South Coast Air Quality Management District

Authorize Purchase and Installation of MicroTurbines from AES Settlement Fund

SYNOPSIS:

At its March 16, 2001 meeting, the Board designated $1,800,000 from the AES Penalty Settlement to assist in the purchase and installation of MicroTurbines at multiple locations within the Orange, Riverside, and San Bernardino counties for distributed power generation. Staff proposes to purchase Capstone MicroTurbines in an amount not to exceed $1,440,000 and offer assistance to operators for the installation of these machines in an amount not to exceed $360,000. Cost sharing is expected from some of the operators for the micro-turbine installations.

COMMITTEE:

Administrative, April 13, 2001, Recommended for Approval

RECOMMENDED ACTION:

1. Authorize the Executive Officer to purchase a combination of 30 kW and 60 kW Capstone MicroTurbines in an amount not to exceed $1,440,000 from the AES Settlement Fund, and to place these MicroTurbines at appropriate locations within the counties of Orange, Riverside, and San Bernardino.
   
   
2. Authorize the Executive Officer to contract with Capstone in an amount not to exceed $300,000 from the AES Settlement Fund to assist in the installation and startup of Capstone MicroTurbines at various locations within the counties of Orange, Riverside, and San Bernardino.
   
   
3. Authorize the Executive Officer to contract with University of California, Irvine (UCI Combustion Laboratory) in an amount not to exceed $60,000 from the AES Settlement Fund for technical assistance and planning for the installation of Capstone MicroTurbines.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

At the March 16, 2001 meeting, the Governing Board approved the expenditure of $1,800,000 from the one-time AES settlement to assist in funding for small turbines that are used for distributed power generation at various locations such as, landfills, schools, hospitals, essential public services, or high-tech business parks. While natural gas fired turbines have been commercially used for large-scale power generation for a long time, MicroTurbine technology (typically less than 100 kW) for distributed power generation is a relatively new development. MicroTurbines today can be installed and operational in a matter of weeks, and produce clean and reliable power in small quantities, as needed. Due to their relatively low emissions, easy operational characteristics, and availability, they represent a preferred option to more polluting diesel engines, which are typically used for backup power generation. The energy crisis in California has forced many public and private entities to look for alternative power solutions to serve their immediate and mid-term power needs. Recognizing these factors, the Board directed staff to assist in the purchase and placement of small turbines at locations throughout the counties of Orange, San Bernadino, and Riverside (at the February 16, 2001 meeting, the Board had directed the placement of MicroTurbines in Los Angeles from the DWP Settlement).

Technology
While several manufacturers have been developing MicroTurbine technology over the last few years, Capstone MicroTurbines are commercially available today in 30 kW and 60 kW sizes, with reported NOx emissions below 9 ppm (at 15% O2) which represents very low emissions for this type of equipment. Capstone MicroTurbines are manufactured in Southern California and use a proprietary combustion technology that has been fine-tuned over several years. Furthermore, they have been extensively tested at University of California, Irvine and found to be reliable and durable. At this time, they represent one of the cleanest and most readily available options for distributed power generation from MicroTurbines to mitigate the energy crisis in Southern California. Several other manufacturers including Honeywell and Bowman also offer MicroTurbines that are in various stages of development and commercialization, but they do not meet the availability or operational characteristics of the Capstone MicroTurbines as yet.

Location
Staff is proposing to distribute the installation of 30 kW and 60 kW MicroTurbines over the counties of Orange, Riverside, and San Bernadino. Staff is in the process of identifying landfills that have waste gases that are not presently utilized, as well as schools, colleges, hospitals, and other suitable recipients that may be able to utilize these turbines for power generation. Recommendations are being solicited from Orange, Riverside and San Bernardino Board Members regarding potential host sites. Multiple units can be placed at suitable locations for economy of scale; however, only 30 kW MicroTurbines can be used at landfill sites due to technical constraints. Staff is proposing to contract with Capstone for the installation and startup of these MicroTurbines. Staff is also proposing a separate contract with University of Califorina, Irvine, (UCI Combustion Laboratory) for technical assistance and planning for placement of MicroTurbines.

Proposal

In a separate action, the Board will consider the establishment of the AES Settlement Projects Fund, which will hold and disburse $17 million from the AES settlement. Staff recommends that $1,440,000 be allocated towards the purchase of 30 kW and 60 kW Capstone MicroTurbines, $300,000 be allocated for assistance in installation and natural gas hook-up and $60,000 be allocated for technical assistance and planning, for a previously authorized total expenditure of $1,800,000 from the AES Settlement Projects Fund.

Benefits to AQMD

The proposed MicroTurbine project will produce clean power at various locations, using natural gas or landfill gas, and thus help mitigate the energy crisis to the extent feasible. Landfill gas utilization is a net environmental benefit since this energy may be currently wasted. The Capstone MicroTurbines will produce power with emissions typically lower than that of the average power generation mix in California, and with much lower emissions than stand-by diesel generators. In addition, the proposed project may help commercialize MicroTurbines as a feasible alternative to highly polluting diesel generators and spur further technological advancements for higher efficiencies of fuel conversion and even lower emissions from other MicroTurbines.

Sole Source Justification

Section VIII.B.2 of the Procurement Policy and Procedure identifies four major provisions under which a sole source award may be justified. This request for sole source awards to (1) authorize the purchase of MicroTurbines, (2) contract for their installation and startup, and (3) contract for technical assistance and planning, is made under provision B.2.b, public health or property may be endangered by delay; and B.2.c, the desired services are available from only the sole-source based upon one or more of the following reasons:

(1) The unique experience and capabilities of the proposed contractor or 
      contractor team; 
      and
(2) The project involves the use of proprietary technology.

The state expects severe power shortages this summer, which may lead to potential blackouts and the resulting use of dirty diesel-fueled backup generators. This proposal will seek to install cleaner MicroTurbines to help manage the summer power crisis. Therefore, any delay in the installation of these distributed generation sources may jeopardize the pubic health and safety benefits of this project.

In addition, Capstone MicroTurbines represent the optimum choice for immediate deployment to address the energy crisis in an environmentally responsible manner at distributed locations in the counties of Orange, Riverside, and San Bernadino. Capstone also holds multiple patents to protect the MicroTurbine technology which leads to superior performance at extremely low emissions. The Capstone team is also uniquely qualified to install these devices expeditiously at selected locations by the summer of 2001. UCI Combustion Laboratory has unparalleled experience with MicroTurbine operation and can help with the planning and site selection and other technical assistance necessary. UCI Combustion Laboratory has conducted efficiency and emission testing on all major MicroTurbines that are in the development stage in the past four years and is uniquely qualified to review all technical features related to the gas processing and heat recovery requirements of MicroTurbines.

Resource Impacts

The total cost for this project is expected to be less than $2,000,000 which may include some cost sharing from the recipients of MicroTurbines for installation and hook-up. AQMD funding shall not exceed $1,440,000 for the purchase of 30 kW and 60 kW MicroTurbines, $300,000 for assistance in installation and start-up, and $60,000 for technical assistance and planning. Funds are available in the AES Settlement Fund, which is being established in a separate action item by the Governing Board today, and which is being funded with $17 million received from the AES Settlement.

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