Session 3
Financing the Energy and Electrification Transition
Speakers
Cathy Nelmes, Financial Program Manager, Federal Aviation Administration, Moderator
Mike Nakornkhet, Chief Financial Officer, Denver International Airport
Angela Shafer-Payne, Chief Development Officer, San Diego International Airport
Juan Macias, Chief Executive Officer, AlphaStruxure LLC
Overview
The demand for energy and electricity continues to increase at airports, requiring comprehensive planning for electric infrastructure, supply, and how to pay for it. Airports need to consider their own energy needs as well as those of tenants and passengers, how and where to source it, whether and how to invest in alternative fuels, and how to fund the transition (green bonds, sustainable revolving funds, grants, partnerships between airports and airlines). The speakers in this session discussed these trends, challenges, and opportunities for airports in planning for the energy and electrification transition of their facilities.
Detailed Summary of the Panel Discussion
Cathy Nelmes welcomed the panel and noted that, during the session, the speakers would talk about the energy and electricity needs at airports and how to finance them and that it would be an interactive discussion rather than a series of presentations.
Mike Nakornkhet provided an overview of DEN’s growth trajectory, development plans, and sustainability efforts, and how these affect energy and electricity demands. He noted the airport’s Vision 100 strategic plan, which is a way of branding the inevitable growth to 100 million passengers. Nakornkhet noted that DEN is growing from 70 million passengers today to 100 million in the next decade and that the airport needs to make changes to accommodate this growth, since DEN was originally designed to accommodate a maximum of 50 million. As a result, there are a lot of constraints, and the airport needs to build out to meet that demand. When asked why the airport is building and expanding, Nakornkhet noted that airport executives have to explain to the public that the airport is building to accommodate the growth that is already happening.
Next, Nakornkhet discussed the airport’s traffic. He said leisure constitutes 70 percent of the traffic and domestic 96 percent, so the airport’s profile can weather downturns very well. During the pandemic, he stated, DEN’s traffic only declined 50 percent, and by 2022, traffic had recovered and the airport hit its all-time high. The airport recently added 39 new gates, which was a $2.5 billion project. For comparison, Nakornkhet pointed out that Reagan National Airport (DCA) has a similar number of gates, so DEN essentially added a new airport with its gate expansion.
In addition to new gates, Nakornkhet explained that DEN is expanding the airport’s great hall (presecurity area of the terminal), including the passenger ticketing and security checkpoint areas. However, once the airport alleviates constraints in one area, new constraints inevitably appear. For example, with the new gates, airlines will grow and add capacity, which will strain the rest of DEN’s facilities. Nakornkhet stated that security is the current bottleneck, so the airport is speeding the project to improve passenger throughput through security checkpoints to open in the first quarter of 2024, which is a $1.3 billion program.
Nakornkhet said other challenges facing DEN include how to add even more capacity to the airport. He noted that DEN has 34,000 acres of land, which makes it the second largest airport by land size in the world. Therefore, available land is not a constraint, but infrastructure and funding capacity are. In addition, Nakornkhet shared that the airport wants to manage the business model in a sustainable way while identifying revenue-generation ideas.
When DEN considers sustainability, Nakornkhet noted, the airport wants to look at all aspects, including workforce. DEN is building a center of equity and diversity in aviation as part of the great hall development program. DEN worked with DBE concessions and other businesses to help develop the workforce pipeline. Nakornkhet pointed out that workforce development is not just a topic for newer entrants to the workforce but also for managers as they develop their succession plans.
When it comes to sustainability at the airport, Nakornkhet stated, DEN wants to ensure that growth, environmental stewardship, and energy sustainability are incorporated. Nakornkhet provided the following examples of the sustainability and energy work that DEN is doing:
- Electrifying the bus fleet (10 EV buses, $1 million per bus),
- Energy performance contracts,
- Modernization of the aircraft deicing system,
- 95 acres of solar photovoltaic panels,
- Voluntary cleanup of per- and polyfluorinated substances, and
- ESG reporting.
Future projects include a consolidated rental car facility; however, Nakornkhet noted that DEN does not at present have the capacity to have enough chargers for EVs.
Angela Shafer-Payne started by sharing that she has been at SAN for 28 years. She noted that though her career has mostly been in airport operations, she moved to her current role of chief operating officer last year, just in time to start a $3.4 billion redevelopment project. Shafer-Payne noted that SAN has only 661 acres, 14 of which are constrained by the presence of the California least tern, a U.S. federally listed endangered subspecies of migratory bird. The airport cannot do any construction work when the endangered species is nesting at the airport for part of the year.
Shafer-Payne noted that it has never been more important to understand the airport’s electricity usage and what the airport will need in the future, in order to prepare for future demand. She also noted that when the airport looked at its anticipated energy and electricity needs 5 years ago, it did consider EV charging needs but did not consider electric vertical takeoff and landing vehicles (eVTOLs). As of last year, however, SAN was already at capacity with the EV chargers currently at the airport and now needs to consider additional EV charging stations as part of the new parking structure that is under development.
Before COVID, Shafer-Payne stated, the airport welcomed 22 million passengers. The airport has a departure curfew that results in a 17-hour operating day and not many parking spots. Shafer-Payne noted that current regulations require the airport to have 10 percent of the parking spots in the new parking structure accommodate EVs, but even that is not enough to meet future demand. By 2030, California will need 1.2 million chargers across the state. There is a question as to where all these charging stations will be located. For example, Shafer-Payne said that SAN’s new parking garage will have 9,000 passenger parking stalls and 1,500 employee parking spots, but there is no room to add more, so that is all the airport has to work with. When the new garage opens, 10 percent of the spots will be designated for EVs, and another 10 percent will be EV ready when needed.
Next, Shafer-Payne stated that Hertz had announced that it has a partnership with the City of San Diego and wants to electrify the city. The rental car companies want to electrify their facilities at the airport. Shafer-Payne noted that the airport determined that it would triple its electricity needs in the future. In addition to a very strong push for electrification from the rental car companies, the airport had to consider eVTOLs as well as the need for an increased number of EV parking stalls in new structure. As a result of this demand, the airport determined that it needed more power.
Next, Shafer-Payne recounted, the airport met with its utility to discuss options. The utility told SAN that the airport was responsible for the costs of the new infrastructure to supply the additional power. Shafer-Payne pointed out, however, that part of the reason the utility could not provide the airport with enough additional power supply was all the development around the airport. Conversations with the utility about increasing supply are ongoing.
Juan Macias discussed the energy work that that is being done at JFK for PANYNJ. AlphaStruxure is developing four mini microgrids at JFK Terminal 1. These projects are capturing waste heat. Macias noted that there are many use cases that are driving the demand for additional power supply and microgrid development. AlphaStruxure is helping its airport clients identify the scenarios driving the power load profile now as well as in 5 to 10 or more years.
Next, Nelmes opened the floor for questions from the audience.
Dave Edwards of GSP stated that his airport is looking at EV chargers and microgrids, solar, natural gas, and, eventually, hydrogen fuel to meet future power demands. For
example, he noted that BMW has a facility at the airport, and all the forklifts on the property are hydrogen fuel cells. Edwards noted that the airport could make an investment in electrification, including looking at hydrogen as a viable fuel source in the future to accommodate tenant demand. He asked the panel how they deal with capital costs for infrastructure when they are considering a truly transitional fuel on the horizon.
Shafer-Payne stated that SAN is looking at user fees. The airport recognizes that the need to consider alternative fuels such as hydrogen is coming, but the more immediate need is to consider how to recover the airport’s current costs from people who are using chargers now. For example, SAN is incorporating dynamic pricing, but the need to invest significantly in electrical infrastructure—approximately $100 million—is still a possibility. Shafer-Payne stated that the utility will need to invest between $60 and $70 million in electrical infrastructure off-airport and $30 million on-airport to bring SAN the power needed. This means that the airport needs to figure out how to charge the users (passengers and rental car companies, for example) and is in the middle of conversations with rental car companies about that now. Finally, Shafer-Payne stated that the airport needs to be able to move as quickly as the private sector.
Nakornkhet stated that with regard to the conversation about electrification versus hydrogen, EVs do have their downside, but the transition to hydrogen fueling infrastructure is very costly. It would be very difficult for the State of California and other agencies to reverse course on the investments they have made in electrification to make the transition to hydrogen in the near term. Electrification is the current trend, but maybe there will be a switch when hydrogen becomes more abundant, efficient, and cheaper. At the end of the day, Nakornkhet noted, airports need to be flexible and adaptable.
Dan Cohen-Nir of Airbus Americas noted that there is a possibility of trucking or tankering in hydrogen fuel.
Cindy Nichol stated that at any one time, more than 50 percent of SMF’s electric buses are out of service. The airport has had to cannibalize parts from one to fix another. In addition, the airport has had a hard time getting people to come out and fix them. Therefore, moving completely to EVs has a downside. Environmental policies are ahead of the technology.
