South Coast Air Quality Management District

Approve Microturbine Purchase and Installation Consistent with Previously Approved Expenditure Plan for 1309.1 - Priority Reserve Mitigation Fees

SYNOPSIS: 

At the September 21, 2001 meeting, the Board directed that $6.2 million of Rule 1309.1 -Priority Reserve mitigation fees be used for purchase and installation of microturbines. Staff requests authorization to: 1) purchase Capstone microturbines and associated equipment; 2) contract with C-4, Inc. and MWH Constructors, Inc. for installation of microturbines; and 3) select facilities within AQMD boundaries to receive the microturbines.

COMMITTEE: 

Administrative, October 12, 2001, Recommended for Approval

RECOMMENDED ACTION:

Authorize the Executive Officer to:

1. Purchase up to 53 60-kW units and up to 10 30-kW units and associated equipment from Capstone California at a total cost not to exceed $4,535,000 from the Rule 1309.1 Priority Reserve Fund, with flexibility to switch among the 30-kW and 60-kW units to reflect the facility needs.
   
   
2. Modify existing contracts with C-4, Inc and MWH Contractors, Inc. and enter into new contract agreements with additional contractors selected through a RFP process for the installation of these microturbine systems at a total additional cost not to exceed $1,665,000 from the Rule 1309.1 Priority Reserve Fund.
   
   
3. Select facilities and implement the installation of these microturbine systems in the four counties as specified in Table 1 of this letter.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

At the April 20, 2001 meeting, the Board approved an amendment to Rule 1309.1 -Priority Reserve that allowed new electrical generating facilities that meet certain criteria to use PM₁₀ emission offsets from the Priority Reserve, upon payment of a mitigation fee of $25,000 per pound of PM₁₀ per day.

So far, two electrical generating operators are using PM₁₀ emission offsets from the Priority Reserve. The Los Angeles Department of Water and Power has paid $6.2 million for 248 pounds/day of PM₁₀ emission offsets, and the Indigo Energy Facility in Palm Springs has paid $2.25 million for 90 pounds/day of PM₁₀ emission offsets.

Rule 1309.1 requires the mitigation fees to be used to fund PM₁₀ emission reduction projects. At the September 21, 2001 meeting, the Board reviewed a list of possible PM₁₀ emission reduction projects and directed staff to proceed with several projects, including a $6.2 million project to replace portable diesel generators with microturbine generators.

Microturbine 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. Burning natural gas, reported NOx emissions are below 9 ppm (at 15% O2) which represents very low emissions for this type of equipment. Emissions of PM₁₀, NOx, SOx and toxic air pollutants from Capstone microturbines are much lower than those from a diesel engine.

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. Several other manufacturers, including Bowman Power, 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. The other U.S. microturbine manufacturer, Honeywell Corporation, has recently withdrawn from the microturbine market.

In other programs, AQMD has already purchased over 140 microturbines from Capstone for stationary distributed generation use.

Proposal

As previously directed by the Board, staff proposes to use this $6.2 million of the Rule 1309.1 mitigation fees to purchase and install microturbine generators as outlined in Table 1.

Table 1
Allocation of Microturbines Funded Under R1309.1 Priority Reserve
 

Staff proposes that $3,881,201 (62.6%) of the $6.2 million fund be allocated for microturbine system purchase and installation in Los Angeles County and the remaining fund be allocated equally to Orange, Riverside and San Bernardino Counties. This recommendation is made considering the sources of R1309.1 fund and the desire to widely spread the microturbine technology throughout the Basin. Ten 30-kW low Btu microturbine systems are proposed for a major overall landfill gas utilization project at Whittier Landfill that will be funded out of the Los Angeles County portion of the allocation. The remaining fund will all be committed to the purchase and installation of 60-kW systems which are more cost-effective for electricity production and emission reduction as compared to the 30-kW systems. The 60-kW units will be capable of operating in the dual mode of "peak sharing" or as a "back-up generator." Therefore, staff proposed to purchase up to 10 30-kW low-Btu landfill microturbine units, up to 53 60-kW microturbine units, and all associated equipment from Capstone California at a total cost of no more than $4,535,000.

Installation costs tend to be site-specific and the above figures are preliminary and for planning purposes. In case additional funds are necessary for installing 10 30-kW and 53 60-kW microturbines at selected sites, staff will decrease the number of microturbines to be purchased and installed appropriately so as to stay within the allocated budget. Staff also may switch the purchase of 60-kW units with 30-kW units depending on the facility needs and will stay within the total budget for the equipment purchase.

AQMD has existing contracts, issued after a recent RFP process, with C-4, Inc. and MWH for the installation of Capstone microturbines. Staff proposes to obtain additional contractors through a new RFP process. Staff also proposes to amend the existing contracts with C-4, Inc. and MWH and to enter into contracts with the new contractors selected through the new RFP process for the installation of these microturbine systems by adding $1,665,000 to the contracted work.

Benefits to AQMD

Microturbines are one of the cleanest distributed generation technologies. While not as clean or efficient as the new large power plants being permitted in the state, they are much cleaner than other small, fossil fuel-fired, electric generators that are used for distributed generation. Moreover, microturbines will likely be combined with fuel cells within the next few years to further increase efficiency and lower emissions.

The microturbines will slightly increase emissions at the facilities where they are installed, but the power that is produced will, in the short-term at least, displace power generated by other sources. The additional power supplied to the electricity grid will also make it a little less likely that electricity interruptions will occur, which trigger operation of emergency standby diesel generators, the highest emitters of all electrical generators.

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 authorize the purchase of microturbines generators is made under provision B.2.c, because 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 microturbine supplier
      and
(2) The project involves the use of proprietary technology.

Capstone Turbine Corporation represents the optimum choice for quick deployment of microturbine generators. Capstone holds multiple patents to protect their proprietary microturbine technology, which leads to superior performance at extremely low emissions.

Resource Impacts

Up to $6.2 million of Rule 1309.1 mitigation fees will be expended to purchase and install microturbine generator equipment.

/ / /