LuTan-1 (LT-1) is a constellation with two full-polarization L-band radar satellites designed by China, and the first satellite was scheduled to be launched in December 2021 and the second one in January 2022. The LT-1 will be operated for deformation monitoring in repeat-pass mode, and for DEM generation in bistatic mode, improving self-sufficiency of SAR data for the field of geology, earthquake, disaster reduction, geomatics, forestry and so on. In this paper, we focused on designing an algorithm for interferometric DEM generation using LT-1 bistatic satellites. The basic principle, main error sources and errors control of the DEM generation algorithm of LT-1 were systematically analyzed. The experiment results demonstrated that: ① The implemented algorithm had rigorous resolution with a theoretic accuracy better than 0.03m for DEM generation. ② The errors in satellite velocity and Doppler centroid had no obvious effect on DEM accuracy and they could be neglected. While the errors in position, baseline, slant range and interferometric phase had a significant effect on DEM accuracy. And the DEM error caused by baseline error was dominated, followed by the slant range error, interferometric phase error and satellite position error. ③ To obtain an expected DEM accuracy of 2m, the baseline error must be strictly controlled and its accuracy shall be 1.0mm or better for Cross-Track and Normal-Direction component, respectively. And the slant range error and interferometric phase error shall be reasonably controlled. The research results were of great significance for accurately grasping the accuracy of LT-1 data products and their errors control, and could provide a scientific auxiliary basis for LT-1 in promoting global SAR technology progress and the generation of high-precision basic geographic data.