California pushes towards all-electric space and water heating in buildings 

Recently the California Energy Commission published their 2021 Building Decarbonization Assessment in which they conclude that sustainable buildings with electric HVAC and water heating reduce operational costs by hundreds of dollars per ton of abated CO2, even without applying economic incentives.

Matter of fact they calculate that switching to fully electric HVAC and electric water heating appliances in commercial buildings will reduce operational costs at a negative cost of -$164 to -$386 per ton of abated CO2. As of late 2020, several cities including San Francisco and San Jose have already enacted all-electric building ordinances that essentially ban natural gas usage in newly constructed buildings and the statewide 2022 California Building Energy Standards Code will reflect a strong push towards all-electric space and water heating, but will stop short of a similar gas ban in new buildings.

Decarbonization of the residential and commercial buildings sector, responsible for 25 percent of California’s carbon emissions, plays a key role in the state’s economic recovery and climate strategy. In 2018, the state legislature firmly committed to a 40 percent emissions reduction from buildings by 2030 (compared to 1990), and reach carbon neutrality by 2045. Eliminating the use of natural gas in HVAC systems and hot water generation is the focal point of building decarbonization, since space heating and water heating account for 44 percent and 23 percent, respectively, of gas usage in residential buildings. With most appliances having a lifespan between 8 and 20 years, it is essential that a conversion to all-electric appliances happens now in order to eliminate natural gas usage by 2045.

In order to achieve this zero emission target, the Building Decarbonization Coalition determined that the share of high efficiency heat pumps for space and water heating must grow exponentially from 1-5 percent in 2018, to 50 percent in 2025, and 100 percent in 2030.

Commissioner Andrew McAllister of the California Energy Commission (CEC) said in an interview in January, "We anticipate that we'll be providing incentives for the market to scale up its adoption of heat pumps. You need to give the marketplace reasons to adopt it before you step in and maybe mandate it. That's the pathway that we're likely on."

Among such incentives is the TECH (Technology and Equipment for Clean Heating) initiative, announced by the California Public Utilities Commission in March 2020 and currently being rolled out. It will provide $120 million in funding in the next four years to promote the adoption of low-emission space and water heating, technology at an early stage of market development, technology with the greatest potential for reducing GHG emissions, and technology with the greatest potential for improving health and safety and energy affordability for low-income households.

While the adoption of all-electric heating and cooling is generally most cost-effective in new construction, shifts in energy pricing, technological advancements and higher market penetration have also improved return on investment of appliance electrification and operational efficiency in existing buildings. 

Beyond governmental action, the private sector has also acknowledged the urgency to reduce carbon emissions from buildings and mitigate already apparent consequences of climate change such as increasingly frequent power outages and wildfires. In December 2020, 55 California-based organizations called on Governor Gavin Newsom and the CEC to deploy new policies and practices to stimulate new “energy efficiency programs, building energy benchmarking, … performance standards for new and existing buildings, … strategic energy management, building-level distributed generation and storage, and demand-side management (DSM) programs.”

As the regulatory push as well as the economic case for building electrification in California continue to grow stronger, the Green team in Silicon Valley is expanding its network across public and private stakeholders, including state and local government actors, utilities, energy service companies, developers, and commercial and large residential building owners. To learn more about the latest developments in building decarbonization in California and connect with key regional actors and resources, please reach out to us.