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Regulatory Solutions for Building Decarbonization

Tools for Commissions and Other Government Agencies

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To meet the imperative of curbing climate change and restoring clean and healthy air to our communities, it is critical that policymakers act to eliminate greenhouse gas (GHG) emissions from the building sector. In the United States, fossil fuels burned in residential and commercial buildings account for at least 600 million metric tons of CO2 equivalent emissions per year—and far more when methane leakage is considered. Utilities, their regulators, and state policymakers together have an opportunity to eliminate these emissions and transform American homes and businesses to run on clean energy.

The old model of utility regulation is not conducive to an all-electric future and the scope of change needed is broad. To help inform that evolution, this report offers a framework for the comprehensive regulatory reforms required to transition to clean energy in the US building sector, along with more than 40 specific recommendations for action.

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Resource Library

“Regulatory Solutions for Building Decarbonization: Tools for Commissions and Other Government Agencies” outlines 10 key strategies to support building decarbonization. In this library, we share resources from commissions, nonprofits, and media that expand on the themes and strategies introduced in our report.

Focus on Equity and Inclusion

Equity and inclusion must be considered throughout all the potential solutions in this framework; low- and moderate-income customers and disadvantaged communities cannot be an afterthought. Decision-making processes must meaningfully include the perspectives of multiple communities and programs must be designed to specifically support low-income and disadvantaged communities at risk of being left behind.

Equitable Building Electrification: A Framework for Powering Resilient Communities

Greenlining Institute and Energy Efficiency For All

Greenlining’s Equitable Building Electrification Framework addresses the opportunities and challenges that electrification presents for low-income communities—70 percent of whom are renters. The framework finds that electrification can be a transformative force for low-income residents, and it explains the steps the state must take to ensure that electrification helps close the clean energy gap in California and provides relief to millions of residents facing energy insecurity in the current system.

This five-step framework presents a start-to-finish recipe for how the current goals of building electrification can be aligned with producing healthy homes, creating high-quality, local jobs that cannot be outsourced, and establishing stronger connections between everyday Californians and our climate change policies and goals.

Sacramento Wants to Electrify Its Homes, Low-Income Families Included

Justin Gerdes, Greentech Media

Sacramento Municipal Utility District (SMUD) attended Rocky Mountain Institute’s eLab Accelerator to answer the question: how does a not-for-profit municipal utility that has committed to eliminate carbon from buildings ensure that its most disadvantaged customers aren’t left behind during the transition? A guiding belief for SMUD was that low- and moderate-income households should be able to transition to gas-free electric appliances at the same rate as the rest of the population. The team saw potential benefits of that transition for building owners and tenants alike and developed a plan to integrate electrification into existing low-income efficiency efforts.

Align Decarbonization Regulatory Work across State and Local Agencies

The scale of transformation needed to eliminate building emissions will require a cohesive strategy across government. To maximize progress in meeting shared objectives, public utility commissions and other government bodies will need to align on a vision, clarify roles, and coordinate policies and programs.

Establish Clear Guidelines for Alternative Fuels

While proposals to decarbonize pipeline fuel have emerged across the country, state regulators need to consider a number of key questions—what is the overall availability and best use of limited alternative fuels? What is the overall lowest-cost decarbonization pathway? What standards and requirements about carbon accounting should be in place?

The Challenge of Retail Gas in California’s Low-Carbon Future

E3 for California Energy Commission

A new E3 study for the California Energy Commission demonstrates why the state needs a transition strategy for its retail natural gas distribution system, as it aims to achieve its ambitious climate goals by midcentury. In this study, E3 evaluated two strategies for reducing carbon emissions from California buildings: building electrification and renewable natural gas. E3 found that building electrification is likely to be a lower-cost and lower-risk strategy for reducing carbon emissions from buildings in California. E3 also found that, particularly under a high building electrification future, customers remaining on the natural gas system could face disproportionately high costs in the absence of a gas transition strategy.

Plan for  Workforce Development

The transition to a carbon-free buildings sector will both create new employment opportunities (e.g., installing new equipment, performing efficiency upgrades, engineering and manufacturing new technical solutions, and expanding electricity generation) and eventually require a managed transition away from employment focused on diminishing fossil fuel use (e.g., engineering and installing gas distribution infrastructure, installing gas appliances, and delivering oil and propane to homes and businesses).

California Building Decarbonization: Workforce Needs and Recommendations

Betony Jones, Jason Karpman, Molly Chlebnikow, and Alexis Goggans

This paper is the first to estimate the statewide market potential, costs, and potential employment impacts of building decarbonization in California. Building electrification will impact several employment sectors, including construction jobs to electrify existing buildings, manufacturing jobs for electrical equipment and appliances needed for installation, and to support upgrades and expansion to the electric system to support increased electric sales.

In addition to the increased demand for workers in these areas, there will be a reduced need for workers in other areas. All-electric new construction of buildings eliminates the need for plumbers and pipefitters to extend gas lines and connections and reduced gas sales could cut the number of utility workers needed to provide gas service to customers.

To guide workforce planning and engagement, this paper discusses the distribution of the positive and negative employment effects by market segment and by industry. It provides recommendations for engaging skilled and trained workers in the transition to clean energy generation and electric buildings. Suggestions to minimize and mitigate potential job losses from decreased natural gas consumption are also presented.

California’s Gas System in Transition: Equitable, Affordable, Decarbonized, and Smaller

Gridworks

This report shows how a suite of local and state-wide policies resulting from California’s commitment to 100 percent clean electricity and carbon-neutrality are set to cause a significant reduction in gas demand in coming decades. At the same time, the cost of safely operating California’s gas infrastructure has risen in recent years and is set to rise again as utilities seek necessary safety upgrades and investments.

Without a strategy to transition the gas delivery system, the confluence of these two trends could cause harm to gas workers, low-income gas residents, gas-dependent industries, and the broader economy. Our report begins the development of that strategy, providing recommendations on how state and industry leaders can meet this challenge head on.

Consistent with Gridworks mission to convene, educate and empower stakeholders to decarbonize electricity grids, this report draws on a series of facilitated discussions between key consumer, labor, equity, utility and environmental stakeholders. These stakeholders provided invaluable input, without which this report would not be possible.

 Optimize Customer and Market Offerings

New programs aimed at developing the market for heat pumps, increasing awareness of electrification solutions, and improving customer and contractor experience with new technologies can help spur progress toward electrification, especially where the market is not yet mature and awareness is low.

Driving the Heat Pump Market: Lessons Learned from the Northeast

Natural Resources Defense Council and Vermont Energy Investment Corporation

Northeast states have identified electrification of space and water heating in buildings as a critical step to reach greenhouse gas reduction goals. Air-source heat pumps (ASHP) are a key technology for building electrification, but there are still a number of barriers to their adoption. Programs in the Northeast region have taken different approaches to incentivizing heat pumps and are at varying stages of maturity and market adoption.

This report reviews the policy, regulatory, and program frameworks in Northeast states—New England plus New York—to identify the key factors driving program success and overcoming barriers to ASHP adoption. It focuses specifically on ductless mini-split heat pumps used for heating and cooling, which are the most commonly installed equipment in the Northeast. However, many of the lessons learned are also applicable to other heat pump technologies.

Transforming our buildings for a low-carbon era: Five key strategies

Dave Hewitt and Susan Coakley

Significantly reducing building sector greenhouse gas emissions is necessary to meet state and local climate stabilization goals. Initiatives to decarbonize home and building energy use are enabled by a new generation of advanced air source heat pumps (ASHPs) that provide efficient, comfortable heat even at low outdoor temperatures as well as highly efficient air conditioning in the summer.

Coupled with thermal improvements to building envelopes and smart controls responsive to grid reliability needs, ASHPs are displacing the use of fossil fuels for comfort heating while providing a range of economic benefits. Investments to decarbonize buildings are most economical in natural market cycles of building construction, renovation, and equipment replacement, and as part of community development initiatives to improve and preserve affordable housing. A growing number of state and local policies and programs are accelerating the rate of efficient electrification of home and building heating to replace fossil fuel heat with increasingly carbon-free renewable electricity.

Decision Establishing Building Decarbonization Pilot Programs

California Public Utilities Commission

The California Public Utilities Commission (CPUC) decision comes out of legislation, Senate Bill 1477, and a regulatory proceeding to design programs that will help decarbonize buildings and support the state’s goal to reduce greenhouse gas emissions 40 percent below 1990 levels by 2030. The decision commits $200 million to two pilot programs: BUILD and TECH. The BUILD program will use $80 million of the funds to develop new all-electric homes with no gas hookups, and at least $60 million will support new low-income housing. A majority of the funding ($120 million) will go to the TECH program to accelerate market development and adoption of low-emissions space and water heating equipment in new and existing homes.

Align Efficiency Policies with Decarbonization

Many energy efficiency policies and standards were designed at a time when fuel switching was not a cost-effective or environmentally beneficial choice. Updating these regulations is crucial to ensuring that utilities have the correct incentives to support electrification where it supports policy goals or offers other benefits, in addition to traditional energy efficiency.

Next-Generation Energy Efficiency Resource Standards

Rachel Gold, Annie Gilleo, Weston Berg – American Council for an Energy-Efficient Economy

Energy efficiency resource standards (EERS) have been a key tool for delivering energy savings in states across the country. Now states are looking to their energy efficiency policies to do more. New approaches to EERS can help them meet aggressive climate goals, lower costs, improve grid flexibility, and provide bill savings and healthier homes to those with the highest need. This report details progress in five states as they shift toward next-generation EERS policies. It concludes with recommendations for using EERS to deliver climate, cost, grid, and equity benefits.

Redefining Energy Efficiency: EE 2.0

Ken Colburn and Joni Slinger

This article presents a new vision for energy efficiency ("EE 2.0″) based on the concept of energy optimization and lays the foundation for subsequent articles on EE in this special issue of Electricity Journal. Energy efficiency is key to reducing the size of the energy challenge, to accelerating the achievement of its solution, and to enhancing energy productivity, but old ideas that ignore the potential benefits of electrification and narrowly equate energy efficiency with efforts to reduce consumption of a single energy source—like electricity—need to evolve. The key to affordable decarbonization is making optimal use of low-cost, emissions-free energy sources, when and where they are available.

Update Electricity Rate Designs

Both electric and gas rate design may need reform to capture benefits and support affordability during a transition from gas consumption to electricity consumption. Time-varying rates can help to capture the value of demand flexibility, and smart rate design, demand flexibility, and targeted energy efficiency can minimize impacts from electrification on peak demands.

Expand Energy System Planning 

Traditionally, gas and electric utility regulation and planning have occurred separately, with electric regulation evolving more rapidly in recent years. To support decarbonization of the residential and commercial end uses served by gas distribution utilities, regulation must evolve, through considering combined electricity and gas planning, resilience, the PUC role in capacity planning, and planning for gas infrastructure retirements.

Electrification for Climate Resiliency

Rachel Golden, Sierra Club

In this blog post, Sierra Club outlines several ways that building electrification is core to climate resilient homes and communities. Electrification is needed for reliability, especially in wildfire-prone areas. Further, building electrification will help us ride out hotter and longer heat waves. The gas system is vulnerable, especially to climate change and natural disasters. Electrification is a fundamental strategy to achieve both climate adaptation and mitigation, and requires deep and early investment by the state, air districts, counties, and cities.

Proceeding on the Motion of the Commission in Regard to Gas Planning Procedures

New York Department of Public Service

The New York Department of Public Service has opened a proceeding to discuss long-term gas planning procedures, including the need for gas planning to align with New York’s Climate Leadership and Community Protection Act. All planning must now consider non-pipes solutions. This proceeding is ongoing.

Modernize Utility Business Models 

Today’s gas utility business model is not well aligned with decarbonizing the buildings sector. The status quo business model will not be feasible in the future; continuing to distribute and burn this gas in the same way is incongruous with a decarbonized world. Gas utilities can either transform their business model to thrive in a low-carbon future, or plan for a managed transition from reliance on the gas system to the electric system for residential and commercial buildings.

Manage Infrastructure and Stranded Asset Risk 

Natural gas utilities are currently investing in expanding and replacing gas infrastructure based on the expectation of continued gas consumption for decades to come, an expectation that is inconsistent with the need to decarbonize buildings and eliminate GHG emissions. Most of this new infrastructure will not be useful for its expected lifetime if we are to meet our climate goals and risks becoming stranded assets. In order to manage these risks and avoid “digging the hole deeper,” commissions must be proactive in developing clear strategies for winding down infrastructure investment and managing costs of existing infrastructure.

The Challenge of Retail Gas in California’s Low-Carbon Future

E3 for California Energy Commission

A new E3 study for the California Energy Commission demonstrates why the state needs a transition strategy for its retail natural gas distribution system, as it aims to achieve its ambitious climate goals by midcentury. In this study, E3 evaluated two strategies for reducing carbon emissions from California buildings: building electrification and renewable natural gas. E3 found that building electrification is likely to be a lower-cost and lower-risk strategy for reducing carbon emissions from buildings in California. E3 also found that, particularly under a high building electrification future, customers remaining on the natural gas system could face disproportionately high costs in the absence of a gas transition strategy.

California’s Gas System in Transition: Equitable, Affordable, Decarbonized, and Smaller

Gridworks

This report shows how a suite of local and state-wide policies resulting from California’s commitment to 100 percent clean electricity and carbon-neutrality are set to cause a significant reduction in gas demand in coming decades. At the same time, the cost of safely operating California’s gas infrastructure has risen in recent years and is set to rise again as utilities seek necessary safety upgrades and investments.

Without a strategy to transition the gas delivery system, the confluence of these two trends could cause harm to gas workers, low-income gas residents, gas-dependent industries, and the broader economy. This report begins the development of that strategy, providing recommendations on how state and industry leaders can meet this challenge head on.

Consistent with Gridworks mission to convene, educate, and empower stakeholders to decarbonize electricity grids, this report draws on a series of facilitated discussions between key consumer, labor, equity, utility and environmental stakeholders. These stakeholders provided invaluable input, without which this report would not be possible.

Managing the Transition: Proactive Solutions for Stranded Gas Asset Risk in California

Andy Bilich, Michael Colvin, Timothy O’Connor, Environmental Defense Fund

To cut greenhouse gas emissions and air pollution, California agencies, municipalities, and some utilities are rethinking the role of natural gas within the state’s energy system. This includes new policies and approaches to use more electric options in homes and businesses, and to reduce the use of natural gas in power plants. Succeeding in this endeavor will reduce reliance on the gas system, which could result in existing gas infrastructure becoming “stranded”.

This carries important financial and political implications that, if not managed effectively, could complicate the state’s efforts to combat climate change. This framework provides guidance on how policymakers can address the transition away from gas. The report details options including strategic electrification, methods to pay for early retirement of the gas infrastructure, plans needed to decommission the gas infrastructure, and the need to have a bright line for new investments.