport uses conventional revenue sources, minimizing the need for stakeholder education and coordination. • Smaller projects can be funded at the end of the budget year if operational dollars are allocated but unspent. • Other priorities require airport revenue and may limit funding available for emissions reductions. Green Revolving Funds Green revolving funds (GRFs) are financial tools that use money in an account to finance a project that simultaneously improves efficiency and offers an environmental benefit, such as emissions reductions. Cost savings from the improved efficiency are added back to the original account and can be used toward additional projects (Indvik et al. 2013). Requiring only an initial investment, a GRF can then pay for myriad subsequent projects that improve efficiency and reduce emissions. Additionally, a portion of the savings realized through the GRF could be set aside and used to repay the funder contributing the initial principle (Better Buildings n.d.). GRFs have been successfully implemented at higher education institutions and in munici- palities. For over a decade, universities have captured operational savings from projects to create an alternative funding stream for new projects. A GRF provides a system to prioritize projects based on the return on investment, track utility savings once they have been completed, and direct cost reductions to a centralized fund. GRFs offer potential for funding emissions savings actions that also reduce operational costs. Airports have just begun to adopt GRFs. Hartsfield-Jackson (ATL) has a sustainability resource fund, capitalized through a fee on large capital projects. Atlanta negotiated this arrangement with airlines to create a more flexible method to fund efficiency projects. The fund’s size is over $1M; at present, the fund does not have a revolving feature with savings returning. The Department of Aviation, Virginia, created a state-wide revolving fund to cover capital projects at its smaller airports and to offer an alternative grant mechanism that can cover investments that will generate revenue. The Department of Aviation charges a modest interest rate to airports for covering its own operational costs and for keeping ahead of inflation impacts. By creating a state-wide centralized fund, Virginia can minimize administrative costs and provide services that a smaller airport many not be able to manage independently. Airports should consider starting their own individual funds if they have more than 1 million passengers per year or annual utility expenditures (electricity, fuel and water) above $1 million. If the operations or utility spending are lower than these thresholds, an airport would be better served by participating in a fund run from the state level. ACRP Research Report 205: Revolving

56 Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports Funds for Sustainability Projects at Airports provides extensive guidance on how to adopt a GRF at an airport (Klauber et al. 2019). Pros Cons • Once operational, GRFs can generate a significant alternative source of funding. • GRFs offer a structural framework to collaborate with airlines and tenants to maximize efficiency. • Implementation requires extensive stakeholder education and coordination. • Airline agreements may have to be modified to allow operational savings to be retained. Power Management Opportunities Back-up power and microgrids offer the ability to generate revenue and reduce utility costs by managing airport energy consumption (NREL 2019). By using on-site stored energy (from batteries or, potentially, thermal storage), an airport can reduce the electricity it takes from the grid. Grid operators offer programs for facilities that can shift energy loads when risk occurs that electricity generation may not be sufficient. These programs are called “demand response” (DOE 2019a). In return for reducing their draw from the grid, airports receive payment from grid operators. If airports rely on diesel generators, there may not be a net reduction in emissions due to the on-site fuel burn. Airports can also use on-site power generation and storage to reduce their total consumption and avoid charges for peak demand. Shifting time-of-use or reducing consumption at the high- est levels will reduce utility costs. In the future, airports with functional microgrids may be able to offer “transactive” services, such as island power when the larger electrical grid experiences outages (Gridwise Architecture Council 2018). Pros Cons • Generates operational savings without investing in additional infrastructure. • Once in place, management and labor requirements may be minimal. • Demand response participation may be distracting for building engineers when routine airport priorities must be addressed first. • Microgrids are complex and implementation requires significant resources. • Emissions tradeoffs exist if airports rely on fossil fuels for back-up power generation. Tax Exempt Financing Airports with functional status as a utility can leverage tax-exempt funding from bonds (Barrett 2015). The airport can purchase an electricity volume over a long-term period. The duration can extend 20 years or more, and that funding can be used to capitalize a renewable energy project at an airport. The airport with utility authority can recoup costs by selling the

Funding Opportunities and Mechanisms 57   electricity to its tenants and back to itself, producing favorable returns over time. An airport must consult with legal and finance experts regarding technical details for this contractual struc- ture before issuing any bonds. Airports without authority to act as a utility, depending on the future of the federal tax credit for solar installations, will need to work with a third party eligible to receive the benefit. Pros Cons • Airports with the authority to act as a utility could receive the benefit of favorable financing conditions indirectly without utilizing their own capital. • Indirect subsidies allow generated electricity to be sold to airports at prices below market rates from grid-sourced power. • Most airports do not have the authority to act as a utility entity. • For airports without utility authority, a third party must own the renewable energy asset (as these airports would not be eligible for the tax credit). 5.3 Third-Party Funding Funding mechanisms presented in this section are obtained by a third party and do not require airport capital. Given the variations on ownership and operational models, airports may experience differing comfort ranges with the options. Power Purchase Agreements Power purchase agreements (PPAs) equip an airport to secure renewable energy, either on site or at a remote location (DOE 2019b). Under a PPA, an airport contracts with a service provider to install photovoltaic panels on the roof or mounted on the ground of the property. The service provider obtains financing from a third party and maintains the equipment for the duration of the contract, which typically lasts from 20 to 25 years. Airports gain the benefit of adding solar capacity to the grid and being able to generate electricity at the airport. Contractors receive an airport’s payment for power supplied from the solar installation and have the security provided by the long-term contract. Both parties benefit from the associated guaranteed price and budget certainty, and the airport does not need to expend any upfront capital. Under a virtual PPA, an airport executes a contract for renewable power produced on non- contiguous land away from the property (EPA 2016d). With virtual PPAs, airports can buy renewable electricity produced from wind as well as solar. Typically, power prices are lower with virtual PPAs that can secure supplies from utility-scale renewable projects with better economics than smaller on-site installations. In conventional PPAs and virtual PPAs, renewable energy credits (RECs) are produced along with electricity (EPA 2018). RECs are commodities that allow utilities to comply with state Renewable Portfolio Standards through procurement, rather than having to develop and operate renewable energy production. RECs are usually retained by the project developer with purchase agreements. So, airports may have to pay additional funding to retain their RECs or to secure them from a secondary source, if they are required for green building or Airport Carbon Accreditation certifications.

58 Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports Energy Savings Contracts An energy savings contract (or performance contract) is a method allowing airports to leverage external engineering upgrades, combined with third-party financing. Energy savings contracts are a low upfront cost strategy that reduces overall energy consumption at specific buildings across an airport. In general, an energy service company (ESCO) implements the effi- ciency upgrades and is selected through competitive procurement. ESCOs then create a package of building-specific upgrades with an extended payback (typically around 10 years) and secure a loan from a bank to cover their labor and equipment costs. Efficiency gains can range between 20% and 35%, and individual projects include HVAC system replacement, retro-commissioning, and lighting improvements. The most common form of energy savings contract is an energy savings performance con- tract (ESPC) (DOE 2019c). An airport pays an ESCO over the term of the ESPC through a portion of energy efficiency savings. For example, after an audit, the ESCO might determine that it can reduce utility costs by at least 25% per year. The ESCO would collect a portion of the savings. Given the requirement to achieve a minimum threshold, ESCOs can usually deliver savings beyond their contracted amount. Any savings above the minimum guarantee accrue directly to the airport at no additional cost. Four main steps are required for entering into an energy services contract, as shown in Figure  18. These are to understand the different contracting mechanisms; choose the best approach for the airport; evaluate procurement methods and solicit a proposal from energy services contractors; and select the best proposal and enter into a contract. Pros Cons • Airports do not have to use their own capital. • Development and maintenance are performed by the contractor. • Airports will pay for electricity that they would have obtained at no cost if they had implemented the project. • RECs are owned by the contracted project developer. Choose a procurement method (e.g., RFP, RFQ, RFI) Choose a contracting mechanism (e.g., ESPC, ESA, MESA) Prepare and issue a solicitation Select the best proposal and enter into a contract Figure 18. Process for establishing an energy services contract.

Funding Opportunities and Mechanisms 59   Two of the other less common types of energy savings contracts are an energy services agree- ment (ESA) and a managed energy services agreement. Each contracting mechanism has dif- ferent arrangements for how and when cash flows from energy savings are shared among an energy savings contract, a finance provider, and an airport. These contracting mechanisms are summarized in Table 15. Energy savings contracts differ from the traditional design/bid/build model. The process and working framework in an energy savings contract is simpler from the airport facility’s perspective. As shown in Figure 19, the ESCO and/or project developer manages all work (e.g., audit, design, construction, measurement and verification) and assumes project liability. This is indicated by the gray dotted line showing airport-only contracts with one entity—the ESCO. Within an ESPC, even if the ESCO does not provide direct financing, it often assists the airport facility with financing procurement (indicated by the dashed line in the figure). Within an ESA or managed ESA, the ESCO funds all investments. Therefore, energy savings contract projects tend to be turnkey, and the developer guarantees the savings that pay for the project, imposing relatively low risks on the airport.4 100% of the capital. 100% of the capital. Market penetration in airport sector High Low Low Typical project size Unlimited, but transaction cost may be too high for very small projects $250,000 to $10 million $250,000 to $10 million Responsibility for utility bills Airport or ESC Airport Managed ESA provider Responsibility for operations and maintenance ESC (usually; can be specified in contract) Project developer/ESC Project developer/ESC Gua rantee of energy savings at a certain level? Yes Usually; can be specified in contract Usually; can be specified in contract Contractor conducts baseline measurement of energy use and ongoing measurement and verification Yes Yes Yes Guaranteed maximum fixed price? Yes No, price is on a relative basis rather than fixed (i.e., price per unit of energy saved or per dollars in energy savings). No, price is on a relative basis rather than fixed (i.e., price per unit of energy saved or per dollars in energy savings) . ESPC ESA Managed ESA Ownership Airport owns all improvements throughout the term. Project developer owns improvements during the term. Airport may purchase them when the term ends. Project developer owns improvements during the term. Airport may purchase them when the term ends. Funding upfront costs Airport uses debt or loan financing , if needed. Project developer is responsible for arranging Project developer is responsible for arranging Table 15. Characteristics of energy savings contracts (Kim et al. 2012). 4 Most state regulations on energy savings contracts require that the energy savings contract guarantee the saving level that the project will achieve.

60 Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports Table 16 shows a partial list of airports of various sizes that have entered into energy savings contracts to reduce their energy consumption and GHG emissions in recent years, for projects ranging from parking lot LED light retrofits to large-scale solar PV arrays (AMERESCO 2012; Georgia Association of Energy Engineers 2017; Hawaii DOT 2017). More information on energy savings contracts is available in ACRP Report 71 (Kim et al. 2012). Figure 19. Airport responsibility in an energy services contract. Table 16. Airports that have energy savings contracts. Airport City State Year Bangor Airport Bangor ME 2009 Honolulu International Airport Honolulu HI 2017 11 airports Various cities HI 2017 Valley International Airport Harlingen TX 2005 City of Dallas—Love Field Dallas TX 2008 Austin Bergstrom International Airport Austin TX 2009 Hartsfield-Jackson Atlanta International Airport Atlanta GA 2017 Miami International Airport Miami FL 2015 Pros Cons • Airport leverages third-party financing. • Multiple projects can be implemented simultaneously as part of a broad ESPC. • There is relatively low financial risk to the airport as energy savings are guaranteed by contract. • A single entity manages all project components, thus reducing the airport’s overhead compared to design/bid. • ESPCs require significant airport staff time for coordination, contracting, and execution, including ensuring the baseline and assumptions for measuring future savings are acceptable. (Note: LaaS contracting is considerably streamlined). • ESCOs ultimately determine which projects they will include in the contract, not the airport.

Funding Opportunities and Mechanisms 61   Public-Private Partnerships A public-private partnership, also known as a P3, is a contractual relationship between a public entity (an airport, in this context) and a private sector entity or entities (U.S. DOT Build America Bureau 2018). The contract allocates responsibility for service delivery, capital invest- ment, and risk assumption. Any P3 should make it possible to improve the efficiency of trans- portation. The P3 usually indicates a structure by which services or investments, traditionally provided by an airport’s sponsor, are provided by a private sector firm (Kaplan Kirsch and Rockwell 2017). In the past, P3s have been viewed skeptically by the public. A number of early prominent efforts at P3s were characterized as transfers of publicly valuable assets to private firms. Several toll roads had private operators filing for bankruptcy and had to be taken back by a public agency. In the U.S. airport industry, early discussions focused on full airport privatizations modeled on similar transactions in other global regions (e.g., under the FAA’s authorized Airport Privatization Pilot Program). Currently, P3 structures have started at terminal projects at JFK and LaGuardia, the Great Hall project at Denver, and the newly privatized terminal at Paine Field in Everett, north of Seattle (Kaplan Kirsch and Rockwell 2017). P3s offer a possibility to mobilize private sector funding for large retrofit projects, and this approach may be appropriate for airports lacking other resources to modernize selected facili- ties, thus dramatically reducing emissions. Projects undertaken can range from building of physical infrastructure to operations. These partnerships can offer new approaches for taking on the project, different financing options, and different risk amounts and types than the government would face alone. P3s can be tremendously effective or tremendously costly, depending on a multitude of factors (Marques de Sá 2017). In exchange for certain rights and abilities to recoup costs over the project’s life, private partners are often willing to supply upfront capital, which can be especially useful for expensive emissions reduction projects. P3s also can allow the private sector to take certain risks, which the govern- ment might not be able to do, even if it had the will (Baietti 2013). Pros Cons • ESCOs will likely exceed a minimum performance target as they must be conservative with their estimates; those operational savings accrue directly to the airport. • Long contracts (∼10 years) reduce airport financing flexibility. Pros Cons • Significant funding can be generated more quickly by private entities. • Airports can selectively partner on the most challenging assets if they find willing partners. • Airports transfer the asset’s ownership for the long term. • Currently held assumptions of P3 structures may be negative.

62 Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports As a Service Model Airports may be able to leverage third-party providers to support an airport function previ- ously seen as an infrastructure cost. For specific performance areas (such as lighting), private firms will provide a service, shifting installation, maintenance, and replacement costs from the airport. Airports already have experience with contracted custodial work and may utilize this approach with companies that offer floor covering as an ongoing service (instead of just selling carpet material). Related to emissions, some companies offer Lighting as a Service (LaaS). Under this model, airports can contract a complete performance area and specify the quantity (lumens) and quality of illumination they require. A service provider is then responsible for maintaining and replac- ing the lighting. Long life and energy-efficient LED options are likely choices for contractors. Energy performance can be one of the specifications of the contracted LaaS. Pros Cons • Improved emissions savings measure can be implemented on a more frequent basis. • Airport does not have to generate the capital for upgrades. • Airport does not have to maintain the asset. • Airport does not have direct control of the service. • Services are limited to areas where a vendor can make a profit. Green Leases Airports can include sustainability performance incentives in their tenant rental agreements. If sub-metering is possible, airports can measure existing energy consumption from each lease and establish baseline usage values for electricity, fuel, and water. Using these data, airports can encourage concessionaires and airlines by granting them a favorable split if they install more- efficient equipment and find ways to reduce consumption through operational modifications. Tenants invest their own funding to make these changes. Airports can promote participation and potentially competition by recognizing participation and promoting high performance by posting signage or digital display content visible to passengers. ACRP has provided specific guidance on contract language and best practices in ACRP Synthesis 42 (Hazeman 2017). Pros Cons • Tenants are responsible for new equipment or retrofit actions. • Tenants are incentivized to change their behavior and conserve energy. • Airports may have to wait until contracts are renegotiated to implement. Passenger Voluntary Contributions Passengers can pay to “offset” their aircraft emissions. Many airlines have offered passengers an option to purchase carbon credits as part of an airline ticket transaction. Currently, it is

Funding Opportunities and Mechanisms 63   difficult to find these programs, and passengers unaware of them will not consider this action as they will not know to look for the option on the airline site. It is understandable that airlines prefer selling higher-margin services as part of the ticket transaction. It is far more profitable to sell extra leg room or expedited boarding privileges than for an airline to provide an option to buy carbon reduction provided by a third-party developer. San Diego Airport launched The Good Traveler carbon reduction program in 2016 to directly engage passengers, so they can take voluntary action (see “The Good Traveler” in Chapter 4). Passengers can estimate their emissions on The Good Traveler website and neutralize them by paying a relatively modest fee in comparison to their flight’s price. The Good Traveler purchases carbon credits on their behalf, verified by third-parties and connected to projects in the regions where the airports are located. In 2019, over 14 airports in the United States were members and post physical or digital signage in their terminals. In the future, The Good Traveler has plans to support “in-sector” carbon reduction that will support purchases of low- carbon, sustainable jet fuel or create a funding stream that can accelerate aircraft fuel efficiency (Good Traveler 2019). Pros Cons • Passengers are empowered to participate in aviation emissions reduction. • Airport does not have to make significant investment. • Achieving higher participation levels requires effectively promoting the program, which could include substantial coordination with airport IT, communications, and tenants regarding signage and other educational content.

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Airports worldwide are setting aggressive zero- or low-emissions targets. To meet these targets, airports are deploying new strategies, adopting innovative financing mechanisms, and harnessing the collective influence of voluntary emissions and reporting programs. In tandem, new and affordable zero- or low-emissions technologies are rapidly becoming available at airports.

The TRB Airport Cooperative Research Program's pre-publication draft of ACRP Research Report 220: Guidebook for Developing a Zero- or Low-Emissions Roadmap at Airports covers all steps of roadmap development, from start to finish, using conceptual diagrams, examples, best practices, and links to external tools and resources. While the main focus of this Guidebook is airport‐controlled greenhouse gas (GHG) emissions, it provides discussion about airport‐influenced emissions from airlines, concessionaires, and passengers.

Whereas other guidebooks and reference material provide airports with information on emissions mitigation and management (for example, the Federal Aviation Administration’s Airport Carbon Emissions Reduction, ACRP Report 11: Guidebook on Preparing Airport Greenhouse Gas Emissions Inventories, and the Airport Council International’s Guidance Manual: Airport Greenhouse Gas Emissions Management), this Guidebook articulates steps for creating an airport‐specific emissions roadmap.

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