BOARD MEETING DATE: October 3, 2003
AGENDA NO. 7

Execute Contracts to Demonstrate Fuel Cell Vehicles, Augment Hydrogen Storage and Fueling Technologies, and Provide Infrastructure Maintenance

SYNOPSIS:

At the September 2002 and June 2003 Board meetings, an initial network (Phases I and II) of compressed-hydrogen fueling stations was approved to accelerate the deployment of fuel cell demonstration vehicles expected to be introduced by major auto manufacturers. Staff recommends executing contracts with Toyota, City of Santa Monica and Stuart Energy to demonstrate hydrogen fuel cell vehicles, augment hydrogen storage and fueling technologies, and provide maintenance support at AQMD headquarters in an amount not to exceed $250,000.

COMMITTEE:

Technology, September 26, 2003, Recommended for Approval

RECOMMENDED ACTION:

Authorize the Executive Officer to:

1. Execute a contract with Toyota Motor Sales, U.S.A., Inc., to utilize AQMD Headquarters as a home base and demonstration site for a fuel cell vehicle that will also be used in short-term demonstrations at other sites in California, at no cost to the AQMD;
    
2. Execute a contract with Toyota Motor Sales, U.S.A., Inc., to cost-share and provide hydrogen fuel to the City of Santa Monica to support the demonstration of a fuel cell vehicle in their fleet, in an amount not to exceed $30,000 from the Clean Fuels Fund;
    
3. Execute a contract with the City of Santa Monica to cost-share the demonstration of a Toyota fuel cell vehicle in their fleet in an amount not to exceed $100,000 from the Clean Fuels Fund;
    
4. Execute a contract with Stuart Energy, to provide maintenance and data management for the hydrogen fueling station and internal combustion engine genset at AQMD Headquarters in Diamond Bar for a period of four years from the commissioning date, in an amount not to exceed $80,000 from the Clean Fuels Fund; and
    
5. Execute a contract with Stuart Energy to install utilities and associated infrastructure for the hydrogen fueling station, including the engineering, documentation, permitting, drawing support, and project management to ensure the completion and future expandability of the hydrogen fueling system at AQMD Headquarters in Diamond Bar, in an amount not to exceed $40,000 from the Clean Fuels Fund.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

The 2003 AQMP identifies the use of alternative clean fuels in mobile sources as a key air quality attainment strategy. As identified in the AQMP, advanced technologies such as fuel cell vehicles offer the potential to eliminate VOC, NOx, CO and particulate emissions to help the region attain the NAAQS by 2010. Furthermore, if hydrogen is produced from renewable electricity, these technologies can reduce toxic and greenhouse gas emissions as well.

To achieve these goals, widespread deployment of clean hydrogen vehicles is necessary, which in turn requires the development of an extensive hydrogen fueling network throughout the AQMD. Hydrogen can be generated through a variety of technologies, with each technology thus far having relative merits and drawbacks. At this early stage, as hydrogen vehicles and the required infrastructure are being introduced, the demonstration of a variety of methodologies and systems will help determine the most effective and efficient methods for hydrogen generation and vehicle design.

Phase I of the hydrogen infrastructure program was approved by the Board at its September 12, 2002 meeting and included five fueling stations. Phase II of this program was approved by the Board at its June 6, 2003 meeting and included seven proposals for fueling stations and vehicle demonstrations. Phase II was further enhanced with the release of an RFP in July 2003 to develop refueling stations and hydrogen internal combustion engine (ICE) vehicle fleets for the cities of Riverside, Santa Monica, Santa Ana, Burbank and Ontario. This Board Letter proposal will augment Phases I and II by facilitating fueling for vehicles and providing for additional fuel cell demonstration vehicles.

Proposals

1. Toyota Motor Sales U.S.A., Inc. (Toyota) maintains their headquarters in Torrance and plans on partnering with AQMD in various fuel cell vehicle and hydrogen technology demonstrations. Toyota proposes to utilize AQMD Headquarters as a home base and demonstration site for a fuel cell vehicle (Toyota Highlander). This vehicle will be made available for short-term demonstrations at various other fleet and governmental sites throughout California during the thirty-month demonstration period. While Toyota will bear the costs for this vehicle including scheduled and unscheduled maintenance, AQMD will provide in-kind support in the form of a host site, hydrogen fuel and fueling, and help facilitate off-site demonstrations. The goals of this project are to provide a versatile and flexible host site for the Toyota fuel cell vehicle and to establish the Toyota-AQMD partnership for the conduct of a variety of small vehicle demonstrations throughout the state.

2. Toyota Motor Sales U.S.A., Inc. (Toyota) plans to demonstrate a fuel cell vehicle with the City of Santa Monica (see item #3) as part of a "hydrogen highway" project. The AQMD is currently evaluating proposals to install hydrogen fueling stations at five municipal fleet sites, including the City of Santa Monica. This proposal by Toyota, independent of AQMD's project, is for the AQMD to cost share interim hydrogen fueling at Santa Monica until the AQMD-sponsored fueling station is completed (which is estimated to be one year). The proposal is to purchase hydrogen from the ISE Research/Wintec project (approved by the Board in October, 2001) and transport the hydrogen in a portable fueler to Santa Monica. This approach is consistent with Santa Monica’s "green" energy policy in that the hydrogen is produced from renewable resources and not dependent upon fossil fuels. The costs for this fuel will be shared by Toyota and AQMD with in-kind contributions provided by the City of Santa Monica.

3. City of Santa Monica in partnership with Toyota Motor Sales U.S.A. Inc. will lease and demonstrate a fuel cell vehicle for 30 months. AQMD has been requested to provide one-third cost share funding for this demonstration. This vehicle demonstration will be supported by the interim hydrogen fueling support proposal in the short term (Item #2 above) and the five-city fleet demonstration project in the long term. The fuel cell vehicle will also provide the opportunity for direct comparison between fuel cell vehicles and hydrogen-fueled ICE vehicles in the Santa Monica fleet. Extensive vehicle testing and evaluation are projected as future activities as well as comprehensive safety evaluation and program development to support the project.

4. Stuart Energy will provide maintenance, data acquisition and evaluation, and performance optimization for the hydrogen electrolyzer and fueling station with an ICE (stationary) power-generation unit at AQMD Headquarters (previously approved by the Board on June 6, 2003). This proposal will ensure the equipment is operating efficiently for a period of four years after the system is commissioned. This maintenance and data collection service will support the operation of the hydrogen fueling station and power generation unit and ensure that it is functioning optimally and safely. The goals of this program are to provide hydrogen for hydrogen fueled vehicles and to demonstrate/evaluate the generation of electric power from electrolyzer hydrogen.

5. Stuart Energy will require additional funds to fully complete the AQMD hydrogen fueling station project in order to ensure compatible utilities installation, effective integration of existing fueling island facilities, and support utilization of power produced by the Stuart unit into the AQMD building power grid. The original proposal from Stuart Energy did not include the tasks covered by this supplemental proposal. With this award, the preparation of the site for equipment installation with required trenching, piping and wiring to support the hydrogen fueling equipment will be covered and effective integration of the new equipment and systems into the normal AQMD lot operations and activities will be completed, including the engineering, documentation, permitting, and drawing support. Stuart Energy’s support under this fund will also ensure future expandability of the system.

Benefits to AQMD

The proposed projects are included in the March 2003 update of the Technology Advancement Plan for the Clean Fuels Program under 2003 CFM3-2, "Development and Demonstration of Distributed Hydrogen Production and Refueling Stations" and 2003 CFM2-1, "Demonstration of Fuel Cell Vehicles," as key elements in the widespread and increased use of alternative fuel (hydrogen) vehicles. These projects address the air quality objectives stated in the AQMP, which relies heavily on the expedited implementation of zero-emission vehicles to achieve ambient air quality standards in the South Coast Air Basin. These projects will also assist in ultimately expediting the implementation of fuel cell vehicles, which are advanced zero-emission vehicles. This, in turn, would lead to direct reductions in NOx, VOC, CO, PM, toxics and global warming emissions from light-duty and medium-duty vehicles.

Resource Impacts

1. Toyota Motor Sales U.S.A., Inc. (Toyota) Fuel Cell Vehicle Demonstration. This vehicle will be provided to the AQMD at no direct cost. In-kind support will include acting as a host site for the vehicle, providing hydrogen fueling, and facilitating, with Toyota, off-site demonstrations throughout California. Since all direct costs for this project will be covered by Toyota, these cost figures are not available, as shown below.

Toyota (FCV, maint., transport, support)	n/a
AQMD requested funding	In-kind
Total funding	n/a

2. Toyota Motor Sales U.S.A., Inc. (Toyota) Cost-share for Interim Hydrogen Fueling in Santa Monica. The total amount of AQMD funding for the proposed project will not exceed $30,000 as shown below. This cost share does not include in-kind service and equipment as well as existing infrastructure to be used for the project which will be provided by the City of Santa Monica.

Toyota ("green" hydrogen, transport, fueling equipment)	$30,000
City of Santa Monica (fueling site, power, etc.)	In-kind
AQMD requested funding	$30,000
Total funding	$60,000

This project will be incorporated into a much larger hydrogen-fueling station in Santa Monica to support the hydrogen internal combustion engine demonstration fleet.

3. City of Santa Monica Cost-Share for a Toyota Fuel Cell Vehicle Demonstration. The total amount of AQMD funding for this project will not exceed $100,000. The total project cost is expected to be $300,000 for a thirty-month demonstration period as shown below (cost share does not include Toyota in-kind support as well as engineering, design and development, outreach and regulatory/permit costs).

City of Santa Monica	$200,000
Toyota (maint., transport, technical support)	In-kind
AQMD requested funding	$100,000
Total funding	$300,000

This project will utilize renewable, non-fossil fuel generated hydrogen for vehicle fueling.

4. Stuart Energy Hydrogen Fueling Station Maintenance and Data Management. The total amount of AQMD funding for this project will not exceed $80,000 for four years from the commissioning date to ensure the efficient maintenance and demonstration of the Stuart hydrogen fueling station and power generation system and to collect and evaluate data to verify the performance. Total project cost is expected to be $80,000 as shown below.

AQMD requested funding	$80,000
Total funding	$80,000

5. Stuart Energy Hydrogen Fueling/Power Generation System Funding. The total amount of AQMD funding for this project will not exceed $40,000. The total project cost is expected to be $107,500.

Stuart Energy (eng., documentation, utilities, etc.)	$67,500
AQMD requested funding	$40,000
Total funding	$107,500

This funding will cover costs incurred in the integration of the hydrogen fueling station and its components into the AQMD facility as well as unforeseen costs associated with the permitting processes.

Sufficient funds are available from the Clean Fuels Program Fund, established as a special revenue fund resulting from the state-mandated Clean Fuels Program. The Clean Fuels Program, under Health and Safety Code Sections 40448.5 and 40512 and Vehicle Code Section 9250.11, establishes mechanisms to collect revenues from mobile sources to support projects to increase the utilization of clean fuels, including the development of the necessary advanced enabling technologies. Funds collected from motor vehicles are restricted, by statute, to be used for projects and program activities related to mobile sources that support the objectives of the Clean Fuels Program. AQMD is actively pursuing cofunding partnerships with the California Energy Commission and the U.S. Department of Energy for these projects.

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. These requests for sole source awards are made under provisions B.2.c.(2): the project involves the use of proprietary technology; B.2.c.(3): the contractor has ownership of key assets required for project performance; and B.2.d.(1): other circumstances, including projects involving cost-sharing by multiple sponsors. For the following reasons, staff believes it is in the best interest of the AQMD to cosponsor the proposed partnership project.

Toyota Motor Sales U.S.A., Inc. is a major automobile manufacturer with its American headquarters located in Southern California. It is a leader in the fuel cell vehicle field and actively supports the promotion of hydrogen as a vehicle fuel and fuel cell vehicles as a viable technology. The projects proposed by Toyota rely upon the use of proprietary, patented devices and the ownership of unique assets that are necessary for the projects, i.e., the fuel cell vehicles and their supporting personnel and equipment. The sole source is further justified by the cost-sharing from Toyota for the vehicle and fueling.

City of Santa Monica is a municipality recognized for its commitment to "green" power and environmental sensitivity. It has supported a variety of projects to introduce clean fuels into its fleets and its city. It has been an effective and willing partner to help introduce hydrogen technologies and vehicles through its sponsorship. This project involves cost-sharing by multiple sponsors which supports the sole source justification.

Stuart Energy specializes in hydrogen production from electrolysis having developed a system that also compresses and dispenses that hydrogen to vehicles. Stuart Energy is also integrating a stationary internal combustion engine/electrical power generator that uses hydrogen as fuel. This hydrogen is produced by the electrolyzer system. Stationary power generation uses hydrogen for this project from the combination of proprietary equipment from Stuart and its partners. This includes the internal combustion engine and its components, the power generation unit, as well as the integrated hydrogen generation and compression system. The proposed Stuart Energy contracts rely upon the access and use of proprietary and patented equipment and processes as well as the fact that the contractor has ownership of key assets necessary to accomplish the contract. Stuart Energy will also cost-share over 50% of the total costs for the installation project. These factors thus support the sole source award.

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