Energy Master Planning
By John F. Infanger, Editorial Director
January/February 2001
Airports large and small stand to benefit from analyzing energy us
FAIRFAX, VA - Harris Energy Systems, a division of DMJM+Harris, has been working with Boston and Philadelphia airports on energy master plans to make their facilities more efficient and reliable. Dale Stanton-Hoyle, associate vice president, recently discussed the concept of energy master planning and its benefits. Here's an edited transcript of that discussion.
AIRPORT BUSINESS: What types of things have you learned
at Boston and Philadelphia?
Stanton-Hoyle: In almost any commercial facility, there tend to be some pretty significant opportunities for decreasing utility costs and they're often overlooked because people are working on their core business. And, investing in
your facilities often provides higher return on investment
than investing in the core business. It's true for typical
office buildings and it's true for typical airports.
Investing in your facilities
to decrease utility costs usually turns out to be the
best investment of all. It's not unusual to see ROI
(return on investment) of 20 to 50 percent.
At Logan, the most significant
cost reductions that they derived were by paying less
per unit of energy. Also, we're working with them on
an overall energy master plan to help them to make their
facilities more efficient.
Also, somewhat unique
at Logan but likely to exist at many other airports,
is that on the supply side Logan was able to purchase
electricity on the wholesale market.
The thing that will make
the biggest difference in whether or not an airport
is able to do what Logan did has to do with the way
that it's chartered. If an airport is chartered in such
a way that it is reselling electricity or fuels to airlines,
air freight companies, or concessioniares, they can
purchase the fuel at one price, mark it up, and sell
it at a different price. They often don't mark it up
because they're not in the business of acting like utilities.
But what we determined at Logan was that they could
be acting like a utility - in fact, they could buy their
power on the wholesale market rather than on the retail
market.
Rather than go to Boston
Edison and pay whatever the prevailing rate was to industrial
customers, they were able to go out on the open market
and allow various generators of electricity to bid on
their long-term needs. Where a lot of people have seen
significant increases in their electricty prices, Logan
has a locked in rate. That's where savings went from
roughly $5 million a year to $10 million a year. For
the ten-year contract that they have, it looks like
they could be saving $80 million or more.
On the demand side, they
also were assuming that they were going to have to build
a new central plant. Part of that was because of the
phaseout of CFC refrigerants and the expansion of the
entire airport under Logan 2000. We were able to analyze
what their real demand was likely to be for cooling
and analyze a more sophisticated solution to their production
of cooling and determine that they didn't have to build
a new central plant. They were about to spend somewhere
toward $15 million to build that plant.
Now, we're continuing
to do other things with them on the demand side. For
example, working with them on the second step of potentially
converting over the whole airport from steam distribution
to hot water distribution. That could save roughly 20
percent, because steam systems are inherently leaky
and it's pretty common for them to leak 20 percent.
In addition to lowering
operating costs because of energy use, you also look
at sustainable development from the perspective of the
materials they use - natural light, that sort of thing.
Taking a broad perspective
can be very useful. There really are synergies involved
when you don't just look at the supply or demand side,
or just new construction or retrofits, or only one terminal,
and you don't look at the entire distribution system.
Working with them on an ongoing basis, we have the benefit
of being able to do things that fit together well.
The same is true for other
airports. We're working with Philadel-phia, for example,
and mostly looking at the landside facilities. Again,
there is tremendous interaction among systems. And,
there is opportunity to analyze the demand side options
along with supply side options.
A key concept that often
gets thrown into the middle of that is co-generation
- which in some ways is like a bridge between the supply
and the demand side. It's sometimes used as a bargaining
chip with the utilities. A facility will say, 'We're
paying so much for our fuel, I think we'll just generate
onsite.' Utilities, wanting to keep a large customer
like an airport, will often evaluate with the airport
whether or not it makes sense to lower the price of
the commodity rather than to have them build co-generation
capacity onsite.
AB: How
likely would that be?
Stanton-Hoyle: It is pretty likely.
AB: In terms
of an airport buying electricity, is there a lot of
opportunity to get competitive bids?
Stanton-Hoyle: I think there is a lot of opportunity; for one thing, most airports are only dealing with one utility. They may have a lot of negotiations with them, but it's usually only one utility.
Airports only see themselves
as consumers of energy, not wholesalers of energy. The
way that it's chartered is important because it may
allow them to purchase fuel on the wholesale market
and resell it. This is where the whole deregulation
thing comes into play. What's partly an opportunity
here is for them to go back, have a legal analysis of
their charter done, and determine whether or not they
are actually capable.
AB: When we're
talking deregulation of the energy industry, what exactly
are we talking about?
Stanton-Hoyle: Mostly, right now, we're talking about the electric industry. Natural gas has been considerably ahead in market deregulation.
For example, you often
hear of people purchasing their natural gas at the wellhead.
Then the pipes that are in the ground are just what
the local utilities are required to provide. They get
to mark it up; they get to make a profit based on having
to invest in the infrastructure of the pipes.
The same is now becoming
true in the electric industry. The local utility that's
invested in all the wiring and infrastructure gets to
make a profit, but they don't necessarily get to provide
you with the electricity that they've generated. Because
of this, a lot of utilities that are trying to stay
ahead of the deregulation tidalwave are divesting in
their generation capacity. So, a utility like Pepco
in the Washington, D.C. area no longer generates; it's
sold off all of its powerplants. It's becoming a distributor.
The third element of this
is who takes care of all the meter reading and billing?
Those services can also be separated from the whole.
So the idea of these vertically integrated utilities
that used to generate, transmit, distribute, and then
read the meters and provide you the bills - those things
can now all be divided up.
It's all part of a quickly
changing landscape. I've spent a fair amount of time
overseas, and this is occurring in different ways and
at different rates, but with a fair amount of similarity,
across the world. England is ahead of us in terms of
their deregulation; the Australians are moving pretty
quickly.
It's about customer choice;
it's just like the deregulation of the phone industry
in many ways. We can choose to pay for MCI, Sprint,
or whomever to handle all of our long distance calls.
Well, that's the same way utilities are now doing it
with power marketing companies coming to your business.
The generators can be whomever you choose.
In the last two or three
years the buzzwords have changed from demand side management
to market transformation. The concept: because we're
now deregulating these utilities, you can't be requiring
utilities to do something in a specific service territory
because they don't operate only within that service
territory. You've got this mix of generation, transmission,
and distribution companies. It's no longer centralized
as a monopoly.
What's perceived in the
common good today is to bring about energy efficiency,
but to do it on a statewide basis rather than on a single
utility basis. States that are on the leading edge of
all this are California and New York. Massachusetts
is also very active - places with high utility rates.
AB: So,
if I'm a manager of a mainstream commercial airport,
what should I be looking at? The charter?
Stanton-Hoyle: I don't think that's necessarily the first thing you should do. The first thing an airport administrator should do is to develop a plan for how to look at the various integrated pieces of their facility, with an
eye toward maintaining reliability and decreasing operating
costs.
Airports are just like
any other industrial process where throughput is everything.
If decreasing reliability means they have to start turning
away flights, then that would be suicide. So, maintain
the reliability while reducing costs. Often, you can
increase reliability and increase comfort, at the same
time that you're reducing costs.
At Philadelphia (Int'l)
Airport they had main feeders coming in from the Philadelphia
Electric Company. Each feeder is large enough to handle
the whole airport, but not the wiring from building
to building. So, if you ever lost one feeder, you couldn't
keep the entire airport running. As part of our evaluation
for them, we've been looking at ways to decrease the
operating cost and provide significantly better redundancy.
They should at least start
to develop a plan that looks at these various components.
They may have engineering staff on board that are capable
of doing this; they may have attorneys on board who
are capable of analyzing their charter. It really helps
to bring in people or send your own people to training
courses so that they're constantly staying on top of
what's going on with deregulation.
AB: If they review
their charter, what is it they're looking for?
Stanton-Hoyle: If they find that they are chartered with the ability to be a reseller of energy, they have flexibility and options. It happens maybe less than half the time.
AB: If I've instituted
a plan and have reviewed how to reduce costs while maintaining
reliability, and have had a legal review of the charter,
what do I do next?
Stanton-Hoyle: After you kind of dipped your toe in each of those areas, then you need to develop a detailed plan, decide whether or not you're going to run it in-house or hire a consultant, or make it part of the scope of work for a consultant
you already have on board.
If you've got an airport
that's growing a lot and/or has aging facilities and
is thinking about whether or not they're going to have
to add on new central plan equipment in order to meet
new demand, then you've got enough complicated issues
that you need to be going ahead and developing an energy
master plan.
AB: It would seem
that a key target or focus would be to look at what
you're paying for energy today.
Stanton-Hoyle: The first thing that's going to happen is your local utility that's already serving you is going to try to lock you into something like a ten-year contract at slightly lower rates. The next thing is, if there are
competitors that are able to get in on the game - if
you're chartered right or you're in a state that's in
a particular stage of deregulation - they're also going
to want you to sign a ten- or 15-year contract. It's
really helpful to be not signing a ten-year contract
without already having looked at your demand side.
AB: You pretty
much feel that there's opportunity here for almost any
airport.
Stanton-Hoyle: I haven't been in any facility that didn't have an opportunity to decrease its operating costs. Most folks are not thinking about it. I could walk into your house and put together a list of dozen items that if you chose
to invest in them would decrease your utility cost 30
percent.
So, the question is, where
is it cost-effective to make these investments? And
the answer is, most of the time, most places, it's cost-effective.
AB: If I want to
go out and get competitive bids for energy, do I go
through a typical bidding process?
Stanton-Hoyle: Competitive bidding doesn't even necessarily come into play here. In the Logan example, we helped them put together a bid package for the purchase of electricity. In their particular situation, having people bid for
electricity in a long-term contract made sense to them.
In a lot of other cases,
though, without going out for bid, any airport can evaluate
its most cost-effective fuel mix. That can involve purchasing
contracts that they already have with their various
utilities. Part of what can be done as part of this
energy master plan is to evaluate whether or not it
really is most cost-effective to be generating your
cooling with gas rather than with electricity, or to
be generating your heating with electricity rather than
gas.
AB: Is there typically
only one supplier of a particular energy?
Stanton-Hoyle: It's usually one. In the case of the electricity provider, you're still using Commonwealth Edison lines or whomever to get the electricity to your airport, but you can be buying your power from Hydro Quebec.
AB: It would seem
that most people don't think they have any control over
energy.
Stanton-Hoyle: That's right. It's said over and over again, utility costs are just fixed costs - the cost of doing business. Yet, when people go around and order copy paper they'll check two or three different sources; you can do the
same thing with your electric costs.
It's more than just shopping
around. It's like if you know you can replace every
light in a building and can easily knock down what you're
paying for lighting by 40 percent. And that decreases
the amount of energy that you also pay for cooling.
So, if the whole thing will pay for itself in three
years, why wouldn't you go after that that type of return
on investment?
And airports that run
more efficiently have a very clear way of saying to
the populations near them that they are being more environmentally
responsible by running our airport in an energy efficient
manner.
Harris Energy Systems, a division of DMJM+Harris, recently completed a Master Energy Plan that is projected to save Boston Logan International Airport some $80 million in operating expenses over ten years. The Plan is part of the Logan 2000 initiative to upgrade the airport.
The
Plan consists of three phases. In Phases I and
II, undertaken simultaneously, the strategy calls
for adding capacity to the central heating plant
to meet the construction schedule, upgrading mechani-cal/electrical
systems for greater efficiency, and negotiating
favorable wholesale rates with the utilities.
During these phases, the Plan has already paid
off by saving Logan $15 million in avoided capital
costs at the central heating/cooling plant.
Phase III looks
to 2006 and analyzes the comparative benefits
of replacing the existing central plant or building
a co-generation plant. The Master Energy Plan
is already saving Logan at least $8 million a
year in energy costs.
Any master energy
plan - comprehensive in scope - can serve an airport
as a valuable strategic road map for ensuring
a reliable, flexible, and cost-effective supply
of energy.
- D.S.-H.