BOARD MEETING DATE: July 9, 2010
AGENDA NO. 5

PROPOSAL:

Execute Contracts to Develop Prototype Natural-Gas-Fired, Fan-Type Central Furnaces with Reduced NOx Emissions  

SYNOPSIS:

In November 2009, the Board authorized $1,000,000 to assist furnace manufacturers in meeting the new NOx limit established by Rule 1111, which goes into effect October 1, 2014. An RFP was issued on February 5, 2010, and four proposals were received requesting a total of $1,447,737. This action is to execute four contracts in a total amount not to exceed $1,000,000 to develop prototype furnaces meeting the 14 nanograms per joule of useful heat rule limit. The Southern California Gas Company has offered $447,737 cofunding so that all four proposals can be fully funded.  

COMMITTEE:

Technology, June 18, 2010, Recommended for Approval

RECOMMENDED ACTIONS:

1. Recognize upon receipt $447,737 from the Southern California Gas Company and place in the Air Quality Investment Fund (27); and

2. Authorize the Chairman to execute the following contracts to develop prototype natural-gas-fired, fan-type central furnaces with reduced NOx emissions:

1. Beckett Gas, Inc. in an amount not to exceed $379,386;
2. Gas Technology Institute in an amount not to exceed $450,000;
3. Ingersoll Rand in an amount not to exceed $368,261; and
4. Nordyne in an amount not to exceed $250,090

for a total not to exceed $1,447,737 from the Air Quality Investment Fund (27).

Barry R. Wallerstein, D.Env.
Executive Officer

Background

At the November 6, 2009 Board meeting, the Board amended Rule 1111 – Reduction of NOx Emissions from Natural-Gas-Fired, Fan-Type Central Furnaces, lowering the NOx emission limit from 40 nanograms per joule of useful heat, which it had been since 1984, to 14 nanograms per joule of useful heat. This action implemented control measure CMB-03 of the 2007 Air Quality Management Plan—“Further NOx Reduction from Space Heaters.” The new NOx emission limit is phased in for several furnace categories that are defined in the rule, beginning October 1, 2014.

During rule development, staff found that there were no commercial products currently available that could meet the new NOx limit, although some major manufacturers expressed confidence that compliant products could be developed. To expedite development efforts so that compliant products will be available as the new NOx limit takes effect, staff was directed by the Board to issue a Request for Proposals (RFP) in an amount of up to $1,000,000 to develop a natural-gas-fired, fan-type central furnace compliant with the 14 nanograms per joule NOx limit that conforms to all applicable safety requirements.

Request for Proposals

RFP #P2010-17 was issued by a Board action on February 5, 2010. The RFP solicited bids from the most qualified applicants with experience and expertise in development of small low-NOx natural gas burners and integration with fan-type central furnaces. The RFP required that the bidder be or include (in a team) a manufacturer of natural-gas-fired, fan-type central furnaces and that the proposed project be completed within two years.

The RFP strongly encouraged bidders to include high-efficiency furnaces in their reduced-NOx development efforts and also encouraged bidders to include some mechanism for sharing of the reduced-NOx intellectual property (IP) so that all manufacturers can benefit from the results. The RFP also encouraged bidders to include a mechanism for return of AQMD funds if the project results in successful product(s); however, AQMD staff later discovered that the agency may not be able to legally pursue return of its funds in this case. 

Proposals Received

Four proposals were received, which are summarized in Table 1. The Gas Technology Institute (GTI), an established R&D organization serving the gas appliance industry, bid with a team of five furnace manufacturers. GTI’s proposal includes a $150,000 cash contribution from Utilization Technology Development (UTD), a collaborative research organization funded by gas utilities. Beckett Gas, Inc. (BGI), also a recognized technology developer for the gas appliance industry, bid with a team of two furnace manufacturers. Nordyne and Ingersoll Rand (IR) are major furnace manufacturers. Nordyne’s proposal includes sharing, without restriction, full disclosure of the hardware and construction of the furnaces developed, including that which was developed prior to the AQMD funding. A total of $1,447,737 was requested.

Evaluation of Proposals

The RFP contained a point scoring system with the following maximum points available:

The 70 technical points were determined by a proposal evaluation panel. The panel consisted of three AQMD staff members from the Technology Advancement Office, Monitoring & Source Test Engineering and Planning & Rules; a retired AQMD employee with expertise in reduced-NOx combustion; and a Senior Engineer in the California Energy Commission Building Efficiency R&D Team. Scoring was based on the bidder’s qualifications, technical approach, management plan, and the thermal efficiencies of the products to be developed. A minimum of 56 technical points was required for a proposal to qualify for funding.

The cost effectiveness points were determined using a formula in the RFP that was based on the number of products to be developed per amount of funding. A maximum of 15 additional points were available for certain business categories, such as disabled veteran business enterprise, small or local businesses, low-emission vehicle businesses, etc.; however, none of the proposals qualified for any of these points.

Table 2 shows the point scoring results. Since the AQMD may not be allowed to receive return of its funds, the scoring of the proposals excluded the points related to return of funds, as was specified in the original RFP. All four proposed projects qualified for funding, and the five panel members agreed that all four have good potential for success. In that the slate of projects contains significant differences in technologies and technical approaches, staff believes that funding all four would maximize the probability that multiple compliant products can be developed.

Southern California Gas Company Offer to Contribute Funding

The Southern California Gas Company requested one set of the proposals to assess the possibility of its funding one or more of the proposed projects and was provided with the requested documents under a confidentiality agreement with the express permission of the bidders. The Gas Company reviewed the proposals and notified staff of its intent to contribute up to $447,737 so that all four proposals can be fully funded. The Gas Company requested that it would be included in all project meetings and would receive all progress reports and the final report.

Recommendation

Staff recommends that AQMD receive the offered $447,737 from the Gas Company and fully fund all four proposed projects in a total amount not to exceed $1,447,737. 

Benefits to AQMD

These research contracts will ensure that research and development efforts are initiated to potentially develop multiple compliant products meeting the future NOx limits of amended Rule 1111 and will allow AQMD to establish work schedules that support development of these products on a timely basis.

Resource Impacts

The total amount of AQMD funding for the contract(s) will not exceed $1,000,000. At the November 6, 2009 Board meeting, the Board allocated $1,000,000 for this RFP from Fund 27, Air Quality Investment Fund, in which sufficient funds are available.

Attachment (DOC, 49k)
Table 1 – Summary of Proposals
Table 2 – Proposal Scores