PRESENTATION VALE Cost Reduction Opportunities Reducing Operations and Maintenance Expenses Through Federal Aviation Administration Voluntary Airport Low Emission Program Grants Prepared for ACI-NA Business of Airports Conference April 22, 2015
Voluntary Airport Low Emission (VALE) Program The VALE Program provides new money to airports for projects that reduce emissions and consequently reduce operating costs. Program need Some airport emission reduction projects were being postponed Other emissions reduction projects were undertaken too soon The eligible participants Commercial service airports located in regions with nonattainment or maintenance air quality status 161 airports in the United States 2 VALE Cost Reduction Opportunities April 22, 2015
Financial Incentives VALE provides new money for participating airport sponsors Funding source: AIP Discretionary Noise & Environmental Set-Aside Budget Issued at national level Does not affect Entitlements Generally does not affect other discretionary projects 75% funding for all eligible costs, including: Low emission equipment purchase and installation costs Incremental or retrofit/conversion costs of airport-dedicated vehicles Supporting infrastructure costs Project design and formulation costs 3 VALE Cost Reduction Opportunities April 22, 2015
VALE Projects Since Inception LeighFisher has prepared more than 60% of the VALE applications approved by the FAA 4 VALE Cost Reduction Opportunities April 22, 2015
VALE Project Concepts Many low-emission project types have been funded Projects that reduce fuel costs Alternative Fuel Vehicles Central Plant Improvements Projects with cost recovery potential Preconditioned Air and Ground Power RON/Remote Ground Power Electric GSE 5 VALE Cost Reduction Opportunities April 22, 2015
Project Concept Alternative Fuel Vehicles The use of alternative fuels can significantly reduce vehicle operating costs Alternative fuels significantly reduce or eliminate the use of gasoline or diesel fuel by airport-dedicated vehicles. VALE-eligible technologies include: CNG/LPG Electric Hydrogen Hybrids VALE-eligible costs include: Incremental vehicle cost Conversion/retrofit cost Refueling/recharging infrastructure Electric PCA and ground power units Vehicle types include: Shuttles Buses Staff vehicles Maintenance vehicles 6 VALE Cost Reduction Opportunities April 22, 2015
U.S. Average Retail Fuel Prices Direct operating cost saved by switching to electric vehicles Source: U.S. Department of Energy 7 VALE Cost Reduction Opportunities April 22, 2015
Project Concept Boiler and Central Plant Upgrades High-efficiency boilers and ultra-low NOx burners reduces heating fuel consumption Central Utility Plant Upgrades High-efficiency boilers reduce fuel consumption Ultra-low NOx burners significantly reduce NOx emissions Emissions typically reduced from 100 ppm to 9 ppm 8 VALE Cost Reduction Opportunities April 22, 2015
Project Concept Gate Electrification Electric PCA and GPU equipment can replace the use of aircraft APUs Aircraft auxiliary power units (APU) power onboard equipment, heaters, and air conditions A typical APU burns 45 gallons of jet fuel per hour Electric Ground Power Units (GPU) and Pre-Conditioned Air (PCA) units provide reliable 400-Hz power and temperate air to parked aircraft, curtailing the use of APUs Units can be fixed (above or under ground) or mobile Saves airlines in fuel consumption Reduces air pollution and ramp congestion 9 VALE Cost Reduction Opportunities April 22, 2015
Project Concept GSE Electrification (egse) Electric GSE projects offer tremendous environmental and financial benefits egse vehicle types include: Baggage tractors Belt loaders Pushback tractors Forklifts/cargo loaders Projects strongly supported by FAA Rechargers and supporting infrastructure are VALE-eligible egse typically purchased by airline partner egse realize more than 80% savings in fuel costs compared to diesel GSE Typical Return on Investment No funding assistance = <10 years With VALE assistance = <3 years 10 VALE Cost Reduction Opportunities April 22, 2015
Project Concept Remote/RON Power VALE grants can support electrification for remote RON and cargo positions Providing power to remote aircraft positions can be particularly attractive from a cost perspective Remain overnight (RON) aircraft power Overnight cargo operations RON/Remote Ground Power Cumulative Savings $/Position $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 -$200,000 Projects typically break even by Year 2 Year 0 2 4 6 8 10 12 14 11 VALE Cost Reduction Opportunities April 22, 2015
Cost recovery is an important project finance consideration If a VALE funded project benefits airlines, it shouldn t come at additional cost to the airport Cost recovery can present an opportunity for mutual benefit 12 VALE Cost Reduction Opportunities April 22, 2015
DERA grants can provide additional financial incentive DERA Diesel Emission Reduction Act (the Clean Diesel Program) National funding program to reduce diesel emissions from transportation Grants from $250,000 to $1M Incremental costs of new electric GSE, up to 25% of total purchase cost 40-50% of engine repowers Only local and state entities may apply Administered by the EPA Funding can be transferred to 3rd parties State DERA grants also available Supporting infrastructure not eligible, but is VALE eligible 13 VALE Cost Reduction Opportunities April 22, 2015
The Process Pursue emission credits State air quality regulators are typically amenable to issuing AERCs Obtain bids Grant requests are based on bids Secure grant matching funds and stakeholder commitments 25% local match plus base cost funding (e.g. recapitalization of vehicles) required Satisfy VALE Conditions Retain equipment at airport for useful life Track equipment usage Replace damaged equipment with in-kind (or cleaner) Label equipment 14 VALE Cost Reduction Opportunities April 22, 2015
Discussion 15 VALE Cost Reduction Opportunities April 22, 2015