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Profit Potential of Green Airport Strategies

Jawad Rachami
Jawad Rachami

A business case for airports and aviation professionals to adopt environmental and energy-efficient strategies.

1 of 17
The Profit Potential of Green Airport Strategies Airports Conference of the Americas July 20, 2008 Jawad Rachami Wyle Laboratories, Inc.
How Green Got Our Attention? Melting Ice Caps The graphic evidence of climate change has been on display BUT popular concern did not translate into aggressive action.
How Green Got Our Attention? Global Oil Prices 1999-2008 Rising fuel prices have us now at full attention Betting on cheap oil is not a sustainable business strategy.
Does Money Grow on Trees? Lower Operating Costs i.e., Energy efficiency (Green Technology & Practice) Penalty avoidance & project offset credits in a Cap & Trade system Cost-Cutting Expanded Revenue i.e., Expanded capacity (Attract more energy-conscious airlines and clear environmental constraints for capital improvement projects) Tradable commodities: Carbon credits Branding Revenue New Investments i.e., Private sector carbon credit investments Govt. grant projects (Infrastructure development, Investment equipment/vehicle conversions, workforce training, process improvements) Enhanced Branding i.e., Consumer (Traveler) Confidence / Preference Market appeal / Image (buzz & novelty)
Green as a Cost-Reduction Strategy Challenges Opportunities A sizeable portion of airport operating budget goes to cover High-performance HVAC energy costs systems Most airports do not have a dedicated energy performance Digital power Control and monitoring program systems No standard energy performance metrics that conform with O&M optimization uniqueness of airport facilities As much as 20% of airport cooling & heating energy is wasted Ground Support Equipment Underutilization of low-cost operational improvements and retrofits Water treatment system upgrades On-site renewable energy and power co-generation rare at airports On-site renewable energy
Energy Performance by Airport Size Small airports are least Small Airports efficient in terms of energy cost per Ft2 (90% higher than medium-size airports) Medium Airports Medium Airports have least utility expenditure per Ft2. Large Airports Large airports require least energy expenditure per enplanement Overall (economies of scale) ALL require energy 0 1 2 3 4 efficiency improvements Utility Costs/ft2 Energy Costs/ft2 Utility Costs/Enplanement Energy Costs/Enplanement Enplanement/ft2 * According to a new study released by the Airport Cooperative Research Program (ACRP) of the US Transportation Research Board (TRB)
Green as a Cost-Reduction Strategy Green Better equipment Operations & = Energy cost Technology & savings + performance + Maintenance Best Practice monitoring optimization Energy-related Best Practices can produce up to 15% of whole building energy costs Green building recommissioning can produce up to 25% of whole building energy costs Green technology retrofits can produce up to 20% of whole building energy costs * According to a new study released by the Airport Cooperative Research Program (ACRP) of the US Transportation Research Board (TRB)
A Case in Point: Dallas-Fort Worth Airport New Computerized Maintenance Management System (CMMS) incorporating energy monitoring and process review functions Aggressive 5-Year facility recommissioning and optimization program. Operational improvements to vehicle fleet and GSE conversion Air Cooling & Heating System Replacements and new Digital Controls New Thermal Energy Storage System - reduced energy consumption during peak hours by 77% or $300K annually. Operational and lighting improvements in Terminal B produced energy savings of 17%. Responding to the events of September 11we needed to cut costs So, DFW implemented a $122M plan to upgrade the Energy Plaza, convert our vehicle fleet to alternative fuels andimplement energy saving protocols at Terminal B and the Rent-A-Car Center. Jim Crites.
Green as a Revenue-Building Strategy 1. Environmental constraints (Noise and Air Quality) are the biggest obstacles to airport expansion and traffic growth. A Green approach can clear regulatory hurdles (i.e., NEPA, potential EPA GHG limits); and Incentivize air carriers to accelerate transition to new generation aircraft. anticipating regulatory change 2. In a Cap & Trade System: Units of carbon are tradable commodities A cap can only be enforced through penalties World Bank estimated the carbon market at $64 billion in 2007 3. In a Baseline & Credit System: Can create credits by reducing carbon emissions below a baseline Credits can be purchased by polluters who have a regulatory limit
Carbon Markets Two Markets: Mandatory and Voluntary Mandatory markets: Kyoto Protocol's Clean Development Mechanism and European Union Emission Trading Scheme (EU ETS) Voluntary Markets in US, Australia, Japan EU ETS allows import of emissions reductions via Joint Implementation (JI) and Clean Development Mechanism (CDM) projects Mandatory markets valued at $64 billion in 2007
Carbon Markets More than 400 million metric tons of CO2 are exchanged through projects annually Voluntary carbon market is a small part of all carbon buying and trading: $331M in 2007
Green as an Investment Strategy Government programs: FAAs Voluntary Airport Low Emissions Program (VALE): $6.2M in AIP grants in FY07. DOE & EPA Building Performance programs Joint Other Voluntary Implementation $265M Investors searching for project offsets $499M to trade Joint Implementation (JI) and Clean Development Mechanism (CDM) projects Secondary CDM Primary CDM $7.4B I.E. Airlines looking for offsets to their carbon in $5.5B EU may invest in project offsets at airports elsewhere
Project-Based Carbon Trading Project Host Emission Reduction buyers Companies or Govts implementing GHG mitigation projects i.e.: Renewable energy Companies, Govts and others buy GSE Conversion ERs ERs from project activities Etc. Some ERs go to satisfy mandatory Mitigation Projects create obligations Emission Reductions (ERs) in equivalent metric tons of CO2 Others buy ERs to apply towards $$ voluntary commitments Project hosts sell ERs to finance project activities
Green as an Branding Strategy Green brand fulfills goal of Corporate Social Responsibility (CSR) It creates goodwill and enhances market image / reputation Global corporations (i.e., GE, Toyota) have pursued and marketed Green brands Airports (i.e. DFW, AMS) are embracing the concept
Green is Primed to Launch Boosters / Galvanizing Factors i.e.: Serves public good, Delivers positive socioeconomic impact 5. Is it cool? Does it have innovative quality and Novelty generates market Buzz? Socioeconomic benefits 4. Does it reliably fulfill intended functions? Reliability Public Good 3. Is it market accessible? Availability 2. Is it useful? Does it effectively address need & necessity? Utility 1. Is the product / service needed? Necessity
A Case in Point: Abu Dhabi Airport A First: Airport City of 6 square kilometers to be carbon neutral Announced in 2008 a $2 billion investment in solar technology. We're serious about this. We're going to put so many resources to do it right. And this is the ideal place where you can demonstrate what you believe in a meaningful scale.quot; Khalid Award, Program Manager.
Overview: Money does grow on trees Green technology and best practices help airports realize operational efficiencies and reduce costs Green strategies create opportunities for new revenue streams and prepares airports for new regulatory requirements New Green markets are creating new possibilities for investment in capital improvements, technology adoption, and process optimization A Green marketing approach fosters consumer confidence and creates market buzz.

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Profit Potential of Green Airport Strategies

  • 1. The Profit Potential of Green Airport Strategies Airports Conference of the Americas July 20, 2008 Jawad Rachami Wyle Laboratories, Inc.
  • 2. How Green Got Our Attention? Melting Ice Caps The graphic evidence of climate change has been on display BUT popular concern did not translate into aggressive action.
  • 3. How Green Got Our Attention? Global Oil Prices 1999-2008 Rising fuel prices have us now at full attention Betting on cheap oil is not a sustainable business strategy.
  • 4. Does Money Grow on Trees? Lower Operating Costs i.e., Energy efficiency (Green Technology & Practice) Penalty avoidance & project offset credits in a Cap & Trade system Cost-Cutting Expanded Revenue i.e., Expanded capacity (Attract more energy-conscious airlines and clear environmental constraints for capital improvement projects) Tradable commodities: Carbon credits Branding Revenue New Investments i.e., Private sector carbon credit investments Govt. grant projects (Infrastructure development, Investment equipment/vehicle conversions, workforce training, process improvements) Enhanced Branding i.e., Consumer (Traveler) Confidence / Preference Market appeal / Image (buzz & novelty)
  • 5. Green as a Cost-Reduction Strategy Challenges Opportunities A sizeable portion of airport operating budget goes to cover High-performance HVAC energy costs systems Most airports do not have a dedicated energy performance Digital power Control and monitoring program systems No standard energy performance metrics that conform with O&M optimization uniqueness of airport facilities As much as 20% of airport cooling & heating energy is wasted Ground Support Equipment Underutilization of low-cost operational improvements and retrofits Water treatment system upgrades On-site renewable energy and power co-generation rare at airports On-site renewable energy
  • 6. Energy Performance by Airport Size Small airports are least Small Airports efficient in terms of energy cost per Ft2 (90% higher than medium-size airports) Medium Airports Medium Airports have least utility expenditure per Ft2. Large Airports Large airports require least energy expenditure per enplanement Overall (economies of scale) ALL require energy 0 1 2 3 4 efficiency improvements Utility Costs/ft2 Energy Costs/ft2 Utility Costs/Enplanement Energy Costs/Enplanement Enplanement/ft2 * According to a new study released by the Airport Cooperative Research Program (ACRP) of the US Transportation Research Board (TRB)
  • 7. Green as a Cost-Reduction Strategy Green Better equipment Operations & = Energy cost Technology & savings + performance + Maintenance Best Practice monitoring optimization Energy-related Best Practices can produce up to 15% of whole building energy costs Green building recommissioning can produce up to 25% of whole building energy costs Green technology retrofits can produce up to 20% of whole building energy costs * According to a new study released by the Airport Cooperative Research Program (ACRP) of the US Transportation Research Board (TRB)
  • 8. A Case in Point: Dallas-Fort Worth Airport New Computerized Maintenance Management System (CMMS) incorporating energy monitoring and process review functions Aggressive 5-Year facility recommissioning and optimization program. Operational improvements to vehicle fleet and GSE conversion Air Cooling & Heating System Replacements and new Digital Controls New Thermal Energy Storage System - reduced energy consumption during peak hours by 77% or $300K annually. Operational and lighting improvements in Terminal B produced energy savings of 17%. Responding to the events of September 11we needed to cut costs So, DFW implemented a $122M plan to upgrade the Energy Plaza, convert our vehicle fleet to alternative fuels andimplement energy saving protocols at Terminal B and the Rent-A-Car Center. Jim Crites.
  • 9. Green as a Revenue-Building Strategy 1. Environmental constraints (Noise and Air Quality) are the biggest obstacles to airport expansion and traffic growth. A Green approach can clear regulatory hurdles (i.e., NEPA, potential EPA GHG limits); and Incentivize air carriers to accelerate transition to new generation aircraft. anticipating regulatory change 2. In a Cap & Trade System: Units of carbon are tradable commodities A cap can only be enforced through penalties World Bank estimated the carbon market at $64 billion in 2007 3. In a Baseline & Credit System: Can create credits by reducing carbon emissions below a baseline Credits can be purchased by polluters who have a regulatory limit
  • 10. Carbon Markets Two Markets: Mandatory and Voluntary Mandatory markets: Kyoto Protocol's Clean Development Mechanism and European Union Emission Trading Scheme (EU ETS) Voluntary Markets in US, Australia, Japan EU ETS allows import of emissions reductions via Joint Implementation (JI) and Clean Development Mechanism (CDM) projects Mandatory markets valued at $64 billion in 2007
  • 11. Carbon Markets More than 400 million metric tons of CO2 are exchanged through projects annually Voluntary carbon market is a small part of all carbon buying and trading: $331M in 2007
  • 12. Green as an Investment Strategy Government programs: FAAs Voluntary Airport Low Emissions Program (VALE): $6.2M in AIP grants in FY07. DOE & EPA Building Performance programs Joint Other Voluntary Implementation $265M Investors searching for project offsets $499M to trade Joint Implementation (JI) and Clean Development Mechanism (CDM) projects Secondary CDM Primary CDM $7.4B I.E. Airlines looking for offsets to their carbon in $5.5B EU may invest in project offsets at airports elsewhere
  • 13. Project-Based Carbon Trading Project Host Emission Reduction buyers Companies or Govts implementing GHG mitigation projects i.e.: Renewable energy Companies, Govts and others buy GSE Conversion ERs ERs from project activities Etc. Some ERs go to satisfy mandatory Mitigation Projects create obligations Emission Reductions (ERs) in equivalent metric tons of CO2 Others buy ERs to apply towards $$ voluntary commitments Project hosts sell ERs to finance project activities
  • 14. Green as an Branding Strategy Green brand fulfills goal of Corporate Social Responsibility (CSR) It creates goodwill and enhances market image / reputation Global corporations (i.e., GE, Toyota) have pursued and marketed Green brands Airports (i.e. DFW, AMS) are embracing the concept
  • 15. Green is Primed to Launch Boosters / Galvanizing Factors i.e.: Serves public good, Delivers positive socioeconomic impact 5. Is it cool? Does it have innovative quality and Novelty generates market Buzz? Socioeconomic benefits 4. Does it reliably fulfill intended functions? Reliability Public Good 3. Is it market accessible? Availability 2. Is it useful? Does it effectively address need & necessity? Utility 1. Is the product / service needed? Necessity
  • 16. A Case in Point: Abu Dhabi Airport A First: Airport City of 6 square kilometers to be carbon neutral Announced in 2008 a $2 billion investment in solar technology. We're serious about this. We're going to put so many resources to do it right. And this is the ideal place where you can demonstrate what you believe in a meaningful scale.quot; Khalid Award, Program Manager.
  • 17. Overview: Money does grow on trees Green technology and best practices help airports realize operational efficiencies and reduce costs Green strategies create opportunities for new revenue streams and prepares airports for new regulatory requirements New Green markets are creating new possibilities for investment in capital improvements, technology adoption, and process optimization A Green marketing approach fosters consumer confidence and creates market buzz.