CITY OF SAN MATEO
City Council Special Meeting
January 16, 2024
5:30 PM
City Hall Conference Room C
Entrance is on O’Farrell Street
COUNCIL MEMBERS
Lisa Diaz Nash, Mayor
Rob Newsom Jr., Deputy Mayor
Rich Hedges
Amourence Lee
Adam Loraine
AGENDA
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January 16, 2024
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CALL TO ORDER
Roll Call
AB 2449 Requests and Considerations for Meeting Participation by Teleconference due to Just Cause or Emergency Circumstances
CLOSED SESSION
The public will have an opportunity to comment before the consideration of these items. Following the meeting a report of action from Closed Session will be provided if required.
1. Conference with Legal Counsel – Existing Litigation
(Paragraph (1) of subdivision (d) of Government Code Section 54956.9) Name of Case: Danielle M., et al. v. Winchester, Noah, et al., San Mateo Superior Court Case No.: 22-CIV-01066
2. Conference with Legal Counsel – Existing Litigation
(Paragraph (1) of subdivision (d) of Government Code Section 54956.9) Name of Case: City of San Mateo v. Argonaut Insurance Company, United States District Court - Northern District of California Case No.: 5:23-cv-02504-VKD
STUDY SESSION
The public will have an opportunity to comment during the consideration of these items.
3. Sustainable Buildings Strategy – Project Update
Receive an update on the development of "Electrify San Mateo - Building for the Future: City of San Mateo Sustainable Buildings Strategy" and provide direction on the policy options to include in continued project outreach.
CEQA: This informational report is not a project subject to CEQA, because it is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines Section 15378(b)(5).)
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ADJOURNMENT
----------------------------------------------------------------------------------------------------------------------------- AGENDAS:
Agendas and material are posted on the City’s website on the Friday preceding each Council Meeting and can be viewed on the City's website at
www.cityofsanmateo.org
. Any supplemental material distributed to the Council after the posting of the agenda will be made part of the official record.
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until 4 p.m. the day of the meeting.
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. Notification 48 hours prior to the meeting will
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CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 3 Section Name: STUDY SESSION Account Number: 10-1311 File ID: 23-8275 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: City Manager's Office
MEETING DATE: January 16, 2024
SUBJECT:
Sustainable Buildings Strategy – Project Update
RECOMMENDATION:
Receive an update on the development of "Electrify San Mateo - Building for the Future: City of San Mateo Sustainable Buildings Strategy" and provide direction on the policy options to include in continued project outreach.
BACKGROUND:
Building energy use represents 38% of communitywide greenhouse gas emissions in San Mateo. In January 2022, the City Council prioritized the decarbonization of existing buildings to help meet the City’s climate goals and reaffirmed this priority in 2023. The decarbonization, or electrification, of buildings refers to the transition from gas equipment to electric equipment for space and water heating, clothes drying, cooking and more. In San Mateo, Peninsula Clean Energy (PCE) provides electricity Citywide that is 50% renewable and virtually 100% carbon free, and PCE is committed to delivering 100% renewable and carbon free electricity by 2025. Electrifying existing buildings is critical to further reducing communitywide greenhouse gas emissions and is a key strategy in the City’s Climate Action Plan. Technical analysis and community engagement are needed to develop a roadmap to clean energy buildings in San Mateo.
In late 2022, staff released a Request for Proposals (RFP) seeking an experienced consultant team knowledgeable in decarbonization policy planning, analysis, and implementation, to help San Mateo develop a decarbonization strategy that centers on equity and promotes a collaborative pathway to electrification. After reviewing the proposals and interviewing the consultants, staff selected Rincon Consultants, Inc. because of their compelling approach to analysis and outreach and their experience with developing similar strategies for other cities. The City Council approved an agreement with Rincon for this project at the March 20, 2023 City Council meeting. This project, which is now titled, “Building for the Future: City of San Mateo Sustainable Buildings Strategy,” launched in May 2023. On September 10, 2023, the project team presented to the Sustainability and Infrastructure Commission on the Sustainable Buildings Strategy. The item received a high volume of public comments including 150 written and verbal comments as discussed later in this report.
This report provides an overview of the project and summarizes the local building electrification policy context, upfront electric equipment costs, community feedback staff has received so far, and policy options for San Mateo to consider. Staff is seeking Council feedback on the policy options to include in continued project outreach.
Project Overview
The goal of this project is to develop a long-term strategy document to electrify San Mateo’s existing building stock, including policies and actions for both residential and nonresidential buildings. Electrifying existing buildings is expected to produce many positive outcomes in San Mateo beyond reducing greenhouse gas emissions and helping meet climate goals. Electrification benefits include the added health benefit of reducing gas use in the home. Peer reviewed studies have documented that residences with gas stoves have 50 to 400% higher average nitrogen dioxide concentrations than
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homes with electric stoves.1 Living in a home with a gas stove may increase children’s risk of asthma by 42%.2 Additionally, gas infrastructure carries an inherent safety risk due to the volatile nature of gas, including risk of methane leakage, damage during earthquakes, accidental explosions, or fires. Nationwide, gas ignites over 4,000 home structure fires annually, causing on average 40 deaths and $54 million in property damage each year.3 When coupled with solar and battery energy storage, all-electric buildings can mitigate impacts of power outages and increase community resilience.
There is a common misconception that having gas appliances provides a redundant system during power outages; however, gas appliances like water heaters, stoves, and space heaters typically cannot function without electricity to power the fans and controls needed for operation.
The concept of energy equity recognizes that disadvantaged communities have been historically marginalized and overburdened by pollution, underinvestment in clean energy infrastructure, and lack of access to energy efficient housing and transportation (Department of Energy, Office of Energy Efficiency and Renewable Energy)4. Equity will be centered in the development of the Sustainable Building Strategy and the equity criteria drafted by the project team builds upon the work done by the City of San Mateo’s Diversity, Equity, and Inclusion Committee, and draws inspiration from equity work conducted in conjunction with its housing element from 2022, the DEI Strategic Framework Report, and City Council resolution work. As part of future policy exploration and analysis, staff will address how vulnerable communities will be supported in each electrification policy implementation.
Local Policy Context
As part of the FY 2022-2023 goal setting session, the City Council directed staff to present to them policy options to decarbonize and electrify existing buildings and eliminate natural gas use by 2030. The City’s Climate Action Plan also identifies electrifying existing buildings as a key strategy to reduce communitywide greenhouse gas emissions. The City promotes electrification through marketing electric equipment rebates and incentives and hosting workshops.
Additionally, the City adopted reach codes to encourage and require building electrification. In 2020, the City Council adopted an ordinance requiring all new residential and office buildings be all-electric starting on January 1, 2021. In 2022, the City Council approved an ordinance that expanded the all-electric requirement to all new buildings and requires electric-readiness and electric appliances for specific home remodels as of January 1, 2023. City staff are monitoring federal litigation involving the City of Berkeley’s ban on gas infrastructure and are reviewing recent Ninth Circuit caselaw on this issue.
In addition, the City is working on electrifying appliances at City facilities. The Senior Center kitchen replaced a gas stove with an electric cooktop. Staff are evaluating gas water heater replacement options with heat pump water heaters at multiple City facilities. Staff worked with PG&E’s program implementer, Willdan, and completed site assessments at 17 City facilities. Willdan staff identified seven sites that show the most potential for replacement through the turnkey program that would leverage PG&E and PCE rebates, resulting in new electric equipment replacement at no cost to the City. Staff are also planning to apply for PCE’s Member Agency Energy Grants. There is $11.5 million available, and monies will be disbursed based on customer count in the jurisdiction. The funding must be used for purposes consistent with PCE’s mission, such as efforts to reduce greenhouse gas emissions and support building decarbonization. Staff looks forward to PCE’s release of the grant funding and will allocate funding thoughtfully and strategically to advance the City’s climate and decarbonization goals in alignment with PCE’s grant guidelines.
At the regional level, in May 2023, the Bay Area Air Quality Management District (BAAQMD) adopted zero nitrogen oxides (NOx) standards that will prohibit the sale and installation of gas water heaters starting in 2027 and gas furnaces in 2029 in 1 U.S. EPA. Integrated Science Assessment (ISA) for Oxides of Nitrogen – Health Criteria (Final Report, Jul 2008). U.S. Environmental Protection Agency, Washington, DC, EPA/600/R-08/071, 2008. https://cfpub.epa.gov/ncea/isa/recordisplay.cfm?deid=194645. 2 Weiwei, L., Brunekreef, B., & Gehring, U. (2013). Meta-analysis of the effects of indoor nitrogen dioxide and gas cooking on asthma and wheeze in children. International Journal of Epidemiology, 42(6), 1724–1737. https://doi.org/10.1093/ije/dyt150. 3 Ahrens, M. & Evarts, B. (2018). Natural Gas and Propane Fires, Explosions and Leaks Estimates and Incident Descriptions. NationalFire Protection Association. https://www.nfpa.org/-/media/Files/News-and-Research/Fire-statistics-and- reports/Hazardousmaterials/osNaturalGasPropaneFires.
4 https://www.energy.gov/eere/energy-equity-and-environmental-justice
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the nine-county Bay Area. These standards are the most ambitious in the country and outpace the state’s goal of banning the sale of new gas furnaces and water heaters throughout the state starting in 2030. These policy efforts drive California closer to the ambitious climate goal of carbon neutrality by 2045.
Building Electrification Costs
Upfront costs include all costs to purchase an appliance, install and permit it, and make it operational. This includes wiring, labor, and contractor mark ups. Upfront costs to electrify were analyzed using the most recent and location specific data available for each appliance: water heaters, HVAC systems, dryers and stoves. Attachment 1 includes detailed cost analysis for residential building electrification and Attachment 2 includes cost analysis information for commercial and multifamily buildings.
Attachment 1 provides data for the electrification costs for the entire home, but most building owners are expected to replace appliances one by one, as the original gas appliances approach the end of their useful life and need to be replaced.
This means that the costs or cost savings to electrify will likely happen at the appliance-level, not the whole-home level.
The following table compares electrification costs and available incentives with replacing equipment with the gas equivalent for each appliance (see Attachment 1 for more details and analysis):
Electrification Marginal Upfront Costs + Incentives*
Appliance Electric
Appliance Cost
Combined
Incentives
Electrification
Cost After
Incentives
Gas Equivalent
Costs
Electrification
Marginal Cost
or (Savings)
Electrification Scenario Marginal Cost with Peninsula Clean Energy, BayREN, IRA Incentives Electric heat pump water
heater $6,000 $(7,500)** - $2,800 $(2,800)
Furnace Only without AC
Low-Cost HVAC Scenario $13,965 $(5,900) $8,065 $6,132 $1,933 Furnace Only without AC
Median-Cost HVAC Scenario $17,910 $(5,900) $12,010 $6,132 $5,878 Furnace and AC
Low-Cost HVAC Scenario $13,965 $(5,900) $8,065 $13,632 $(5,567) Furnace and AC
Median-Cost HVAC Scenario $17,910 $(5,900) $12,010 $13,632 $(1,622) Electric dryer $1,963 $(250) $1,713 $925 $788
Electric stove $2,375 $(250) $2,125 $1,155 $970
Panel upgrade (if needed) $3,700 $(1,600) $2,100 N/A $2,100 *Note that IRA incentives take the form of tax credits, while other rebates can be applied upfront by the building owner or contractor after completing program documentation requirements. Please refer to Attachment 1Error! Reference source not found. for a full summary of rebates and incentives by funder.
**Rebates cannot exceed total project cost which is expected to be $6,000 for a water heater replacement.
There are a few main takeaways that influence project cost:
•HVAC systems are a major cost variable: Differences across installation bids for electric heat pump HVAC systems are a major cost variable for the electrification of space heating. Accordingly, ‘low’ and ‘median’ scenarios are provided to detail the significant difference in installation bids for electric heat pump HVAC systems. This discrepancy in installation bids from contractors stems from home-specific needs for ductwork upgrades, locations to site HVAC systems, and labor costs which vary depending on the contractor. •Air conditioning: Most homes in San Mateo do not have air conditioning, though staff have observed an increase in the installation of new air conditioning units. Electric heat pump HVAC provides both space heating and cooling.
If an existing home does not include air conditioning, this is an added benefit but will increase marginal costs. •Panel upgrades: Not all homes will need a panel upgrade to electrify appliances. Panel upgrades can add to project costs, estimated at $3,700 without a rebate and $2,100 with a rebate. •Rebates and incentives: Significant rebates are currently available through the Inflation Reduction Act (IRA),
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Peninsula Clean Energy (PCE), BayREN, and TECH Clean California. When combined, building owners are eligible for $15,500 in incentives. Incentives take the form of both rebates and tax incentives. Tax incentives through the IRA are provided as a credit but require the building owner to have some tax burden to reduce. Future funding through the High Efficiency Home Rebate Act (HEERA) will further reduce costs for low-income and moderate- income households. Rebates are challenging because they change often.
On-bill costs are another important piece of the overall economics of electrification. On-bill costs describe how much the building owner will pay to operate their appliances. PCE and Silicon Valley Clean Energy (SVCE) recently evaluated on-bill cost impacts of whole-home single-family electrification vs. mixed fuel in a September 2023 analysis. The PCE and SVCE Study5 shows that electrification of an average single-family home could lead to savings of ~$380/year when switching from gas to standard-efficiency electric appliances, and even more if high-efficiency systems are installed. More details are provided in Attachment 1 and the PCE and SVCE Study.
Community Feedback
Outreach for this effort is ongoing and will continue throughout the project. To date, outreach has focused on educating the community about the costs and benefits of building electrification and about the project’s general goals. Outreach also focused on gathering feedback on the equity and effectiveness criteria the City will use to evaluate policy options.
At the September 13, 2023 Sustainability and Infrastructure Commission meeting, staff and the consultant team presented the building inventory and market segmentation analysis as well as building electrification cost analysis. Over 120 written public comments were submitted for the item with the majority in support of decarbonization. 24 verbal comments were also provided at the meeting. Proponents of the City’s decarbonization support electrification policy efforts to reduce gas use in the community to combat climate change and to encourage the leveraging of incentives and rebates for electrification. For those opposed, the number one concern about electrification is the costs to the property owner. Other concerns include power outages, growth of the grid to accommodate future electric buildings, and passed on costs to renters. Commissioners' top concern was a robust engagement and outreach approach to make sure all voices of the community were heard.
In Fall of 2023, five General Plan Town Hall meetings were held to solicit feedback on the City’s General Plan Update. Staff had a poster board summarizing the Sustainable Buildings Strategy project efforts and received a mix of both supportive feedback for working on electrification requirements as well as concerns about costs related to electrification. On September 22, 2023, staff presented to the City’s Diversity Equity and Inclusion Task Force. Feedback from the Task Force included: the need to include education, data, and storytelling in outreach. The Task Force’s biggest concerns regarding electrification were related to the electric power outages and costs to homeowners. The Task Force also helped identify follow up opportunities for partnerships and project outreach.
The project team also launched an online survey to assess community priorities for building electrification that was open December 2023 through January 10, 2024. Results of the online survey will be shared orally during the January 16, 2024 City Council Study Session. Early survey results show that the major concerns and values related to building decarbonization are consistent with the feedback received and during fall outreach events as summarized above.
Policy Options
At this point in the project, the project team has focused on education and gathering feedback to prioritize the community’s goals for the Sustainable Building Strategy. The goal of this report is to outline potential policy options to include in continued project outreach, research and analysis, including legal review.
These policies are meant to be considered as a menu of options to achieve the City’s climate goals, while considering implementation and cost challenges for property owners across the City. Most local governments considering a building decarbonization strategy combine multiple strategies together to produce the most comprehensive, and equitable policy 5 Bill Impacts of Decarbonizing Existing Single Family Homes. September 2023. Peter Mustachich (SVCE), Blake Herrschaft (PCE). https://svcleanenergy.org/wp-content/uploads/SVCE-PCE-Single-Family-On-Bill-Impacts-Results-2023.pdf
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result. Potential policy options are summarized below and detailed in Attachment 3:
1) Follow State mandates and BAAQMD Zero NOx requirements for gas water heaters in 2027 and gas furnaces in 2029, continue with adopted reach codes, and focus on outreach and incentives 2) Explore and adopt new reach codes to encourage and require electrification at time of renovation 3) Require electric equipment upon replacement ahead of BAAQMD Zero NOx requirements 4) Establish Building Performance Standards for commercial buildings 5) Adopt an electric first policy for City facilities
Adoption of an “End of Flow Ordinance” was considered but not provided in the ultimate policy options. An “End of Flow Ordinance” establishes a long-term carbon-neutrality aligned target to end natural gas use in a jurisdiction. The adoption of such an ordinance sends a signal to regional planners and utilities that the jurisdiction has taken long-term action to end the flow of natural gas in the community. The City of Half Moon Bay is the only jurisdiction that has adopted such an ordinance; their ordinance requires fuel gas lines to be capped or decommissioned in existing buildings by 2045. This type of approach should not be adopted as a standalone policy because it requires additional short-term actions to electrify existing buildings to meet such a goal.
This list of potential policies includes a range of options to address different building types and equipment. Each policy option requires legal review, further research, outreach and engagement with the community, and cost resource allocation for implementation. In future policy analysis, staff will identify how vulnerable community members may receive the technical or financial support needed to comply with a potential policy.
Staff is seeking Council direction on which of the five policy options to include in its ongoing outreach efforts and future analysis. Building electrification is a complex topic and by providing example policy options for community feedback, the project team hopes to receive deeper engagement and provide a clearer understanding of potential building decarbonization strategy options to the community and for inclusion in the final Sustainable Building Strategy.
Project Timeline and Next Steps
The project team adjusted the original timeline to allow for deeper community engagement. Council feedback will inform the next phase of outreach, which will begin in July 2024. The final Sustainable Building Strategy would return to City Council for adoption in 2025.
BUDGET IMPACT:
This study session has no impact to the City's General Fund. Funding for the "Electrify San Mateo - Building for the Future:
City of San Mateo Sustainable Buildings Strategy" was approved at the March 20, 2023, City Council meeting and funding was appropriated from the Advance Planning Fund (Fund 225).
ENVIRONMENTAL DETERMINATION:
This informational report is not a project subject to CEQA, because it is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines Section 15378(b)(5).)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 – Single-Family and Low-Rise Multifamily Building Electrification Costs Att 2 – High-Rise Multifamily and Nonresidential Building Electrification Costs Att 3 – Building Decarbonization Policy Options
Att 4 – Public Comment
STAFF CONTACT
Andrea Chow, Sustainability Analyst
[email protected]
(650) 522-7007
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Rincon Consultants, Inc.
449 15th Street, Suite 303
Oakland, California 94612
510-834-4455
www.rinconconsultan ts.com
Attachment 1: Single-Family and Low-Rise Multifamily Buildings Electrification Costs
Upfront Electrification Costs
Electrification upfront costs include all costs to purchase an appliance, install and permit it, and make it operational. This includes wiring, labor, and contractor mark ups. Upfront costs were analyzed using the most recent and location specific data available. See Appendix A for data sources.
For most upfront costs, median install values were selected to inform the cost analysis. Using median costs helped remove outlier quotes from contractors, which would have influenced the average value.
Quotes for some equipment, such as furnaces, could vary between contractors by as much as $15,000 for the same project. Where median costs were not available, averages were used.
In general, the costs for single-family homes and the costs per unit for low-rise multifamily buildings (3 stories and under) will be similar. Low-rise multifamily buildings tend to use similar equipment to single-family homes and one piece of equipment may even serve multiple units in some buildings. For example, an 80-gallon hot water heater being used by both units in a duplex. The refore, the per unit costs for electrification in Table 2 are assumed to be conservative for multifamily buildings which use residential (as opposed to commercial) sized equipment. High-rise multifamily homes (over 3 stories) look more like commercial buildings with a wide variety of equipment and the potential for larger centralized systems.
Like for Like Scenario: Replace Gas Appliances with New Gas Appliances Upfront Costs In the gas ‘like for like’ scenario (base case), where it is assumed that the building owner replaces existing natural gas appliances with new natural gas appliances, the typical whole-home cost in San Mateo without air conditioning1 is $11,012. Once costs for air conditioning (AC) are added in, the total projected cost to replace all appliances that run on gas plus an air conditioner is $18,512. The results are summarized in Table 1.
Table 1 Like for Like Scenario: Replace Gas Appliances with New Gas Appliances Appliance, Install, Wiring End Use Median/Average Cost (All Data) Gas water heater Water Heating $2,800
Gas furnace Space Heating $6,132
Air conditioner (keep existing furnace)* Space Cooling $7,500 Gas dryer Clothes Drying $925
Gas stove Cooking $1,155
Whole-Home Total Cost without AC $11,012
Whole-Home Total Cost with AC $18,512
*Note: Existing datasets did not cover the cost of air conditioning, which was found using desktop research (Angie’s List), filtering for location-specific costs by zip code, refers to central air conditioner.2 The air conditioner uses electricity not gas to operate.
1 According to the 2035 Peninsula Clean Energy Decarbonization Analysis, only 25% of homes in San Mateo County have Air Conditioning, with central air conditioning being the most common type of air conditioner. 2 https://www.angi.com/articles/how-much-does-installing-new-ac-cost.htm
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2 Electrification Scenario: Gas to Electric Upfront Costs (No Incentives) Installation costs for heat pump HVAC and the potential need for an electric panel upgrade are two of the largest influencers of cost in home electrification for the City of San Mateo. Differences across installation bids for heat pump HVAC systems are a major cost variable for the electrification of space heating. Accordingly, a ‘low’ and ‘median’ scenario was broken out for each to detail the significant difference in installation bids for heat pump HVAC systems. This discrepancy in installation bids from contractors stems from home-specific needs for ductwork upgrades, locations to site HVAC systems, and labor costs which are highly variable depending on the contractor. Note, heat pump HVAC systems provide both electric space heating and cooling. Electric panel upgrades were also a significant cost variable, adding $3,700 to total electrification costs if they were necessitated as part of the e lectric appliance installation.3 Upfront costs to electrify each appliance are described above in Table 2.
Table 2 Electrification Scenario: Replace Gas Appliances with New Electric Appliances (No Incentives)
Appliance, Install, Wiring End Use Median/Average Cost (All Data) Electric heat pump water heater Water Heating $6,000
Electric heat pump HVAC system
(provides both space heating and cooling)
Space Heating/Cooling:
Low-Cost Scenario
$13,965
Space Heating/Cooling:
Median-Cost Scenario
$17,910
Electric dryer Clothes Drying $1,963
Electric stove Cooking $2,375
Panel upgrade (if needed) Electrical $3,700
Electrification Scenario: Incremental Costs (Difference Between Gas and Electric Install Costs)
‘Incremental costs’ for electrification of individual appliances are at the core of this analysis because they describe the cost premium (if any) that a building owner would pay to make a switch to electric at the time of appliance replacement. Incremental costs describe the price difference between a gas replacement and an electric appliance . The incremental cost analysis below also factors in $7,500 savings for homes that displace both a gas furnace and air conditioning with a single heat pump HVAC unit.
Table 3 shows incremental costs for replacing gas appliances with electric appliances, with no incentives. The next section will demonstrate the impact of current incentives to reduce the upfront costs of electrification.
3 As discussed in the BayREN Decarbonizing Single-Family Homes Case Study, potentially costly electric panel upgrades are frequently recommended by contractors without first understanding the many potential avenues to avoid this cost through maximum usage of existing service capacity. The threshold for a panel upgrade appears to be around 100 amps. A single family home with a panel below 100 amps may need a panel upgrade to accommodate all-electric appliances. Panels 100 amps and above can likely find pathways to electrify without a panel upgrade. The BayREN Decarbonization Case Study recommends several ways for “panel optimization”, including making a whole home electrification plan, and investing in circuit sharing and pausing infrastructure instead of a panel upgrade.
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3 Table 3 Electrification Scenario Incremental Costs (No Incentives) Incremental Cost = Electric Appliance Cost – Gas Equivalent Cost Appliance End Use
Electric
Appliance Cost
Gas Equivalent
Cost
Median/
Average
Incremental
Cost
Gas furnace only: Electric heat
pump HVAC system
Space Heating/Cooling:
Low-Cost Scenario
$13,965 $6,132 $7,833
Space Heating/Cooling:
Median-Cost Scenario
$17,910
$6,132 $11,778
Gas furnace with AC: Electric
heat pump HVAC system
Space Heating/Cooling:
Low-Cost Scenario
$13,965 $13,632*
$333
Space Heating/Cooling:
Median-Cost Scenario
$17,910
$13,632*
$4,278
Electric heat pump water heater Water Heating $6,000 $2,800 $3,200 Electric stove Cooking $2,375 $1,155 $1,220
Electric dryer Clothes Drying $1,963 $925 $1,038
Panel upgrade (if needed) $3,700 N/A $3,700
* Includes $7,500 for a new air conditioning unit as well as $6,132 for a new furnace.
Figure 1 displays the incremental cost to electrify as the difference between the blue bar [electric] and gray bar [gas], which display appliance replacement costs. The difference between each bar is the increase in cost for upgrading to an electric appliance before rebates are applied. 4 Note that Space Heating & Cooling [Total Cost- Gas] combines cost for AC and a gas furnace.
Figure 1 Incremental Costs ($) to Electrify Each Appliance
4 Figure 1 combines costs for AC + a gas furnace to illustrate the full cost of dual space heating and cooling. It also selects the median, not low-cost HVAC scenario as a conservative estimate for an electric scenario for space heating and cooling. Units are displayed in $ amount.
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4 Figure 2 reflects four different HVAC scenarios which each result in a different incremental cost. A major finding is that when a heat pump HVAC is used to replace a gas furnace and AC, the incremental cost to upgrade is much lower and, in some cases, may be close to cost parity.
Figure 2 Incremental Costs ($) to Electrify: Detailed Heat Pump HVAC Scenarios
Whole-Home Electrification Incremental Costs
Electrification in existing buildings will likely happen on an individual appliance level instead of at the whole-home level, as building owners will likely only upgrade appliances as they fail. However, looking at the incremental cost to electrify on the whole -home level is useful for understanding the overall upfront cost impact of building electrification.
Over the course of 10-20 years a building is expected to replace each of its major gas consuming appliances including the water heater, furnace, air conditioner (if appli cable), dryer, and stove which all have effective lifespans of less than 20 years. During this time a homeowner would spend between $11,000 and $18,500 dollars to replace gas equipment with new gas equipment. During this same time period upgrading to electric appliances would cost between $24,300 and $32,000 before any incentives and dep ending on varied HVAC costs and need for a panel upgrade . This means the incremental or increased costs associated with whole-home electrification could be between $5,800 and $21,000.
A full cost table can be found in Appendix A detailing different scenarios for electrification.
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5 Current Incentives for Electrification
Current electric appliance incentives available through the Inflation Reduction Act (IRA), Peninsula Clean Energy (PCE), BayREN, TECH Clean California when combined make building owners eligible for $15,500 in rebates and tax credits, as summarized in Table 4. Incentives take the form of both rebates and tax incentives.
Data for existing rebates were collected from most recent online sources on existing federal-level (IRA5), local (PCE 6, BayREN 7, TECH Clean California 8) sources of home electrification rebates. Note that funders change available rebates often. Table 4 data reflect the most recent rebates as of December 2023.
Table 4 Current Electric Appliance Incentives – No Income Qualifications (as of December 2023)**
Appliance End Use
$ Rebate/
Tax Credit*
Available Funder Notes
Electric heat pump
water heater
Water
Heating
$2,000 PCE Stackable with other incentives, but most cannot exceed cost of projects. Must be a PCE Customer
$400 BayREN BayREN Home+ program. All BayREN- capped at $4,000 per customer over an 8-year period.
$3,100 TECH Incentives based on tank size- low-end highlighted here for conservative application of scenarios
$2,000* IRA Max for IRA 30% heat pump water heater tax incentive ($2000) max, must have paid taxes in
calendar year. Additional low-middle income IRA
incentives are upcoming but not included here.
Heat Pump Water
Heater Total Stackable
Rebates and Tax
Credits Available
$7,500 Note that incentives cannot exceed whole project cost which is projected to be $6,000. Whole
project cost currently covered with all stacked
incentives.
Heat Pump HVAC
System
Space
Heating/
Cooling
$2,500 PCE Stackable with other incentives, but most cannot exceed cost of projects
$400 BayREN High efficiency heat pump ≥ 17 SEER replacing existing natural gas system
$2,000* IRA Tax Credit, same as description for electric heat pump water heater
$1,000 TECH Single family incentives of $1,000 for new heat pump HVAC systems, with up to two incentivized
systems per home for a total of $2,000; must be a
TECH-enrolled contractor; project must be a non-heat
pump to heat pump installation; no new construction,
retrofits only; equipment must be AHRI matched
systems; equipment must meet Title 24 code
minimum standards.
Heat Pump HVAC
System Total Stackable
Rebates and Tax
Credits Available
$5,900
5 https://www.rewiringamerica.org/IRAguide
6 https://www.peninsulacleanenergy.com/residential-programs/ 7 https://www.bayren.org/articles-tools-tips/electrification 8 https://switchison.org/
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6 Appliance End Use
Rebate/ Tax
Credit*
Available Funder Notes
Electric dryer Clothes
Drying
$250 BayREN Specifies heat pump clothes dryer
Electric Dryer Total
Stackable Rebates and
Tax Credits Available
$250
Induction Stove Cooking $250 BayREN Specifies Induction Range Induction Stove Total
Stackable Rebates and
Tax Credits Available
$250
Electrical Panel and New Circuits $1,000 PCE
$600* IRA Tax credit for panel upgrades- available in conjunction with other home upgrades (ex.
weatherization, electrification, solar)
Electric Panel Total
Stackable Rebates and
Tax Credits Available
$1,600
Total Electrification Incentives
(Rebates + Tax Credits) Available
$15,500
Total Electrification Rebates
Available $
$10,900
Total Electrification IRA Tax Credits
Available $*
$4,600
*While rebates can be applied upfront by either the building owner or contractor, depending on the incentive program, IRA tax credits can be deducted from total taxes owed, meaning that the building owner would have to wait until tax season to receive the full cost reduction to electrify. Tax incentives through the IRA are provided as a credit but require the building owner to have some tax burden to reduce.
** Note that funders change available rebates often. These rebates reflect the most recent rebates as of 12.15.2023.
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7 Federal Electrification Incentives under the Inflation Reduction Act (IRA) & the High Efficiency Electric Home Rebate Act9
The IRA was signed into law in August 2022, ushering in significant federal policy support and funding for building decarbonization. The High Efficiency Electric Home Rebate Act (HEEHRA) is the official name of the IRA’s rebate program for electric home technology including heat pumps, electrical wiring, and induction stoves, which will be available starting in 202 4. Low-income households up to 80% of Area Median Income (AMI) can access 100% of upfront discount incentives, while moderate -income households from 80-150% AMI can access up to 50% of the upfront discount, in addition to tax credits that vary based on household income. Total HEEHRA discounts are capped at $14,000 across all electrification projects.
Cost reductions under HEEHRA are not included in this analysis as details are still developing and the incentives and most City of San Mateo building owners are generally classified as high income and would be ineligible . However, for low and moderate -income households up to 150% of AMI in San Mateo, IRA incentives may further incr ease the effectiveness of local electrification incentives available via PCE and BayREN, and help to close the gap for appliances where subsidies don’t always zero-out incremental costs, like HVAC systems, dryers, and induction ranges.
Table 5 details the rebates available through HEEHRA. These rebates are also extended to multifamily buildings where fifty percent of the residents are LMI. 10 With all HEEHRA rebates a pplied, LMI households in the City could fully close the incremental cost gap to electrify, and potentially entire project costs up to $14,000.11
Table 5 High-Efficiency Electric Home Rebate Act (HEEHRA): low-moderate income rebates: <80-150% Area Median Income (expected to be available in 2024) Appliance End Use
$ Rebate
Available Funder Notes
Heat Pump Water Heater Water Heater $1,750 HEEHRA
100% electrification costs for <80% AMI
(Low-Income)
50% electrification costs for 80-150% AMI
(Moderate-Income)
Heat Pump HVAC Space
Heating/Cooling
$8,000 HEEHRA
Electric dryer Clothes Drying $840 HEEHRA
Electric stove/ cooktop Cooking $840 HEEHRA
Panel upgrade
(if needed)
$2,500 HEEHRA
$4,000 HEEHRA
All rebates from HEEHRA capped at $14,000.12
9 https://www.rewiringamerica.org/IRAguide
10 https://www.rewiringamerica.org/policy/high-efficiency-electric-home-rebate-act 11 $14,000 value includes $1,600 for weatherization (insulation, air sealing, ventilation), but each individual maximum electrification end use adds up to more than $14,000 total rebate cap.
12 https://www.rewiringamerica.org/policy/high-efficiency-electric-home-rebate-act
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Electrification Costs with Incentives Applied
In the final piece of the analysis, we have applied the rebates described in Table 4 to the incremental costs described in Table 3 to see if rebates and tax incentives can make electric technologies the same cost, or less costly than the gas scenario . For this analysis, an available $5,500 whole-home electrification rebate provided by Energy Smart Homes California was not applied since it requires a whole-home electrification project at one time.
Electrification Incremental Costs + Incentives
Once incentives are applied, heat pump hot water heaters and heat pump HVAC systems which replace both the furnace and AC unit result in incremental cost savings. This means that it is less expensive to install efficient electric space and water heating today in many cases. Future changes to incentives for home electrification could continue to move the needle towards upfront cost -effectiveness for whole-home electrification. Additionally, as more building -owners install electric appliances, the upfront cost of these appliances is expected to decline over time as these electric technologies become more widely adopted.13
Figure 3 illustrates that stacked incentives help close the incremental cost gap to electrify , in some cases outperforming costs to install a new gas appliance. Stacked electric heat pump water heater incentives can cover all upfront costs for water heating .14 It should be noted that the total rebates claimed cannot exceed total project costs, even if they are available (in the case of water heating).
Bright blue bars indicate the total costs to electrify once rebates are applied . This visual allows for a comparison of remaining costs to electrify versus total new gas appliance cost which would have been taken on by the building owner.
On the high end of the incremental costs + incentives range, electrifying a home without AC, with a panel upgrade, under the Median HVAC cost analysis scenario, would be $8,536 more expensive than a gas-for-gas scenario. These results are summarized in Table 6 at the appliance level. Whole home- electrification costs are further described in Appendix A.
BAAQMD Zero NOx Covered Appliances: Water Heaters and Furnaces Upcoming BAAQMD Zero NOx rules require water heater equipment replacements to be zero NOx in 2027 and space heating equipment replacements to be zero NOx in 2029 . Based on the current incentives and installation costs, installing a heat pump water heater was found to be no-cost, resulting in savings of $2,800 dollars without a panel upgrade or a savin gs of $700 when paired with a panel upgrade. This represents a major opportunity area for building electrification in San Mateo. By electrifying water heaters now and installing a panel upgrade where needed, residents can save money compared to installing a new gas water heater while preparing for future electrification.
The electrification of furnaces with the addition of air conditioning also offers immediate cost savings of between $1,622 to $5,567 when compared to replacing both a furnace and AC. This means that electrification of water heaters as well as furnaces (when also replacing an AC offers immediate cost savings over a ‘like for like’ replacement scenario. Working to facilitate these replacements would both reduce GHG emissions and save residents money upfront in San Mateo while also preparing for these upcoming regulations.
13 https://www.rewiringamerica.org/pace
14 It should be noted that this table’s marginal cost references the combined cost for air conditioning and a gas furnace, as well as a ‘median’ case HVAC.
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9 Table 6 Electrification Incremental Upfront Costs + Incentives* Appliance Electric
Appliance Cost
Combined
Incentives
Electrification
Cost After
Incentives
Gas Equivalent
Costs
Electrification
Incremental
Cost or
(Savings)
Electrification Scenario Incremental Cost with Peninsula Clean Energy, BayREN, IRA Incentives Electric heat pump water
heater $6,000 $(7,500)** - $2,800 $(2,800)
Without AC
Low-Cost HVAC Scenario $13,965 $(5,900) $8,065 $6,132 $1,933 Without AC
Median-Cost HVAC Scenario $17,910 $(5,900) $12,010 $6,132 $5,878 With AC
Low-Cost HVAC Scenario $13,965 $(5,900) $8,065 $13,632 $(5,567) With AC
Median-Cost HVAC Scenario $17,910 $(5,900) $12,010 $13,632 $(1,622) Electric dryer $1,963 $(250) $1,713 $925 $788
Electric stove $2,375 $(250) $2,125 $1,155 $970
Panel upgrade (if needed) $3,700 $(1,600) $2,100 N/A $2,100 *Note that IRA incentives take the form of tax credits, while other rebates can be applied upfront by the building owner or contractor after completing program documentation requirements. Please refer to Table 4 for a full summary of rebates and incentives by funder. Note that incentive costs cannot exceed total project cost. **Rebates cannot exceed total project cost which is expected to be $6,000 Figure 3 Incentives Help Close the Incremental Cost Gap To Electrify ($)
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10 On-Bill Costs for Single-Family Home Electrification On-bill costs are another important piece of the overall economics of electrification. On -bill costs describe how much the building owner will pay to operate their appliances. PCE and Silicon Valley Clean Energy (SVCE) recently evaluated on-bill cost impacts of whole-home single-family electrification vs. mixed fuel in a September 2023 analysis.15
The Study shows that electrification of an average single -family home could lead to savings of ~$380/year when switching from gas to standard -efficiency electric appliances. If high -efficiency electric appliances are used, savings could increase to $495 annually as shown below (depicted monthly savings) in Table 7.
Table 7 Bill Impacts of Mixed Fuel vs. All-Electric Homes
Source: PCE & SVCE September 2023 Analysis
With the caveat that both natural gas and electric rates, like incentives, change often, these values can be used to project potential return on investment for going electric. One whole-home electrification scenario led to immediate upfront cost-savings. As shown by Table 8 the remaining scenarios project a return -on—investment (ROI) ranging from 2 -18 years depending on if the household switched to standard or high-efficiency appliances.
15 Bill Impacts of Decarbonizing Existing Single Family Homes. September 2023. Peter Mustachich (SVCE), Blake Herrschaft (PCE). https://svcleanenergy.org/wp-content/uploads/SVCE-PCE-Single-Family-On-Bill-Impacts-Results-2023.pdf
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11 Table 8 Whole-Home Potential Return on Investment for Whole-Home Electrification Whole-Home Electrification Scenario with PCE,
BayREN, IRA Incentives
Total
Incremental
Cost After
Incentives
Standard
Efficiency ROI
(Years)
High-Efficiency ROI
(Years)
Existing Home without AC
Median-cost HVAC scenario, with panel upgrade $6,936 18 14 Median-cost HVAC scenario, no panel upgrade $4,836 13 10 Low-cost HVAC scenario, no panel upgrade $891 2 2
Existing Home with AC
Median-cost HVAC scenario, with panel upgrade $(565) N/A- Immediate Cost Savings
N/A-
Immediate Cost
Savings
Median-cost HVAC scenario, no panel upgrade $(2,665) N/A- Immediate Cost Savings
N/A- Immediate
Cost Savings
The study also notes that switching to the electric residential rates (E -ELEC or EV-2A) were critical in achieving on-bill savings, as shown below in Table 9.
Table 9 Selecting the Correct Electric Rate is Critical for On-Bill Cost Savings
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12 Appendix A
Single and Low-Rise Multifamily Building Data Sources + Analysis Overview For most upfront costs, median install values were selected to inform the cost analysis. Using median costs helped remove outlier quotes from contractors, which would have influenced the average value.
Quotes for some equipment, such as furnaces, could vary by as much as $15,000 for the same project.
Where there are exceptions to this data filtering process, due to missing data, the applied data substitution methods will be clarified in the relevant cell of the analysis. Data sources are shown below in Table A-1.
Table A-1 Data Sources Analyzed for Single Family Cost Analysis Author/Source Source Description Analysis Use and Considerations Peninsula Clean Energy
(PCE)
2035 Decarbonization Feasibility
Analysis & Plan: Complete Analysis and
Draft Plan (September 2022)16
Electric and gas appliance installation costs,
including wiring, appliance cost, labor, and
markup.
Commercial rooftop package unit cost data.
Josie Gaillard & Tom Kabat
via funding from BayREN &
County of San Mateo Office
of Sustainability
Decarbonizing Single Family Homes
(January 2023)17
Single-Family Home Decarbonization
Case Study: San Mateo 1-Story Home
(March 2023)18
Electric and gas appliance installation costs
(all-cost inclusive), based on specific
equipment and models, bids for 10 homes
under consideration as part of cumulative
case study.
One City of San Mateo Single-Family Home
case study analyzed.
BayREN Contractor Install
Dataset
BayREN Contractor-Input Raw Data for
Electric Appliance Installation (Excel),
filtered for most recent year input (2022)
This raw data source was also used to inform
the PCE 2035 Decarbonization Feasibility
Analysis and Plan
TECH Clean California
Install Dataset
TECH Clean California Install Dataset-
Input Raw Data for Electric Appliance
Installation (Excel), filtered for most
recent year input (2022)
This raw data source was also used to inform
the PCE 2035 Decarbonization Feasibility
Analysis and Plan
Note: Existing datasets and reports did not cover the cost of air conditioning (both appliance and installation), which was found using desktop research (Angie’s List), filtering for location-specific costs19
16 https://www.peninsulacleanenergy.com/wp-content/uploads/2022/01/2022.09-BOD-2035-Decarb-Plan-Complete-Analysis-Draft-Plan-
1.pdf
17 https://www.smcsustainability.org/wp-content/uploads/Decarbonizing-Single-Family-Homes.pdf 18 https://www.smcsustainability.org/energy-water/decarbonizing-homes/cost-plans/ 19 https://www.angi.com/articles/how-much-does-installing-new-ac-cost.htm
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13 Whole-Home Electrification Incremental Cost Scenarios The total incremental cost for whole-home electrification described in Attachment 1 is outlined in Table A-2 with detailed scenarios for primary cost variables including HVAC costs and need for panel upgrade.
Table A-2 Whole-Home Electrification (Replace All Gas Appliances with Electric) Incremental Costs
Existing Home without AC Whole-Home Electrification Incremental Cost
Low-cost HVAC scenario, no panel upgrade $13,291
Low-cost HVAC scenario, with panel upgrade $16,991
Median-cost HVAC scenario, no panel upgrade $17,236
Median-cost HVAC scenario, with panel upgrade $20,936
Existing Home with AC Whole-Home Electrification Incremental Cost
Low-cost HVAC scenario, no panel upgrade $5,791
Low-cost HVAC scenario, with panel upgrade $9,491
Median-cost HVAC scenario, no panel upgrade $9,736
Median-cost HVAC scenario, with panel upgrade $13,436
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1 Attachment 2: High-Rise Multifamily and Nonresidential Building Electrification Costs
To better understand costs and other constraints related to multifamily and nonresidential building electrification, Rincon reviewed best-available existing resources on this topic, namely, the PCE 2035 Decarbonization Plan (2022), and The Rocky Mountain I nstitute The Economics of Electrifying Buildings: Medium Size Commercial Retrofits (2022)1. This document review is also supplemented by original contractor interviews conducted by Rincon for the upcoming Sacramento Electric Buildings Strategy (2022). Tho ugh not strictly City of San Mateo specific, the technical considerations of challenges to electrify oversized buildings are consistent between Sacramento and San Mateo, so are referenced here as recent region-specific resources for commercial electrificat ion in Northern California.
Electrification Up-Front Costs and Other Considerations While single family and low rise multifamily residential buildings tend to use similar equipment and operate in similar ways, commercial buildings and high -rise multifamily buildings tend to be highly variable. In original research conducted by Rincon for the City of Sacramento in the summer of 2022, all interviewees2 communicated that larger multifamily and nonresidential buildings are more complicated to electrify than si ngle-family homes and estimating costs is typically only possible on a project-by-project basis. This is because for most larger buildings, replacing a gas system with a similarly sized electric system is cost-prohibitive and therefore, often requires building re-engineering to determine appliance replacement and sizing options. For this reason, a detailed cost analysis for larger multifamily and commercial buildings was not developed and included here. Smaller buildings with domestic-sized space and water heating end uses, such as small to medium-sized retail or service buildings, have similar electrification costs as seen for single-family homes.
However, some equipment types are similar across building types and the cost to electrify can be more readily analyzed at a high level. For example, the PCE analysis notes that packaged commercial HVAC equipment, namely, packaged Single Zone (SZ) Gas Furnace with Cooling, are easy to electrify, as existing building 2-way A/C ordinances can cover most units without the requirement for incentives.
The Rocky Mountain Institute (RMI) ‘The Economics of Electrifying Buildings: Medium-Size Commercial Retrofits’ Report notes that local policy, or expectations of new local building electrification policies, will be a key driver in advancing commercial energy electrification, as portfolio owners will want to avoid stranded assets unless they undertake electrification. The RMI report focused on the electrification of HVAC systems from rooftop units (RTUS) with Heat Pump Rooftop Package Units (RTUs), on a prototypical 50,000 sq ft office building.
The RMI report modeled 5 cases to assess the economics of RTU retrofits: Case 1: No electrification, Case 2: Partial electrification, Case 3: Full electrification, Case 4: Efficient electrification, Case 5:
Efficient electrification + demand management, Case 6: Efficient electrification + demand
1 https://rmi.org/insight/economics-of-electrifying-buildings-medium-size-commercial-retrofits/ 2 To better understand costs and other constraints related to multifamily and nonresidential building electrification, Rincon conducted interviews with three energy engineering consultants working on large building decarbonization in Sacramento. Five additional interviewees were identified through the City’s contact network to speak to this topic, including energy managers and directors of UC Davis Health. Sacramento Municipal Utility District, Brighton Energy, Association for Energy Affordability, TRC Companies.
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management and PV. These cases, found that in the cases of more temperate climates like Las Vegas and Seattle, building owners could achieve either neutral or positive 20-year net present value through full electrification (Seattle), or with full electrification with demand management and solar photovoltaics (Las Vegas), as shown in Figure 1.
Figure 1 RMI Report Exhibit 3: The 20-year Net Present Value of Each Case by City3
The results from the RMI study have three important San-Mateo-relevant takeaways, which is that 1) electrification policy, with electrification-specific prescriptive language for commercial building owners will be critical in actually electrifying commercial buildings, and 2) electrification of commercial building electric retrofits will likely have to be paired with a suite of demand management, energy efficiency, or renewable energy projects in order to make building electrification economical for building owners, and 3) heat pump rooftop package units are the most promising electrification solution for commercial building electrification, offering a replicable model for a 1:1 equipment swap-out.
Current Incentives
Current electrification programs and rebates are available for commercial and multi -family buildings in the City of San Mateo from PCE, TECH, and BayREN are summarized in Table 1. All residential appliance incentives also apply to multifamily residents if the applicant for rebates is also the ow ner of the apartment, in the case of PCE Incentives.4
3 Page 20 of: https://rmi.org/insight/economics-of-electrifying-buildings-medium-size-commercial-retrofits/ 4 https://www.peninsulacleanenergy.com/wp-content/uploads/2022/09/Peninsula-Clean-Energy-Appliance-Rebates-Terms- Conditions_10.01.22.pdf
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Table 1 Current Incentives and Programs for Commercial and Multifamily Buildings (as of November 2023)
Description Amount/Type Details
Commercial Building Incentives
Data Connect (PCE) Technical assistance Access or share PCE Data Connect platform to analyze facility energy data, access data to
help calculate energy carbon footprint. Could
be useful for future building performance
standard work.
Technical Design Assistance (PCE) Technical Assistance Free project assistance for all-electric buildings with TRC via AllElectricDesign.org
Inflation Reduction Act (IRA) Commercial
Buildings Tax Credit
Tax Credit Tax credit for energy efficiency based on
square footage (Tax Credit 179D)
Multifamily Building Incentives
TECH Heat Pump HVAC Systems Serving
Multiple Apartments
$1,000/unit* HP HVAC equipment serving multiple
apartments
TECH Common area HPWH rebate $1,800/ system* Split or packaged rooftop/ multi/position heat pump (ducted or ductless)
TECH Electrical panel upgrade $1,400/ apartment
receiving electrical
upgrade*
Undersized apartment electrical
infrastructure is upgraded as part of an
apartment’s HPWH or HP HVAC Installation
BayREN Common Area HVAC $1,000/equipment Common area heat pump HVAC BayREN Laundry/Common Area Heat
Pump Water Heater
$1,000/equipment Common area laundry or heat pump water heater
BayREN Heat Pump Pool Heater $1,500/pool
BayREN Subpanel Upgrade $1,000/apt served
BayREN Central/common area panel
upgrade
$5,000/property
Source : https://www.peninsulacleanenergy.com/commercial-programs/, https://techcleanca.com/incentives/multifamily- information/, https://www.bayren.org/multifamily-property-owners/building-improvements *These incentives reflect November 2023 research, Note that TECH Clean California was currently not accepting multifamily reservations at the time of writing this memo, though multifamily unitary HPWHs were set to re-open for submission on December 5, 2023.
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Attachment 3: Building Decarbonization Policy Options
This memo describes a short list of policy options to decarbonize San Mateo’s building stock through regulatory requirements, incentives, and other programs . The project team first completed a nation- wide scan of existing policies and programs to decarbonize existing buildings in August of 2023.
Policies addressing building decarbonization is an emerging and evolving space. This short list of policy options was selected based on the cost and building stock analysis developed by the project team and is intended to illustrate a range of feasible approaches being considered in other cities.
These policies are meant to be considered as a menu of options to achieve the City ’s climate goals while considering implementation and cost challenges for residents and property owners across the City. Most local governments considering a building decarbonization strategy (e.g. City of Berkeley, City of Sacramento) combine multiple strategies together to produce the most comprehensive, and equitable policy result.
The City has established a Climate Action Plan goal (BE:2: All -electric existing buildings) of reducing GHG emissions by electrifying existing buildings by 102,210 MT CO2e by 2030 and by 221,260 MT CO2e by 2045. 1 Based on the City of San Mateo Climate Action Plan t his reduction equates to approximately 14,840 water heaters and 9,890 furnaces electrified by 2030.
Most policy options described in Table 1 only affect a subsection of the building stock or a particular appliance. Establishing a building decarbonization strategy that will span all building types found in the City while providing equitable support to the community will likely require combining multiple policy approaches. The sections below provide further detail on the policy options, identify c ities that have implemented or are considering implementing the policy approach, and expand on policy pros and cons.
1 City of San Mateo Climate Action Plan, Table ES-2: Reductions by Measure. https://sanmateo.primegov.com/Portal/viewer?id=8895&type=2
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2 Table 1 Building Decarbonization Policy Summary
Policy Option Name and Number Description Pros Cons
Option 1: Follow State/BAAQMD
requirements, continue adopted reach
codes & focus on outreach and
incentives
Introduce no new building
decarbonization policies, increase
outreach and education around
incentives
Only voluntary costs taken on by
residents and business owners
Minimal/no additional GHG reductions
Option 2: New reach codes to
encourage and/or require
electrification at time of renovation
Explore and adopt new reach codes to
require electrification at time of
renovation
City has experience with reach code
implementation
Resistance to new regulations
Option 3: Require electric equipment
upon replacement ahead of BAAQMD
Zero NOx requirements
Require electrify on replacement for
water heating and space heating,
passed ahead of the 2027 Ruling 9-6 for
water heaters and 2029 Ruling 9-4 for
space heaters
Cost effective (time of replacement) –
appliance level
Wide reach --- encompasses both
commercial and residential building
stock
Leverages federal and local monies
Prepares community and workforce for
upcoming BAAQMD requirements
More politically difficult as affects
largest amount of building owners and
may incur upfront project costs.
Option 4: Building Performance
Standards for commercial buildings
Requires standards to track and
increase energy performance across
commercial buildings
Allows for a flexible approach for
variable commercial building
equipment
Allows for future right-sizing of systems
before they electrify
Policy precedes building electrification
for cost-effectiveness reasons, but
does not guarantee electric end uses.
Option 5: Electric First Policy for City
facilities
Requires municipal facilities collect
information for gas and electric
equipment, and choose the electric
option
Allows city to lead by example
Leverages known processes like capital
improvement plan to electrify
Robust municipal incentives from CCAs
to decarbonize municipal buildings
Only impacts municipal buildings
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3 Policy Option Descriptions
Option 1: Follow State/BAAQMD requirements, continue adopted reach code implementation & focus on outreach and incentives
Policy Option 1 introduces no new building decarbonization requirements. Instead, Option 1 relies on City’s adopted reach codes and identifies opportunities to incentivize the electrification process using education, outreach, and connecting the community to rebates and technical support. The City’ s adopted reach codes established electric requirements for all new construction and electric equipment and electric -readiness requirements for specific residential remodels. The City’s most recent reach codes went into effect on January 1, 2023 and will expire at the end of the code cycle on December 31, 2025.2
This option would use future staff time to readopt the same reach codes each code cycle. It would also use future staff time to promote existing programming and incentives run by partners (e.g., PCE) to assist voluntary behavior shift towards electrification , and prepare the community to electrify space and water heating end uses in advance of upcoming BAAQMD Zero NOx requirements . For example, this option could include an education campa ign to encourage homeowners to prewire for water heaters and furnaces, so they are ready to make the switch once their appliance burns out. Another example of incentivizing electrification would be waiving permit costs for electric equipment upgrades.
Other Cities:
More than 100 cities in California have adopted reach codes that require all-electric new construction.
San Mateo is among a handful of cities with reach codes for residential remodels. Many cities focus on education and outreach to encourage dec arbonization. Menlo Park and Burlingame are local examples of cities that waive permit costs for electric equipment upgrades.
Policy Pros
• Policy already in place/ has received community support • No policy-related additional costs to building owners unless they voluntarily opt-in • Allows community to prepare for upcoming BAAQMD requirements through City -led outreach and education
• Allows community to prepare for upcoming requirements through electric -readiness requirements
Policy Cons
• Limited impact and reach: The adopted reach codes do not affect the majority of existing building stock (which is unlikely to be renovated)
• Outreach and education programs are extremely variable in their effectiveness .
Investment of staff time and city resources into outreach may not achieve substantial shifts in behavior that will be required to decarbonize buildings , even through major outreach campaigns.3
2 https://www.cityofsanmateo.org/3363/Reach-Codes
3 https://www.wastedive.com/news/survey-save-the-food-campaign-successfully-raised-waste-awareness-in-first/446200/; this case study illuminates a $34 million NRDC & Ad Council ad campaign in food waste reduction that is considered a success because it raised consumer awareness (not underlying behavior change) from 51-54% during the campaign period. This illustrates the significant investment needed to effectively raise awareness, and the current lack of data behind environmental education campaigns and tangible behavior shifts.
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4 Option 2: New reach codes to encourage and/or require electrification at time of renovation
Option 2 would include the evaluation of additional reach codes to encourage and/or require electrification. Reach codes are typically evaluated on a three -year cycle in alignment with the new Building Code. New reach codes options would vary depending on the updated Energy Code and Green Building Code. The City’s adopted reach codes apply to residential remodels. The City could consider a variety or reach codes that apply to different building types and/or equipment.
Other Cities:
• City of Piedmont Building Electrif ication Ordinance (Adopted 2021 and updated 2022):
Ordinance requir es existing low -rise residential building owners spending $25,000 on home improvement projects, including kitchen or both updates, to select one item from a list of energy efficient insulation or electrification fixes (renovations of $100,000 or more must include two)4
• City of Burlingame (Adopted 2022): All-electric requirements apply to qualifying alteration projects.5
Policy Pros:
• City has experience exploring, adopting and implementing reach codes • Further analysis needed, policy pros are dependent on the reach code adopted Policy Cons:
• Community and builder resistance to new regulations.
• Further analysis needed, policy cons are dependent on the reach code adopted
4 https://piedmont.ca.gov/services___departments/planning___building/about_building_/reach_code_information 5 https://www.burlingame.org/departments/building/reach_codes.php
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5 Option 3: Electric equipment replacement requirements for space and water heating ahead of BAAQMD requirements
The Bay Area Air Quality Management District (BAAQMD) requires zero NOx (currently the only options for Zero NOx appliances are all-electric) appliances for water heating by 2027 and space heating by 2029. Option 3 has the greatest potential to achieve GHG reductions and the goals outlined in the City’s CAP by moving faster than the 2027 and 2029 timelines outlined by BAAQMD. The City of San Mateo issues permits for space and water heating end uses that currently burn natural gas. The City could adopt and implement a local version of the BAAQMD zero N0 x threshold ahead of the current schedule to require all new space and water heating to have zero NOx emissions, and therefore, zero GHG emissions.
A ‘time of replacement’ ordinance would require the replacement of gas appliances with zero NO x versions when they fail or are voluntarily upgraded. This approach maximizes the lifespan of the existing gas appliance s. This is the most cost -effective approach for the building owner . As these appliances may function for dozens of years, it also is the timeliest option to replace gas appliances with electric-run appliances instead of locking in emissions from natural-gas appliances which could potentially continue to operate past the City’s target for carbon neutrality.
Other Cities:
Although time of replacement policies are widely considered to be the best way to reduce GHG emissions and achieve climate goals, there is not significant political precedent for establishing such a code. If passed, the City of San Mateo wou ld be the first local government in the nation to pass a time of replacement ordinance (not including BAAQMD zero NOx threshold). • City of Sacramento Existing Building Electrification Strategy [draft] has electrify on replacement for water and HVAC as a co re strategy for the Single-Unit Residential/ Small Multi-Unit Residential buildings. The strategy is currently open for public comment and has not yet been approved by City Council.
• City of Berkeley Electrification Strategy includes provisions but are not yet adopted:6 Adopt a time of replacement electrification policy for all municipal buildings Implement a time of replacement requirement for HVAC and hot water heaters once accessible funding/ financing option is available.
Policy Pros:
• Ambitious policy and opportunity to show leadership potential in Bay Area • Community and workforce prepared for 2027 and 2029 BAAQMD requirements • Upfront cost savings for water heating and homes with AC replacement with rebates • On-bill savings for homes that go all-electric
Policy Cons:
• Potential upfront costs for residents for home electrification • Not yet been passed by local government
6 Berkeley is in the early stages of Phase 1 (2021-2025) which will include pilot projects, voluntary electrification programs, tenant protections, and holistic funding and financing programs:
https://www.cityofberkeley.info/uploadedFiles/Planning_and_Development/Level_3_- _Energy_and_Sustainable_Development/Draft_Berkeley_Existing_Bldg_Electrification_Strategy_20210415.pdf
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6 Option 4: Building Performance Standards (BPS) for Commercial Buildings Option 4 introduces new policy standards for commercial buildings (Building Performance Standards) aimed at increasing energy efficiency, and eventually, electrifying commercial buildings as a phased efficiency-focused approach.
Commercial buildings feature frequently oversized systems for heating and cooling. Process loads also vary significantly across commercial building types . For these reasons, electrifying commercial buildings necessitates a flexible approach where building managers can first make strides towards energy efficiency before electrifying to avoid potentially increased energy bills post installation of an all-electric system.
Typically, a BPS Program is implemented in phases where buildings first report energy use for several years, then perform a retro -commissioning process to identify opportunities before finally reducing emissions below an established threshold. Energy benchmarking must be completed prior to settin g BPS thresholds. Best practices for implementing a BPS threshold that would likely be a feature of the City’s BPS policy include:
• Standards and methods for energy benchmarking : Covered Buildings (buildings and properties with buildings totaling the specified size threshold or larger) report their annual energy usage in Energy Star Portfolio Manager. This process is already mandated by AB 802, which requires energy usage reporting to the CEC for buildings over 50,000 square feet. The data collected in the benchmarking phase improves building manager and City understanding of building energy usage and will inform GHG -emissions performance standards.
• Retro-commissioning: Retro-commissioning is a process through which a building’s energy consuming systems are analyzed for efficiency and proper operation. The retro- commissioning process serves two primary purposes. The first is to uncover inefficient operations, increase energy efficiency, and save building owners money. The second is to identify cost -effective opportunities to reduce building GHG emissions through electrification and energy efficiency. Building owners of covered buildings may complete retro-commissioning as a means of improving building performance and prioritizing retrofits prior to BPS implementation. Retro-commissioning would be a voluntary approach that building managers could pursue to identify the most cost -effective and efficient investments available for their building.
Other Cities:
Building performance standards are a well-established policy mechanism that has been adopted by many local governments across the country including the City of Reno, City of Ch ula Vista, City of Seattle, City of St. Louis, City of Boston, and City of New York.7 • City of Brisbane Building Efficiency Program adopted in 2019, requires annual energy and water benchmarking and reporting, and co mpliance with Beyond requirements to show that they are high performing, or improving performance for commercial buildings 10,000 SF and larger.8
7https://www.energycodes.gov/BPS#:~:text=Building%20Performance%20Standards%20(BPS)%20are,gas%20emissions%2Dbased%20p erformance%20targets.
8 https://www.brisbaneca.org/bbep
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7 • City of Denver [2021], Building Performance Standards require buildings that are 25,000 square feet or larger to submit annual benchmarking data and meet specific energy efficiency requirements based on the building’s Energy Use Intensity [EUI]. It also features phased requirements to electrify buildings with heat pumps starting in 2025.9 Policy Pros
• BPS approach addresses high degree of variability in commercial building types by focusing on performance-based requirements
• Phased approach allows for structured guidance for facility managers , uncovering cost savings over time
• Can lead to incremental reductions in energy intensity (and corresponding GHG emissions reductions) but is still not a guarantee for decarbonization as some highly efficient options still may be mixed fuel
• Reduces pressure on harder to electrify equipment types (e.g. gas stoves) through phased approach, longer runway for electric equipment to become widely available and cost - effective on-market
• Robust programming examples from Cities who have already implemented Policy Cons
• Necessitates new staff time and staff members to implement and track BPS Data tracking through BPS requires facility manager education and fluency in new software and systems, requiring new uses of staff time by facility managers • Does not guarantee all-electric end usage in short term until phased retro commissioning phase, potentially missing some appliances that could be electrified • Limited building stock reach, best suited to large commercial building s (for example buildings >25,000 sq ft)
9 https://www.denvergov.org/Government/Agencies-Departments-Offices/Agencies-Departments-Offices-Directory/Climate-Action- Sustainability-Resiliency/High-Performance-Buildings-and-Homes/Energize-Denver-Electrification-Program
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8 Option 5: Electric First Policy for City Facilities
This policy establishes a mechanism for local government renovations to go ‘electric first’, collecting comparative costs for mixed fuel vs. all electric renovations and new projects owned and operated by the City. This policy can also allow for technical and cost infeasibility on a project-level, as granted by Council. The main purpose of the policy is to ensure that financial and feasibility data is being collected for municipal facilities that will allow them to compare costs to electrify vs. replacing gas equipment, and opting out of electrification, instead of opting in.
Other Cities:
• City of Mountain View: Municipal Green Building Policy (2020): requires analysis of opportunities for electrification upon major upgrade of City-owned buildings, and develops a minimum of LEED Gold for new construction.10
• City of San Diego: Zero Emissions Municipal Buildings and Operations Policy ( 2022): any time a natural gas burning sys tem is being replaced, requires the new equipment to be electric.11
Policy Pros:
• Demonstrates City leadership of hard -to-electrify buildings that mirror the commercial sector
• Availability of significant local government incentives to electrify through Peninsula Clean Energy’s Gov BE and Willdan GK12 program
• Existing resources available through County of San Mateo including staff report, model code language, and case studies
Policy Cons:
• Limited reach as policy only covers municipal buildings
10 https://www.mountainview.gov/home/showpublisheddocument/790/637940944813700000 11 https://www.sandiego.gov/sites/default/files/zero_emissions_municipal_buildings_operations_policy.pdf
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From: Richard Schram
Sent: Saturday, January 6, 2024 1:07 PM
To: City Council (San Mateo) <[email protected]> Subject: Banning of gas appliances
Please note the recent Ninth Court of Appeals ruling as reported in Berkeley:
https://www.berkeleyside.org/2024/01/03/berkeley-gas-stove-ban-ruling A copy of the ruling title pages has been dropped off at the City Manager's office.
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From: Patrice Olds
To: Andrea Chow
Subject: Fwd: Electrification survey
Date: Tuesday, January 2, 2024 7:00:00 AM
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From: Genel Morgan
Sent: Monday, January 1, 2024 4:45:07 PM
To: City Council (San Mateo) <[email protected]> Cc: Patrice Olds <[email protected]>
Subject: Electrification survey
Dear Mayor Diaz Nash and Council Members,
I recently filled out the Electrification Survey. I found the questions slanted with weird options.
Why are there no questions on the survey asking what the concerns of the residents are about the mandate to convert from gas to electric and the city's decision to push forward mandating electrification? Why do we have to go above and beyond what the state mandates? There should be no mandate to convert from gas to electric appliances until the grid has the capacity to handle the increased demand. We have already experienced power outages in the past and residents were asked to minimize their use of electricity. It is also a concern that depending on only one source of power leaves us vulnerable to sabotage and weather events that could cut power.
In addition, as a senior citizen on a fixed income, I cannot afford to convert the few gas appliances I have to electricity. The cost is not just for the appliances but also to rewire my electric box.
Please consider ALL the options and the effect your decision will have on San Mateo residents.
Regards
Genel Morgan
San Mateo