PURPOSE

Staff requests that the City Council approve use of the design-build method of project delivery for the Lake One selective catalytic reduction (SCR) Performance Improvement and CO Catalyst Replacement Project.  Section 9-101(g) of the Burbank Municipal Code provides for use of the design-build method in place of the traditional �design-bid-build� method with Council approval when consistent with principles of competitive bidding and appropriate to the type of project.

BACKGROUND

The Lake One Power Project is composed of a General Electric LM6000 combustion turbine with a SCR.  The SCR reduces the NOx and CO emissions generated within the LM6000 so that the resulting exhaust from the Lake One stack conforms with SCAQMD regulations.

While over 400 LM6000 combustion turbines have been deployed worldwide, less than 35 have been installed with emissions controls.  These emissions controlled units are less than three years old. 

The SCR associated with the construction of Lake One was initially found to have a faulty catalyst that failed to reduce NOx levels as required.  The manufacturer replaced the catalyst without charge to the utility.  Following this replacement of the SCR, the unit performed as required.

Testing the emissions control system for compliance with SCAQMD regulations using SCAQMD testing methods proved to be problematic.  This problem arose by allowing the gas sample to cool before testing the NOx and CO content of the exhaust gases.  The Environmental Protection Agency (EPA) and General Electric showed the SCAQMD a revised testing method that captured the exhaust in a special gas sample vial that maintained the temperature of the gas at exhaust gas temperature, approximately 500 degrees.  With the new testing procedure, the Lake One easily passed its SCAQMD certification.

After operating the Lake One for about six months, power production operating staff noted some loss in performance of the SCR.  While still within the regulatory requirements of the SCAQMD, the degradation was faster than what BWP staff thought was appropriate.  In response to this, Entrix, an environmental engineering company, was assigned the task to review the design of the SCR and determine if the degradation could be reduced.

Entrix evaluated the unit and found that the exhaust gases were not evenly distributed across the catalysts.  As a result, the life of the catalyst would be compromised, even though the unit would perform as required for 18 to 24[v1]  months depending upon its usage.

Entrix found that after market modifications to these SCRs had become available as other combustion turbine owners had found similar loss of effective life of their catalysts in similarly designed units.

These findings regarding the SCR were incorporated into the SCR retrofits for Olive 1 and 2.  The Olive 1 and 2 SCRs are specifically designed for a uniform flow of exhaust gases over the catalyst.  Other design features were included in the Olive 1 and 2 SCR design to allow for a five year operational life for the catalysts.

The Sacramento Municipal Utility District (SMUD) has a lawsuit against the Lake One SCR manufacturer.  SMUD used this same manufacturer and received a defective catalyst, just as we initially received from this same company.  We are monitoring this lawsuit.  We are uncertain as to how successful this lawsuit will be.  In BWP�s case, the SCR defective catalyst was quickly replaced, it did perform as required, and it has operated successfully throughout the year.  While the design may not be optimal, it has performed as required.

This fall, BWP sought some of these after market contractors in order to evaluate retrofitting the SCR.  The following findings were made:

• The life of the catalyst could be extended from 1 to 2 years to 3 to 5 years

• The performance of the catalyst could significantly improve (more than 10%)

The retrofit could be performed with less than a two week shut down.  By doing this retrofit now it is possible to complete the retrofit by this summer and preserve the existing catalyst.  Waiting until next year will result in excessive degradation of the NOx catalyst, perhaps even necessitating its replacement.  Replacing the NOx catalyst would cost an estimated $200,000.

The Lake One CO catalyst, the second of the two catalysts within the SCR, is currently showing signs that it will soon require replacement.  The retrofit will come too late to preserve this catalyst.  The replacement of this catalyst is included in the current budget.  This CO catalyst replacement was included in the recently approved budget amendment.

This retrofit and replacement of the catalyst must be done on a design-build basis.  The integration of design with the craftsmanship required to implement the design is required to assure the design will operated as intended.  Such retrofits have been performed in a similar manner in the past.  However, in the past, another engineering firm was hired to write a generalized specification and then a vendor was hired to perform the detailed design and construction of such retrofit.  The design build approach is a better approach of doing such retrofits as it more accurately represents the nature of this construction.

ANALYSIS

The estimated cost of the SCR retrofit is $550,000.  It will extend the replacement of the CO and NOx catalyst by a factor of 2 to 3 times.  The CO catalyst and NOx catalyst each cost an estimated $200,000 to replace for a total replacement cost of $400,000.  Without the retrofit the catalysts will degrade at a cost of $266,666 per year ($400,000/1.5).  With the retrofit the catalysts will degrade at a cost of $133,333 per year ($400,000/3).  The retrofit represents an annual savings of $133,333 per year.  At a cost of $550,000 the retrofit would have a payback of the 4.12 years and a 24.2% rate of return.

The retrofit consists of modifications to the SCR so that the exhaust gases are distributed in a more uniform manner than they are currently distributed.  Such redistribution can be done with airfoils, vanes, or diffusion plates.  The resulting redistribution will effect the operation of the SCR, so modifications to other components of the SCR will be necessary in order to compensate for these changes in operations.  Such changes include, for example, operating temperature of the exhaust gases, turbulent flow in the SCR, and back pressure.  All such operating changes must be addressed by the engineering contractor.

Staff recommends that this project be done on a design-build basis.  While the design/build approach is a relatively new approach for Burbank public works projects, it is how virtually all power plants retrofit projects have been done in the past.  The City of Burbank�s first use of design-build contracts was for the Alan Capon Substation which was completed within original budget and schedule.  The SCR retrofits are very much like a product, but retrofits are sold as a service.  The retrofits often use technology that is proprietary with the associated rights held by the vendor rather than BWP. 

Using the design-build method here is �consistent� with principles of competitive bidding as required by the BMC.  Competitive proposals for the project have been solicited and are now under consideration, a vendor is expected to be selected in February, and is to be presented to the BWP Board for award of a contract in March. 

The most critical operational issue associated with this project will be the down time for Lake One.  The outage duration range estimated by potential vendors has been from one to two weeks.  As the work is to be done prior to summer loads, an outage of one to two weeks is not expected to be a problem.  In order to adhere to this timeline, so that the work may be completed by summer, the Request for Proposals were issued in anticipation of the City Council approval of the budget amendment and authorization to proceed on a design-build basis. 

FISCAL IMPACT

The recently approved mid-year budget amendment included this project as part of the current budget.  The budget amendment for this line item was for $750,000.  $200,000 will be for the replacement of the CO catalyst that has reached the end of its useful life and $550,000 for the SCR retrofit.

Funding for this the project will be made from wholesale sales margins rather than retail sales.  This project will not adversely affect retail rates.

RECOMMENDATION

Staff recommends that the City Council, by motion, approve use of the design-build method of project delivery for the LM6000 SCR Performance Improvement and CO Catalyst Upgrade Project.

RD:FF:ff:gm

Lake one design build-council memo 2-17-04.doc

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