August 11, 1995

South Coast Air Quality

Management District Board

Background

The Air Quality Management Plan (AQMP) anticipates the commercialization and rapid deployment of zero-emission transportation systems over the next 15 years. One specific AQMP target is to phase in electric propulsion technologies for the Basin's transit bus fleet. The most technologically mature method to accomplish this is to implement a trolley bus system with electrified lines. However, such systems can be prohibitively expensive and create aesthetic problems, and therefore may not be suitable for most transit corridors in the Basin. Battery-electric buses are viable alternatives for certain applications, but they have limited range and require long recharging times.

Fuel cells are emerging as a leading alternative technology to electrify transit corridors. These electrochemical engines can provide excellent performance and range for transit buses while being virtually pollution free. In 1990, Ballard Power Systems, a leading manufacturer of proton exchange membrane fuel cells (PEMFCs), joined with Science Applications International Corporation (SAIC) to successfully build the world's first zero-emissions fuel cell transit bus. Since 1993, this same team has been designing and fabricating a larger and more powerful "Phase 2" zero-emission bus that features Ballard's latest-generation fuel cell technology and major systems improvements by SAIC. Ballard is working closely with New Flyer Corporation, a major manufacturer of transit buses, to ensure that this Phase 2 prototype bus meets industry requirements. The driving force behind Ballard's efforts to develop and commercialize PEMFC engines is the Basin's emerging market for zero-emission transit buses, as outlined in the AQMP. In turn, Ballard's success to date is having a very beneficial impact on the viability of meeting zero-emission goals for heavy-duty applications.

AQMD's Existing and Proposed Phase 2 Support

The AQMD's Technology Advancement office has cosponsored Ballard's three-year Phase 2 effort, on a year-by-year basis, because it has clear potential to expedite commercialized zero-emission transit buses in the Basin. The Board previously authorized AQMD funding in the amounts of $325,000 and $400,000 to cosponsor years one and two, respectively, of this $4.675 million Phase 2 effort. These funds, which were leveraged with major cost sharing from Ballard and other entities, were used to: 1) demonstrate and showcase the Phase 1 bus, 2) design and fabricate the larger and more advanced Phase 2 bus, and 3) perform preliminary testing on the Phase 2 bus and its various subsystems. Ballard and SAIC have achieved all milestones for the first two years of Phase 2, on time and within budget. The Phase 2 bus is fully operational, with a PEMFC engine that provides 2.5 times more power than the Phase 1 powerplant, at comparable weight and volume. To date, the program is a major technical success. Ballard has also successfully carried out tasks to explore fuel-cell-related economic development opportunities in the Basin. In fact, Ballard is developing plans to build a facility in the Los Angeles area where PEMFC bus engines will be assembled for larger-scale demonstrations in 1997, followed by commercialization in the year 2000 time frame.

As outlined in previous Board letters, the final part of Ballard's Phase 2 plan involves detailed testing and demonstration of the advanced PEMFC bus. Staff recommends amending the agreement with Ballard to provide an additional $275,000 as AQMD's final contribution for Phase 2. These funds will be primarily applied to the following work: 1) comprehensive shakedown testing of the bus, and 2) demonstration of the bus at various symposia and forums in the Basin, Sacramento, and other key locations.

Sole-Source Justification

Section II, Step 3(C) of the Consultant Selection Policy and Procedure identifies four provisions under which the Executive Officer may award a sole-source bid: (1) cost to prepare documents exceeds cost for consultant, (2) delay would result in the endangerment of public health, (3) services are only available from sole-source, (4) other circumstances exist identifying sole-source as in the best interests of the District. This request for sole-source bid is made under provision #3.

Ballard Power Systems is the only company in the world that has successfully developed and demonstrated a working zero-emissions fuel cell transit bus. Ballard has been designing and manufacturing PEMFC technology since 1983; their proprietary 250-kW fuel cell stack is the world's largest and most advanced PEMFC system. It features high efficiency, low operating temperature, compact size, immediate response to changes in electricity demand, modular design, and zero emissions when operated on pure hydrogen. Ballard has accumulated the most experience in the industry on PEMFC technology, and may be several years ahead of its competitors.

The Ballard/SAIC team has twice demonstrated the ability to design and build a pioneering fuel cell bus on time and within budget. In addition to manufacturing the fuel cell stacks, Ballard serves as the prime contractor for Phase 2 and provides senior management leadership, technical expertise, and staff support. SAIC, with its headquarters in San Diego and offices in Los Angeles and Vancouver, continues to be responsible for integration of the fuel cell and balance-of-power systems, and delivery of the prototype bus. SAIC also provides expertise in the development and implementation of the business plan to achieve commercialization, with particular emphasis on California.

Financial Terms

The Ballard program offers strong leveraging of AQMD funds, as Table 1 shows. The total direct cost of the Phase 2 program is estimated to be $4.675 million, of which nearly 80% is provided by Ballard and its Canadian funding partners. Staff recommends an AQMD contribution of $275,000 in FY 1995-96, bringing AQMD's three-year total to $1,000,000.

Table 1: Total Cost Sharing in US Dollars for Phase 2

Agency/Organization Direct Phase 2 Cost Share

Canadian Federal Government $ 775,000
Province of British Columbia $1,700,000
AQMD $1,000,000 (over 3 years*)
Ballard Power Systems $1,200,000**

TOTALS $4,675,000

*$325,000 in FY '93-94, $400,000 in FY '94-95, and $275,000 in FY '95-96

**Not including Ballard's fuel cell stack development costs

Sufficient funds are available in the FY 1995-1996 Budget of Technology Advancement to fund this development and demonstration program. This recommendation was approved by the Technology Committee July 12, 1995. In addition, this recommendation will be reviewed by the Technical Review Committee for allocation of SB2297 funds.

THEREFORE IT IS RECOMMENDED THAT YOUR BOARD

--Authorize the Chairman of the Board to execute an amendment to the agreement with Ballard Power Systems to provide additional funding for Phase 2 of the Ballard Fuel Cell Bus Program, in an amount not to exceed $275,000.

Respectfully,

James M. Lents, Ph.D.

Executive Officer

ACL:ARA:JHL