PURPOSE:

This memo recommends approval of a Public Benefits Research and Development Project that will be partly funded by a California Energy Commission (CEC) Grant.  The project consists of a 250 kW expansion and improvements to the existing 300 kW Burbank Landfill Gas Electric Generation Project.  This expansion will cost $1,100,000.  The CEC will fund $450,000, for a net cost to BWP of $650,000.

The current BWP budget has funding for repair to the project�s compressors, which failed last year.  This repair is expected to cost $250,000.  This proposed project will replace the ten failed compressors with a single larger compressor that has been successfully used for landfill gas applications.  However, rather than make these repairs, we have an opportunity to expand and improve the project taking advantage of the experience gained by others over the last two years.

This is a new Capital Improvement Project that can be funded within the current total BWP budget expenditures.  It qualifies as a Public Benefits Program.  It will restore the ten existing landfill gas turbines to service.  This matter requires City Council approval to add this proposed project to the budget, with no increase in expenditures.

The firm of Sterns, Conrad and Schmidt Consulting Engineers, Inc., dba SCS Energy, has substantial experience in designing and constructing this kind of project and is the actual recipient of the CEC grant.  This memorandum seeks authority to dispense with formal bidding and authorize the General Manager of Burbank Water & Power to execute a design-build agreement with SCS Energy.

BACKGROUND:

In 1999, it was proposed to develop a Public Benefits Research and Development Project utilizing landfill gas at the Burbank Landfill.  Landfill gas is collected through a series of pipes embedded in the landfill and then the gases are flared in a flame that burns continuously.  The concept was to use a portion of this gas to generate electricity rather than simply burning it.  After a year of research, a proposal using small combustion turbine generators was developed.

This approach was a new, unique application of a new technology called micro-turbines.  Our research found that these turbines should be well suited for this application; however, there was no such application in existence at that time.

A grant application for the development of this technology was made to the CEC in 2000.  The CEC approved $250,000 for the $950,000 project.

Construction of the project began in December 2000 and was completed by 2001.  The project was completed on time and within budget.  This project was the first project of its kind.

The project has generated 50,000 kWh.  The micro-turbines worked fine.  Unfortunately, the ten compressors developed a problem that led to their failure.  In early 2002, these compressors failed because the gas treatment system failed to treat the gas to the extent necessary and the compressors were not as well suited for such a corrosive gas. 

It is not unexpected that such a Research and Development Project might experience problems such as this.  Early applications can be expected to experience such problems.  That is why these CEC grants are provided, to help bear the costs of these risks, and hence, encourage the development of projects.  BWP investigated the cause for the existing system�s failure by examining landfill gas generation projects that have been built since the Burbank Landfill Gas Project and found the following design problems:

     �        The compressors were not well suited for landfill gas;

     �        The moisture removal system, which relied on a desiccant-type dryer, was inadequate to handle the large amount of water

            in landfill gas; and

     �        The activated carbon filtration of the landfill gas was placed before the compressors, rather than after, which is a more

           effective location.

BWP has found that a sliding vane type compressor can be used successfully on landfill gas micro-turbine projects.  This is demonstrated by the Los Angeles County Sanitation District�s micro-turbine project at its Calabasas Landfill, which has operated very well for over a year.  BWP has also determined that the activated carbon filtration should be located both prior to and after compression, and that refrigeration of the gas is the best moisture removal method.  These refinements in this technology were developed after the Burbank Landfill Project.

Rather than simply restoring the units, we considered an upgrade that could use more of the landfill gas.  This would allow us to use the money we would have used to repair the units to help expand the system as well.  In addition, such an upgrade was expected to possibly qualify for a grant.

Sam Mahsoul, a recently retired BWP employee, proposed an expansion of the landfill generation project, as an alternative to simply repairing the project.  Mr. Mahsoul was retained as a consultant to develop this concept.  He concluded that the project was technically feasible.

After the expansion was found to be technically feasible, Mr. Mahsoul investigated potential sources of funding from the CEC, the South Coast Air Quality Management District, and the American Public Power Association.  He learned that the CEC had awarded a grant of $450,000 to SCS Energy for a 250 kW microturbine generation project utilizing landfill gas as fuel.  Discussions with SCS Energy led to a proposal from them to design and construct their demonstration project as part of an expansion of Burbank�s existing facility, which would include upgrading the existing facility to correct the problem with the compressors. 

The grant does not obligate the City to proceed.  This grant approval is an offer of partial funding of the project to BWP.  In order to receive the benefits of the grant the City must elect to construct this expansion.

SCS Energy, which has offices in Long Beach, California, has been responsible for the construction and/or design of seven landfill gas microturbine projects, including the very successful Calabasas project.  Obviously, we did not have access to this level of experience when we embarked on the initial project four years ago.

The project concept will replace the compressor system and expand the generation capability from 300 kW to 550 kW by adding a 250 kW Ingersoll-Rand turbine generator.  This concept uses the improved compressor system design, restores the existing microturbines, and the installs an additional larger micro-turbine.  This project is now ready for implementation.

ANALYSIS:

Currently, the landfill gas project can serve as many as 300 households.  This expansion will serve an additional 250 homes, for a total of 550 households.  It will allow for the productive use of up to two-thirds of the available landfill gases for the production of electricity.  This gas would otherwise be simply flared and serve no useful purpose.  It is not practical to use all of the available landfill gas; sufficient gas must be used to maintain the flare to assure no landfill gas is released into the air. 

This project will cost $1,100,000.  The CEC will fund $450,000, leaving $650,000 to be funded by BWP.  It would cost $250,000 to simply repair the existing compressor system.  The net cost to BWP for the additional 250 kW is, therefore, $400,000.

The initial 300 kW system cost is $950,000, which with a $250,000 grant had a net cost of $700,000.  This initial system was installed at a cost of $2,333 per kW (after grant).  The 250 kW expansion can be built at a cost of $1,600 per kW (after grant).  The expansion can be made at a cost of 70% of the initial cost.  This expansion will provide continued development of this technology, provide for the repair of the existing facility, and improve the reliability and capacity of the existing facility.  This will allow incorporation of improvements developed in landfill gas treatment for renewable electricity generation.

The project is expected to be completed this fiscal year and represents a Public Benefit Program.  This new project will be added to the current Public Benefits Program without impact on existing programs.  This will represent a credit that will be applied to future Public Benefit Program spending obligations.  By moving forward with this project this year, rather than waiting until a future year, the expansion can be economically made in conjunction with the replacement of the compression section of the Landfill Generation Project and the CEC grant. 

The funding will be made possible by the cancellation of the Olive 2 overhaul.  Because of the workload associated with the Olive NOx Retrofit and the Magnolia Power Project (MPP) construction, it is not practical to do this overhaul until MPP is completed.  This project, therefore, can be done within the current budget�s expenditures.  However, the project shall be specifically added as a Public Benefits Program.

Lastly, the Project, when completed, will result in a negligible expansion of the use of the landfill generation station.  For that reason, the City Council may find that the Project is categorically exempt from compliance with the California Environmental Quality Act under Section 15301(b) of the State CEQA Guidelines (minor alteration of existing utility facilities).

RECOMMENDATION:

It is recommended that the City Council approve the 250-kilowatt expansion and improvement of the existing 300-kilowatt landfill gas electric generation project for $1,100,000, and authorize the General Manager of BWP to execute a Design and Construction Services Agreement with SCS Energy.  The funds for this project will come from the following sources:

            $450,000         California Energy Commission grant

            $400,000         BWP�s FY 2003-04 Power Supply budget

            $250,000         BWP�s FY 2003-04 Public Benefits budget

Please note that the full $650,000 BWP cost of this expansion and improvement renewable energy project will be charged against the utility�s Public Benefits spending obligation.  While $250,000 will be charged against the obligation this fiscal year, the remaining $400,000 contributed from the Power Supply budget will be charged against the utility�s future Public Benefits spending obligation.  BWP used current fiscal year Power Supply funds so that the landfill energy project could move forward now and not negatively impact BWP�s existing Public Benefits programs. 

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