LAFCC Request for Proposal

Table of Contents:

Project Scope
Project Background
  • Environmental
  • Political
  • Economic
    About the LAFCC
    Joint Venture
    Technical Specifications
  • Fuel Cell
  • Vehicle
    Technical Infrastructure
    Proposed Deliverables

    Project Scope:

    To design, fabricate and sell 100 fuel-cell powered taxis per year01 for the greater Los Angeles area

    Project Background:

    1. Environmental Issues

    The greater Los Angeles area needs to use alternative sources of energy for automobiles. Already the 2nd most populous urban area in the U.S., it also has the heaviest per capita concentration of cars in the world. These factors combined with the geographical location of Los Angeles result in excessive amounts of air pollution, especially in the form of smog.

    Because of the unique geography of Los Angeles, the pollution created has nowhere to go. Instead of being blown away, most of it sits over the city and its inhabitants. We believe that fuel-cell powered vehicles will save not only local resources, but also the health and well-being of the community. They will also create a strong positive example to follow for other major urban aglomerations such as New York, Mexico City, Tokyo, etc.

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    2. Political Issues

    The issue of fuel emissions has always been a sore point for many individuals, especially in California.

    Constant episodes of smog affects millions of people living in the Los Angeles area. It is no wonder governmental regulations were instituted to try to decrease the amount of pollutants that are released into the air.

    The need for fuel emission regulation can be traced back to the 1940s. During this time the number of registered vehicles in California approached 2.8 million and the total vehicle miles traveled (VMT) was 24 billion. In 1943, the first traces of smog were observed in Los Angeles, which caused nausea and burning eyes. The event was caused by a nearby butadiene plant. However, the smog did not disappear after the plant was closed down. In Donora, Pennsylvania, air pollution killed 20 people and numerous animals due to uncontrolled emissions from industrial facilities. To prevent events like these from happening, the National Environmental Protection Act (NEPA) was put into law in 1969. This act created the Environment Protection Agency (EPA) to protect all aspects of the environment. However, to this day smog and air pollution are still unfortunate realities in California.

    To try to combat this problem, the Clean Air Act of 1990 was passed. This act has created many programs and regulations that will vastly effect the automobile industry. Among these laws are the creation of clean air pilot programs in California. However, perhaps the most important of these new regulations is the law requiring that ten percent of all vehicles sold in California must be zero emission vechicles (ZEVs) by 2003. It is apparent that preparing for these new regulations has become vital to the survival of the automobile industry in California, and perhaps soon in the entire country. To address this issue, we propose using methanol fuel cells instead of gasoline to power the engines of automobiles. Methanol is one of the most widely used types of fuel cells for automobiles and can be readily made from many agricultural crops. In California today, there is already a network of 50 public methanol-refueling stations and 50 additional stations operated by public and private fleets servicing 15,000 methanol-powered vehicles. So therefore, methanol would be an excellent choice in the production of ZEVs.

    Not only would methanol powered vehicles eliminate hazardous emissions, but they also provide many other political benefits to the United States and the world. For one, the mass production of methanol for consumption by vehicles would revive an ailing farm industry. Massive "methanol farms" would be created that would provide jobs and economic security to farmers. Another benefit would be the reduction of the country's foreign oil dependency. The United States spends billions of dollars defending their interests in the Middle East, money that does not need to be spent if methanol's use to power vehicles becomes large enough. This would lead to fewer crises, as there would be a constant, stable flow of fuel throughout the country, and also stable energy pricing. Also, the cost to the consumer would be equal to or less than current prices of gasoline. Methanol would also help out smaller countries by promoting greater domestic self-reliance.

    To help promote methanol as a vehicle energy source, there has been legislation to provide financial support for methanol. Tax credits have been enacted to encourage the purchasing of methanol and methanol powered vehicles. Also proposed is the decreasing of state tax rates for methanol. Currently, in many states, methanol has a much larger tax rate than gasoline. If passed, methanol would clearly have a bright future in the automobile industry.

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    3. Economic Considerations

    The fuel cell is a clean, efficient energy source for all the power needs. It generates electricity for cars, buses, cell plants as well as many other things. In essence it can be viewed as a continuously operating battery that can be re-energized few times. So what is the problem? The challenge in fuel cell development has been to improve the economics through the use of low-cost components with acceptable life and performance. Thus, are they worth the risk?

    The first question that comes up is "What’s been holding back the use of fuel cells in cars?" Fuel cells are relatively a young technology. There are still too many engineering and technical challenges that remain which scientists are working hard on. The biggest problem is that they are still too expensive. Fuel cells will have to become much cheaper in order to be commercial in vehicles. Conventional car engines cost about $3000 to manufacture. In order to do this, more research and development is necessary so that the cost of fuel cells can be brought down to a manufacturable level. Research and development involves more money. Five cabinet-level departments are investing over $100 million per year. The U.S. Departments of Transportation and Energy also maintain their own research programs. Also, the U.S. government has to provide grants to help with even more researching costs. However, the major issue when dealing with the commercializing of fuel cells is that one cannot sacrifice quality. Low-cost component development is crucial in order to produce fuel cells with sufficiently high power, acceptable performance and lifetimes and most importantly affordable costs. The components of the fuel cell have to be of top quality because safety issues and concerns come into play.

    With commercialization, cumulative production has to be increased greatly. A modern fuel cell electric vehicle is very safe as far as the hydrogen content and the strength of the hydrogen tank are concerned. Also, many safety features are installed for any last minute emergencies. These require time and energy to put together and can be sacrificed with mass production. Ways to mass-produce these components with the same high-value are key, for the results can be catastrophic. Despite the drawbacks, fuel cells in cars have a positive future that should not be overlooked. One benefit is the exposure of new markets. According to a recent Arthur D. Little, Inc., study, fuel cell power system markets could exceed $3 billion worldwide by 2000. Only 1% of the global vehicle market (450,000 vehicles) would mean $2 billion or more. Also, another recent study projected that global demand for transportation fuel cells in 2007 would be at $9 billion. Another benefit is energy security. The U.S. energy dependence is higher today than it was during the "oil shock" of the 1970s. Passenger vehicles consume 6 million barrels of oil every day- equal to 85% of oil imports. If just 20% of cars used fuel cells, oil imports would be cut by 1.5 million barrels every day. 10,000 fuel cell vehicles running on non-petroleum fuel would reduce oil consumption by 6.98 million gallons per year. Third, fuel cells are clean and efficient. Fuel cells in cars would dramatically reduce urban air pollution, decrease oil imports, reduce the trade deficit and produce jobs. The Department of Energy projects that if 10% of the nation’s automobiles were powered by fuel cells, oil imports would be cut by 800,000 barrels every day.

    What is most pleasing to businessmen about the benefits of fuel cells is the great room for economic growth. Fuel cells could create new markets for steel, electronics, electrical and control industries and other equipment suppliers. They could provide tens of thousands of high-quality jobs and reduce trade deficits. Estimates show that if 20% of cars used fuel cells, 800,000 jobs would be created. Looking at the numerous benefits fuel cells provide, one is probably wondering how can fuel cells be further supported. Obviously, the government has to push for major increases in research and development budgets. The federal government should purchase early power units and vehicles. Last, the government should continue to expand the programs that help "buy down" the cost of early units installed around the country.

    All in all, progress has been made in the development of a fuel cell that is performance worthy and reasonable as far as cost. The combination of small size fuel cells (unheard of 5 years ago), high market values, low development and demonstration costs, as well as low market entry costs provide a low financial and technical risk scenario for fuel cell commercialization.

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    About the LAFCC

    The LAFCC (Los Angeles Fuel Cell Corporation) is a fuel cell manufacturer based in the LA area. As our corporation has been working with fuel cell technology for several years now, we feel that it is time to use our knowledge to help improve the environment that we live in. By undertaking the taxi project, we will help play our part in sustainable development and also provide jobs in LA.

    We have a 5-member management team that continues to study various factors in such an ambitious project. These factors include environment, politics, economics, marketing, technology, and joint venture structure.

    Simon Goldburd, Politics Professional, specializes in the political issues involved in the project.
    Dennis Mitsanis, Economics Expert, focuses on the economic considerations of our goal.
    Malini Ramanarayanan, Public Relations Officer and Structure Specialist, addresses correspondences from prospective bidders and also deals with the joint venturestructure.
    Yotaro Sherman, Technology Trustee, gathers information about the technology involved in the fuel cell and its applications.
    Yasmin Yabyabin, Management Team Leader, is familiar with the environmental concerns.

    Joint Venture (J-V) management and financial terms

    In entering into a joint-venture partnership, LAFCC seeks to develop the next generation of fuel-cell run vehicles. J-V objectives and goals include the following:

    The J-V will aim to leverage the special facilities and capabilities of each partner. The chart below shows possible resource combinations:
     
    LAFCC can offer: J-V Partner should provide: 
    • Fuel Cell production facilities
    • Vehicle production and maintenance facilities
    • Fuel Cell design capabilities (engineering & development)
    • Vehicle design capabilities (engineering & development)
    • Fuel Cell engine technical maintenance
  • Engine technical support 
    • Engine-vehicle design and construction capability
    • Marketing and distribution assistance
    • High credit rating
    • High grade credit rating and financial resources
    • Local presence, marketing, financial, and legal resources
    • Product introduction capabilities (marketing, advertising)

    In addition, our partner should have some global exposure and international presence as well as superior management of their parent company.
     
    The J-V Board of Directors should consist of highly educated and experienced professionals who will successfully merge the mission of LAFCC with the goals of the project:

    Strategic contributions to J-V management by both parties will result in a powerful and effective Board of Directors.

    LAFCC shall have 70% equity ownership of the J-V, while the partner shall own 30% of the equity. Financing of the J-V shall be done through 70% debt and 30% equity. Please see charts below.

    Capital

    Equity


    Capital investments will be estimated on the basis of producing 100 fuel-cell taxis the first year, 120 the second, 140 the third, 160 the fourth, 180 the fifth, and 200 the sixth year, and maintaining that production per year for the remaining years up to 10 years after the J-V start. The 10 year life-span of the J-V has been chosen in order to allow sufficient time for evaluation of technical, environmental, social, and political effects. After several years of addressing initial local goals, the progress of the J-V shall determine its entrance into the global market.

    Note: 01 See the 20% yearly increase in capacity described above.

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    Technical Specifications of the LAFCC Fuel Cell Taxi

    Technical Specifications of the LAFCC Fuel Cell

    Proton Exchange Membrane (PEM) type fuel cell

    The LAFCC fuel cell generates power in a fundamentally different way from internal combustion engines (ICEs) and storage batteries. Fuel cells have the advantages of both ICE's and batteries without the problems of either. 

    ICEs 

    ICEs operate by burning fuel to create heat, heat is converted into mechanical energy and then motive power or, by turning a generator, electric power. The efficiency of this conversion process is greatly affected by losses of waste heat and friction. In contrast, fuel cells efficiently convert fuel directly into electricity via an electrochemical reaction, making fuel cells more than twice as efficient as ICEs in extracting useful power from fuel. Like an ICE, fuel cells conveniently use fuel from a tank that can be quickly refueled, and they operate continuously as long as fuel is supplied. Unlike ICEs, however, fuel cells do not burn fuel and therefore do not produce the air pollutants resulting from combustion. 

    Batteries 

    Batteries are energy storage devices; they can only produce power intermittently as they must be recharged. The recharging process is lengthy, inconvenient, and shifts pollution, efficiency and cost issues up the power line to central electrical power plants. The battery is recharged (refueled) by the process of passing electricity into the battery. Batteries and fuel cells are both electrochemical (no combustion) devices that have high efficiency and quiet operation, without the polluting byproducts of combustion. A battery stores its energy in its electrodes. Electricity is released as the stored energy is consumed. In contrast, fuel cells produce electricity using fuel from an external tank. Fuel cells operate continuously as long as fuel is supplied and the tank can be quickly refueled, avoiding the time-consuming recharging process. 

    Fuel Cells

    Fuel cells are the ultimate power provider. They are clean, quiet, and efficient, and operate continuously as long as fuel is supplied. Fuel cells have no moving parts; therefore they have excellent reliability and long operating lives. Fuel cell systems can use multiple fuels such as natural gas, methanol, gasoline and hydrogen. They have high power density, sufficient to power an automobile, and the refueling ease of an ICE. Fuel cell systems feature positive qualities of both ICEs and batteries while overcoming their negative attributes. Fuel cells are the best alternative.

    Click to see a movie on how a fuel cell operates.

    Description
    A movie illustrating how Proton Exchange Membrane (PEM) fuel cells work. 

    Instructions
    To play the movie click on the image above. The audio portion of this movie requires a sound card on your computer. If your computer is not equipped for sound and you wish to follow the movie's sound track, click the link below to download a text file containing the narration. Then print out the narrative and follow along as you watch the movie. 

    The Plug-in
    To view the movie you will need the FLASH 3 plugin which can be found at:

    Emissions

    The emission levels from the LAFCC fuel cell are half or less of conventional ICE emissions. These emissions are primarily from the conversion of meth onal to hydrogen fuel. The PEM process produces only water vapor as waste.. 

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    Specifications of Vehicle

    The LAFCC recommends using a multiple passenger vehicle design such as a sedan, sports utility vehicle or minivan. Modifications using existing car designs would be the most economical method as well as saving time on design and manufacturing.

    The vehicle should seat one driver and up to 4 passengers. (Three in back and one next to driver)

    The vehicle should have sufficient space for luggage or other items that cannot be contained in the passenger compartment.

    The vehicle should be able to attain a maximum velocity of 90 mph (145 kph) and travel 300 miles (486 km) between refills. These are mostly due to the total weight of the vehicle which must be minimized to accommodate the weight of the fuel cell and its associated components. The fuel cell is stored underneath the floorboard. Because it is noiseless and has relatively low operating temperatures (90 degrees Celsius), thermal and noise dampening insulation mass can be reduced.

    Here are some examples of fuel cell cars from various carmakers.

    Zevco London Fuel Cell Taxi

    The DaimlerBenz NECAR 3

    NECAR 4

    Ford P2000 Prodigy Hydrogen Fuel Cell Vehicle

    Mazda Demio

    Opel Sintra

    Opel Zafira

    Toyota Fuel Cell RAV 4

     
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    Technical Infrastructure for LAFCC Fuel Cell Taxi

    Refueling Stations

    The fuel cell taxi requires refueling stations that provide methanol fuel. The most economical and practical method of providing refueling stations for the taxis is to convert existing gasoline stations to provide methanol. The cost of building a new tank and pump at an existing location is about US$60,000 while the cost of converting an existing tank and pump is only US$20,000.

    Refueling Station Locations

    The positioning of refueling stations should be at the most strategic positions. The map shows the primary locations needed at the beginning and secondary locations to be completed in subsequent years as the number of vehicles and the area of service increases. The locations are no more than 15 miles apart with closer spacements near the center of the city.


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    Proposal Deliverables:

    By 11/18/99, bid closing date, we welcome proposals that include detailed and clear answers to our concerns, technical writeup and sketches as required, as well as financial calculations for the startup period and the next 10 years. If there are any questions, please contact the LAFCC. We are available via e-mail and Bulletin Board. We look forward to our first teleconference on November 03, 1999 between 10 AM-12 PM, EST.

    Thank you for your consideration.