BOARD MEETING DATE: May 3, 2002
AGENDA NO. 7

Execute Contract to Cost Share Pilot Demonstration of Residential Fuel Cells

SYNOPSIS:

Fuel cells are energy efficient and clean sources of electrical energy. On March 16, 2001, the Board adopted a resolution providing $350,000 funding from the AES Settlement Fund for a residential fuel cell demonstration project. On July 20, 2001, the Board approved the issuance of a RFP to solicit proposals for pilot demonstration of residential fuel cells. Staff is proposing to award a contract to Fuel Cell Technologies Ltd. in an amount not to exceed $366,149. Funding is proposed as follows: $350,000 from AES Settlement Fund and $16,149 from Clean Fuels Fund. The total project cost is $982,300 and involves the use of solid oxide fuel cell technology.

COMMITTEE:

Technology, March 22, 2002, Recommended for Approval

RECOMMENDED ACTION:

1. Reauthorize $350,000 in funding from the AES Settlement Fund to support a residential fuel cell demonstration project.
   
    
2. Authorize the Chairman to execute a contract with Fuel Cell Technologies Ltd., to demonstrate natural gas fueled solid oxide fuel cell (SOFC) technology at ten residences in the South Coast Air Basin with a total electrical power output of 50 kW at a cost not to exceed $366,149 from the AES Settlement Fund. $350,000 will be provided from the AES Settlement Fund, and $16,149 will be allocated from the Clean Fuels Fund.
   
    
3. Transfer $16,149 from the Clean Fuels Fund to the AES Settlement Fund.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

In 1988, the AQMD's Board adopted a Clean Fuels Program to promote the development, demonstration, and commercialization of innovative clean-fuel technologies. The Technology Advancement Office (TAO) was subsequently formed to administer and manage this Clean Fuels Program. TAO programs target advanced clean air technologies to meet AQMP objectives.

During the current energy crisis in California and the future, there is a serious need to generate additional electrical energy without increasing emissions such as that which result in energy production from combustion of fossil fuels. This is where near-zero emissions fuel cell technology becomes important. As a key air quality attainment strategy, it is necessary to implement zero-emission technologies both in stationary and mobile pollution sources. The purpose of this near-zero emission residential fuel cell project is to demonstrate the viability of this technology.

In addition, this project also includes a centralized reformer based energy station that could be used to produce hydrogen for fuel cell power for ten homes and in the future for mobile fuel cells, given that various auto manufacturers are expected to produce commercially available fuel cell vehicles within the next two to three years.

On July 20, 2001, after Board approval, an RFP was issued to solicit proposals for various fuel cell technologies. AQMD received four qualified proposals, and after a four panel member evaluation, two of them tied for the first position. Based on cost effectiveness, it was decided to award the contract to Fuel Cell Technologies.

Proposal

The March 16, 2001 Board resolution allocating funds for this residential fuel cell demonstration project required contractor selection within nine months or the unencumbered funds would be used to support clean fleet rules.

However, staff has encountered delays in developing this project within the timeframe originally proposed. Some of the problems encountered are as follows. The parties in the fuel cell community are limited, and many of them are involved with the applicants who responded to this RFP. It took the AQMD staff about six weeks to select a RFP evaluation panel that had no conflicts with the applicants. The evaluation was completed on December 20, 2001. After completing the evaluation process, the AQMD staff was in the process of seeking cost sharing funds from governmental agencies. This would have allowed the AQMD staff to financially and technically extend the scope of the RFP to explore additional fuel cell technologies that would benefit this project and the South Coast Air Basin. These factors were not anticipated in the initial stages of developing this project and the RFP. These events delayed the finalizing of the evaluation process, and consequently the contract award is being recommended beyond the December 16, 2001 deadline originally established at the March 2001 Board Meeting, with the funds to be used for the purpose of a residential fuel cell demonstration project.

AQMD staff recommends that a contract be awarded to Fuel Cell Technologies in which the AQMD’s cost sharing will not exceed $366,149, and the total project cost with non-AQMD cost sharing will be approximately $982,300. This contract will deliver 5 kW of electrical power to ten residences as required by the RFP. This proposal has a five-year comprehensive warranty, and uses SOFC technology with pipeline natural gas as fuel. Of all the proposals received, this project is the most cost effective.

AQMD staff also proposes to seek additional non-AQMD cost sharing and use the remaining $633,851 from the RFP to demonstrate proton exchange membrane (PEM) residential fuel cell technology possibly with a centralized reformer based energy station that could be used to produce hydrogen for fuel cell power for homes and in the future for mobile fuel cells. The target of stationary source electrical power from this effort is 40 kW. The AQMD will seek Board approval for this project in the near future.

Outreach

In accordance with the AQMD’s consulting and contracting policies, a public notice advertising the RFP and inviting bids was published in the following publications:
 

Additionally, potential bidders were notified utilizing the Los Angeles County MTA and Cal Trans Directories of Certified Minority, Women, Disadvantaged and Disabled Veterans Business Enterprises; the Inland Area Opportunity Pages Ethnic/Women Business & Professional Directory; AQMD’s own electronic listing of certified minority vendors; and AQMD Purchasing’s mailing list. Notice of the RFP were mailed to the Black and Latino Legislative Caucuses and various minority chambers of commerce and business associations; and placed on the Internet at AQMD’s Web site [http://www.aqmd.gov, "Business and Job Opportunities" icon] and AQMD’s bidder’s 24-hour telephone message line (909) 396-2724.

Bid Evaluation

Proposals were received from Fuel Cell Technologies, Plug Power, DCH Technology, and Altair Energy. The proposals were reviewed and evaluated according to established AQMD guidelines using the criteria outlined in the RFP. The proposal from Fuel Cell Technologies proposes to use solid oxide fuel cell (SOFC) technology. The proposals from Plug Power, DCH Technology and Altair Energy propose to use proton exchange membrane (PEM) technology. All four proposals will provide stand-alone natural gas fuel cells.

Attachment A summarizes the evaluation of the proposals and the selection process. Fuel Cell Technologies’ score tied with that Altair Energy’s. Based on the cost effectiveness of these two proposals, AQMD recommends that the contract be awarded to Fuel Cell Technologies. As proposed, the total cost of project per Fuel Cell Technologies’ proposal is $982,300 with AQMD cost sharing of $366,149. Altair Energy’s total project cost is $2.9 million with AQMD cost sharing of 950,000. On March 6, 2002, Altair Energy proposed to provide 20 kW, half of the RFP’s minimum requirement, at a total cost of $1.5 million with AQMD cost sharing of $550,000.

Benefits to AQMD

The AQMP relies on the expedited implementation of advanced technologies and clean burning fuels in Southern California to achieve air quality standards. The above projects will demonstrate the technological feasibility of multiple near-zero emission residential fuel cells and a reformer based energy station that will provide electrical power to residences and potentially also provide hydrogen from a centralized reforming station for mobile sources. Eventually, if these pilot concepts are commercially successful, these technologies will substantially reduce emissions from power plants using conventional fuels and eliminate exhaust emissions from light duty vehicles.

Resource Impacts

The proposed AQMD cost sharing is $366,149, of which $350,000 will be provided from the AES Settlement Fund as previously approved by the Board, and $16,149 will be allocated from the Clean Fuels Fund. Fuel Cell Technologies will provide approximately $616,150 in cost-share, for a total project cost of $982,300.

Attachment A
 

RFP requirement: For procurement of Research and Development (R & D) projects or projects requiring special technical expertise, technical factors including past experience shall be weighted at 70 points and cost shall be weighted at 30 points. A proposal must receive at least 56 out of 70 points on R & D projects and projects for special technical expertise in order to be deemed qualified for award.

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