STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of January 11, 2021
TO: Members of the City Council
VIA: Dante G. Hall, City Manager
SUBMITTED BY: Robert Reber, Community Development Director Larissa Alchin, Contract Assistant Planner
SUBJECT: Continued discussion from City Council meeting held September 28, 2021, on decarbonizing buildings through possible adoption of an all-electric building code amendment RECOMMENDED ACTION:
Discuss and provide direction if and what type of all-electric ordinance should or should not be pursued.
COMMISSION/SUBCOMMITTEE ACTION AND RECOMMENDATION:
No Commission or Subcommittee actions or recommendations are yet applicable for this action. If an ordinance were to be considered, it would require Planning Commission review. If Council directs staff to initiate adoption of an all-electric ordinance, staff recommends that the process be completed early enough that it can be approved by the California Energy Commission (CEC) no later than September 2022, prior to the start of the next building code cycle that will take effect January 1, 2023.
FISCAL IMPACT OF RECOMMENDATION:
If Council desires an ordinance be drafted, additional but unknown staff and attorney time will be needed to draft the ordinance, notice and hold required public hearings, and then implement a mandatory program, which would also affect costs of construction in Hercules.
BACKGROUND:
At the regular City Council meeting held on September 28, 2021, following a presentation by staff, City Council members present agreed to continue the discussion to a date uncertain to enable the full City Council an opportunity to provide feedback to staff. The September 28 staff report to City Council provided an in-depth look at all-electric ordinances (see Attachment 1). During the September 28 meeting, Council members asked staff to provide additional information regarding the range of ordinance types, example ordinance, feasibility, and power grid capacity.
DISCUSSION:
Types of Reach Codes
Local jurisdictions have adopted two types of reach codes:
Prescriptive codes, which require one or more specific energy efficiency measures; and Performance codes, which require buildings perform more efficiently based on accepted computer modelling and allow trade-offs between energy efficiency measures.
Additionally, some related codes do not specifically require increased energy efficiency, but they may cause less energy to be used or they may increase the likelihood of electrification and therefore reduced greenhouse gas emissions. Examples of this type of code are requiring EV charging stations or requiring a home energy audit.
Table 1 - Prescriptive & Performance Reach Codes
Reach Code Type
Examples
Prescriptive
Banning new natural gas infrastructure;
Requiring all-electric power source for new construction in most common occupancy types; Requiring all-electric power source for new construction and substantial remodels.
See Attachment 2: All-Electric Model Reach Code
Performance
Fuel-Neutral Reach Code requiring stricter energy efficiency, renewable energy, and energy storage requirements for newly constructed buildings regardless of energy power source (electricity and natural gas OR electricity only). All new mixed-fuel buildings must comply with stricter performance standards or prescriptive requirements such as being all-electric.
See Attachment 3: Electric-Preferred Model Reach Code
Local jurisdictions have adopted a variety of reach codes for the current (2019) three-year code cycle which took effect January 1, 2020. These adopted reach codes include performance-based “Fuel-Neutral” ordinances (such as those adopted by the cities of San Rafael and Albany), which require new buildings comply with greater energy performance levels regardless of building power source. The “Electric Preferred” ordinance adopted by Marin County requires only mixed-fuel buildings comply with greater energy performance levels to offset the effects of continued natural gas use. Some prescriptive “All-Electric” reach codes, such as that adopted by the City of Campbell, ban natural gas for specific appliance uses such as water and space heating while still allowing gas for fireplaces and cooking. The cities of Petaluma and Berkeley have adopted “Gas Ban” or “All-Electric” ordinances whereby no new gas lines or hookups are allowed in certain new construction.
As of September 2021, 49 local justifications in California had adopted reach codes to reduce their reliance on natural gas and improve energy efficiency (see Attachment 4). On February 18, 2020, Richmond was the first city in Contra Costa County to adopt a reach code banning natural gas for space/water heating and cloth dryers in new single-family and low-rise multifamily units. Richmond is currently working on an update to its reach codes to make it more stringent in anticipation of the upcoming Title 24 update. On December 14, 2021, the Contra Costa County Board of Supervisors voted to waive the first reading and set a date of January 18, 2022, for a public hearing to consider adoption of an ordinance amending the County’s building code to require all newly constructed residential buildings, hotels, offices, and retail buildings to be constructed as all-electric buildings without natural gas infrastructure (see Attachment 5).
Figure 1- Adopted Reach Codes
Feasibility of All-Electric Ordinance
The feasibility of switching to all-electric energy sources compared to the current hybrid model of gas and electric power depend on the installation of solar photovoltaic (PV) systems, battery storage, and improving efficiencies. Starting with the 2019 Title 24 update, all new single-family and low-rise multi-family buildings are required to install PV systems that cover the projected annual electrical usage. With the 2022 Title 24 update, current solar requirements will be coupled with PV battery storage to increase the availability of energy when needed at night and on cloudy/smoky days. Additionally, starting in 2023, new high-rise multifamily units, hotels-motels, schools, and commercial buildings will also be required to install PV and battery systems. The solar systems must also be sized to provide for the full annual energy usage of the building, based on the floor area of the building and climate zone where the building is located. Nevertheless, there are exceptions to the PV mandate, like a property being too shaded or having too small a roof to install solar panels.
Local weather patterns impact how much energy a building consumes and accordingly the amount of energy certain measures may save. Provisions in the California Energy Code account for climate variation by dividing the state into sixteen climate zones. Hercules contains two climate zones: 91.8% of the existing building stock is located in Climate Zone 3, and 8.2% is located in Climate Zone 12. Cost effectiveness studies model energy performance using weather patterns from each climate zone to better approximate energy savings and therefore cost-effectiveness in each climate zone. The California Energy Codes & Standards Study (Attachment 6) contains the full methodology, assumptions and building prototypes used in the low-rise residential cost-effectiveness studies. Cost effectiveness studies analyze two different metrics (utility bill impacts and time-dependent valuation) to assess cost-effectiveness in newly constructed residential buildings. Both methodologies require estimating and quantifying the incremental costs and energy savings associated with energy efficiency measures. The main difference between the methodologies is the way they value energy and thus the cost savings of reduced or avoided energy use.
Utility Bill Impacts (On-Bill): Customer-based Lifecycle Cost (LCC) approach that values energy based upon estimated site energy usage and customer on-bill savings using electricity and natural gas utility rate schedules over a 30-year duration, accounting for discount rate and energy cost inflation.
Time-Dependent Valuation (TDV): This methodology is intended to capture the “societal value or cost” of energy use including long-term projected costs such as the cost of providing energy during peak periods of demand and other societal costs such as projected costs for carbon emissions, as well as grid transmission and distribution impacts. This metric values energy use differently depending on the fuel source (gas, electricity, and propane), time of day, and season. Electricity used (or saved) during peak periods has a much higher value than electricity used (or saved) during off-peak periods. The Energy Commission uses this methodology in evaluating cost-effectiveness for efficiency measures in Title 24, Part 6.
The cost-effectiveness study measures the benefit-to-cost ratio of multiple energy saving measures over a 30-year time frame, taking into account future savings, costs, and financing of incremental first costs. Energy efficiencies studied include but are not limited to cool roofs, slab insulation, wall & attic insulation, and HVAC duct measures. Results are presented as On-Bill benefit-to-cost (B/C) ratio or Time Dependent Valuation (TDV) B/C ratio. A value equal to one is equivalent to the incremental cost and a value greater than one represents a positive return on investment. The tables below show the results from the Cost-Effectiveness report for new low-rise single-family homes and multi-family units in Hercules. The City of Hercules Climate Zone 3 cost-effectiveness study also provides calculations for new and existing office, retail, and hotel buildings (see Attachment 7).
Table 2 – Benefit-to-Cost Ratios of Energy Options for New Single-Family Homes in Hercules Package
B/C
TDV B/C
Energy Efficiency (EE)
2.60 2.36
High-Efficiency Appliances
1.76 1.62
EE + PV
2.22 1.68
EE + PV + Battery
1.50 1.58
Electrification
0.55 1.53
Electrification + EE + PV
2.88 ∞
Electrification + PV (neutral cost)
∞
∞
Table 3 – Benefit-to-Cost Ratios of Energy Options for New Low-Rise Multifamily Units in Hercules Package
B/C
TDV B/C
High-Efficiency Appliances
1.73 1.58
EE + PV
2.43 1.73
EE + PV + Battery
1.32 1.64
Electrification
0.58 1.46
Electrification + EE + PV
4.18 ∞
Electrification + PV (neutral cost)
∞
∞
The following Energy Efficiencies (EE) were included as part of the climate zone 3 new single-family home packages: verified low-leakage ducts in condition spaces, R-10 perimeter slab insulation, basic compact hot water distribution design credit, 0.35 cfm (cubic feet per minute) HVAC system, minimum code compliant PV, and 5-kWh battery storage. No Energy Efficiency packages alone were found to be cost-effective and therefore not included for multifamily units. The only package which did not show a positive On-Bill ratio was the Electrification package which compares a 2019 code compliant all-electric home with a 2019 code compliant mixed-fuel home, and does not include improved efficiencies, HE appliances, increased PV scaling, or battery storage.
The cost-effectiveness study for climate zones 3 and 12 show reach codes requiring all-electric fuel in new construction would result in a positive return on investment in nearly all new residential and nonresidential construction in Hercules. Furthermore, requiring new construction to be electric-ready as the new 2022 Title 24 update proposes would likely make mixed-fuel buildings more costly to build as they require the added cost of gas lines.
Power Grid Capacity
According to a 2019 study by Energy and Environmental Economics, Inc., the California grid is a summer peaking system, with peak electricity demand driven by residential and commercial air conditioning. This means that the summer peak load is used to plan systemwide capacity additions and investments. Residential and commercial building electrification will lead to an increase in winter electricity demand across all climate zones. However, as the study suggests, even in a relatively high residential building electrification future, buildings’ contribution to statewide winter electricity demand is likely to remain lower than the residential summer peak demand levels. Currently, most natural gas consumption is attributed to water and space heating in the home, which generally increase in the winter months during off-peak electricity demand.
Without additional energy efficiency measures, widespread use of electric space and water heating could increase California’s overall electricity use by approximately 19 percent. However, when coupled with energy efficiencies, PV systems, and batteries (as required by the energy code), those grid impacts would be reduced. In California, space heating accounts for 40 percent of natural gas use in residential and commercial buildings combined. Electric heat pumps are an energy-efficient heating and cooling system that can heat buildings by moving heat from outdoors to indoors (during winter) and cool buildings by moving heat from indoors to outdoors (during summer). Similarly, induction cooktops, heat pump electric clothes dryers, and electric water heat pumps and solar hot water heaters are high efficiency and reduce the impact of increased electric grid use.
Furthermore, a 2018 Synapse Energy Economics study that modeled the impacts of building electrification scenarios on the grid in the winter and summer, confirmed that California’s electricity infrastructure is well equipped for electrification and that the new winter demand from space and water heating needs would remain below the summer peak demand. Northern California PG&E customers (including Hercules) consume the majority of natural gas in the state. Under an “unmanaged” scenario in which 50 percent of the natural gas used in new and existing building is converted to electric for space and water heating, PG&E’s winter peak loads would begin to surpass summer peak loads as shown in Figure 4. Converting 50 percent of buildings to electric space and water heating will be a slow process with natural gas currently accounting for 86 percent of space heating and 90 percent of water heating in residential buildings. Similarly, natural gas is used to heat water in 95 percent of commercial buildings and for 80 percent of space heating in Northern California. Nonetheless, according to the Synapse study, if PG&E becomes a winter-peaking utility in the future, it is unlikely to require additional generation supply but could require additional transmission and distribution upgrades to serve load in its territory.
Figure 2 – PG&E electrification impacts in a 50% building electrification scenario During the summer months, electrification will result in relatively minor additional load from water heating, but very little additional load from space heating. The graphs below depict the expected hourly load shapes from water and space heating on a peak summer day and a peak winter day.
Figure 3 - Residential peak summer and winter space and water heating The graphs indicate that water heating load is highest during the morning and late evening hours. Electric water heating in the summer would likely draw energy form the grid. However, a portion of the load could be shifted to off peak hours through time-of-use rates and through water heaters’ ability to heat water during off-peak hours and store it for use during peak hours.
With increased Title 24 energy efficiency standards for 2022, including heat pump technology use for space and water heating, PV systems and batteries sized to provide the total electricity usage of a home, all electric newly constructed buildings would likely have minimal impact on the summer and winter grid demand.
Direction to Staff
As described above, reach codes can be either prescriptive codes, which require one or more specific energy efficiency measures, or performance codes, which require buildings perform more efficiently through a variety of optional measures regardless of fuel source. Performance reach codes require energy modeling to craft policies which exceed minimum building energy performance by a certain percentage and are generally more complicated to develop and enforce. The prescriptive and performance approaches can also be combined as a hybrid reach code.
Staff is requesting the Council provide direction on the following:
Does the Council wish to adopt a building decarbonization ordinance (Electrification Ordinance)? If so, does the Council wish to adopt by reference the County’s pending ordinance, or adopt an ordinance of its own? If the latter, does Council prefer a prescriptive or a performance-based ordinance? What projects would be subject to the ordinance?
New single-family residential
New multi-family residential
New accessory dwelling units
New commercial buildings
Substantial remodel of existing buildings
Will any exceptions be allowed?
Affordable housing projects
Cooking appliances (commercial and/or residential)
Outdoor fireplaces/pits and grills
Medical
Laboratories
Emergency facilities
When will the ordinance take effect?
Immediately upon approval, which effects the current 2019 building code With the 2022 update which takes effect January 1, 2023 ATTACHMENTS:
Staff Report to the City Council – September 28, 2021
All-Electric Model Reach Code
Electric-Preferred Model Reach Code
2019 Code-cycle adopted reach codes
Contra Costa County Ordinance No. 2022-02 All-Electric Buildings California Energy Codes & Standards Study
Summary Cost-Effectiveness results for Hercules Climate Zone 3 2 Date Page 1
Climate Zone 3 is typified by hot dry summers and warm winters (distinct wet and dry seasons; low rainfall and low humidity; no extreme cold but can be cool in winter; hot to very hot summers common; significant diurnal temperature range). Climate Zone 12 experiences cooler winters and hotter summers than Climate Zone 3, with some lower areas receiving frost on winter nights.
Ratios listed “∞” indicate cases where there are both first cost savings and annual utility bill savings; upgrade and benefits are realized immediately.
The cost savings for the all-electric code compliant home ("Electrification" package) is invested in a larger PV system, sized to result in a lifetime incremental cost of zero based on the On-Bill approach, relative to a mixed-fuel home.
Residential Building Electrification in California:
https://www.ethree.com/wp-content/uploads/2019/04/E3_Residential_Building_Electrification_in_California_April_2019.pdf Decarbonization of Heating Energy Use in California Buildings:
https://www.synapse-energy.com/sites/default/files/Decarbonization-Heating-CA-Buildings-17-092-1.pdf