1.16.2024 City Council Meeting
Presentation Outline
▪ Project Overview
▪ Local Policy Context
▪ Building Electrification Costs
▪ Single family & Low-Rise Multifamily Upfront and On-Bill Costs ▪ Multifamily & Commercial Upfront Costs
▪ Community Feedback
▪ Building Decarbonization Policy Options
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Council Feedback Needed: What policy options
should the project team include in continued project
outreach?
Policy Option Name and Number Description
1) Follow State and BAAQMD
requirements, continue adopted reach
codes & focus on outreach/incentives
Introduce no new building decarbonization policies, increase outreach and education around incentives
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
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
4) Building Performance Standards for
commercial buildings
Requires standards to track and increase energy
performance across commercial buildings
5) Electric First Policy for City facilities Requires municipal facilities collect information for gas and electric equipment, and choose the electric option
Project
Overview
Sustainable Buildings Strategy Goals
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• Develop an actionable roadmap with
concrete steps for City of San Mateo to
electrify buildings
• Align approach to meet climate goals
while balancing costs and other impacts
• Use best available science and data
• Listen to the community: engage early
and often, two phases of community
outreach
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How do we
electrify
buildings?
▪ Building Electrification: Appliances that usegas are replaced with electric technologies
▪ ‘Electrify on Replacement’ & Cost Effectiveness: Replacing gas appliances with electric when they stop working (‘burnout’), or would have been upgraded anyway, increasescost effectiveness since appliance would have been replaced regardless
Space heating and cooling:
Gas Furnace → Heat Pump
Water heating:
Gas water heater → Heat Pump
Hot Water Heater
Cooking:
Gas stove → Induction Stove
Clothes Drying:
Gas Clothes Drying →
Electric Dryer
Electrification Benefits
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▪ Greenhouse gas emission reductions
• Building gas: 42% of total GHG emissions in 2030, 36% in 2045 ▪ Community Health
• Electronic appliances → improved air pollution, reduced risk of asthma (particularly childhood asthma)
▪ Energy Affordability
• Gas bills could more than double over time
▪ Resilience & Safety
• Decreased fire & carbon monoxide risk, increased resilience with solar
▪ Equity
• Equitable access to health, safety, upgraded buildings & comfort benefits.
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Local Policy Context Paves the Way for Building
Decarbonization
• Bay Area Air Quality Management District (BAAQMD)
Zero NOx Space and Water Heating Requirements
• Zero NOx water heating by 2027
• Zero NOx space heating by 2029
• Collectively makes up 91% of home gas usage
• City of San Mateo Building Electrification Reach Codes • All-Electric New Construction & electric ready and
appliance electrification (Started: Jan 2023)
• Electric readiness and electric appliance
replacement requirements for specific home
remodels (Started: Jan 2023)
• City of San Mateo Policy: Climate Action Plan (CAP)
• Climate Action Plan 2030 & 2045 Targets:
• BE 1: All-electric new construction
• BE 2: All-electric existing buildings
• BE 2 = most significant driver of GHG
reductions
Building
Electrification
Costs
Single Family & Low-
Rise Multifamily
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Gas-to-Electric Scenario – Incremental
Cost
Electrification Without Incentives is More Expensive Than Replacing With Gas Appliances
Note that this figure combines cost for AC + a gas furnace to illustrate the full cost of dual space heating and cooling for the first row of ‘gas equivalent cost’. It also selects the median, not low-cost HP HVAC scenario to provide a conservative estimate in this visualization. See detailed HP HVAC scenario in the next slide for more detail. 11 of 22
Incentives Help close the Incremental Cost
Gap to Electrify ($)
Electrifying Water Heating & Space Heating /Cooling (+AC) = Upfront Cost Savings for Building Owners
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~$30-40/ Month in Utility Bill Cost Savings for All -
Electric Homes on Correct Electric Rate
▪ Electrification of a single-family
home could lead to on-bill savings
of ~$380/year when switching
from gas to standard efficiency
appliances
▪ These on-bill cost savings could
cover the costs of whole-home
electrification, with a return on
investment ranging from 2-18
years
▪ Selecting the correct electric rate
is critical for on-bill cost savings
[e.g. TOU, E-ELECT].
▪ Source: SVCE/Peninsula Clean
Energy 2023 Analysis
▪ Natural gas and electric rates
change often- this analysis reflects
2023 conditions
Building
Electrification
Costs
Multifamily &
Commercial
Multifamily and Commercial Upfront Costs Are Variable
With Some Clear Cost Wins for Specific Appliances (Rooftop Package Units) ▪ Electrification of commercial and high-rise
multifamily buildings feature variable costs &
technical challenges.
▪ Most will need to be costed out on a project -by-
project basis.
▪ However, these building types can feature
similar equipment types; like rooftop package
units.
▪ Peninsula Clean Energy 2035 Decarbonization
Plan shows near cost parity for rooftop
packaged heat pump installation costs.
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Community
Feedback
Initial Community Feedback
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o September 13, 2023: Sustainability and Infrastructure Commission meeting
▪ Over 120 written comments and 24 verbal comments
o Five General Plan Town Hall meetings in Fall 2023
o September 22, 2023: Diversity, Equity and Inclusion Task Force meeting o Online survey: Dec 2023 – Jan 2024
T op Concerns
• Growth of grid to accommodate
future electric buildings
• Power outages / resilience
• Costs
T op Values
• Climate change is a pressing
issue, need for City to take
action
• Electric equipment incentives
and rebates available now
Survey Highlight: Community Members Support
Building Electrification Action Beyond State Minimums
▪ Survey Question: How Fast Should the City of San Mateo Electrify its Buildings to Achieve Climate Action? ▪ The majority of respondents support City movement to electrify buildings beyond State or Local (BAAQMD) requirements.
▪ This approach lies somewhere in the middle for ‘Move ahead on easy issues with cost savings now beyond State minimums’ and ‘Electrify everything’
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Building
Decarbonization
Policy Options
Policy Options Overview
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▪ Menu of options to decarbonize San
Mateo’s building stock through
regulatory requirements, incentives,
other programs
▪ Based on nation-wide scan of existing
policies and programs as of Fall 2023
▪ A successful building decarbonization
strategy will require combining
multiple policy/ programmatic
approaches & continued community
outreach
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Policy Options Summary Table
Policy Option Name and Number Description
1) Follow State and BAAQMD
requirements, continue adopted reach
codes & focus on outreach/incentives
Introduce no new building decarbonization policies,
increase outreach and education around incentives
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
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
4) Building Performance Standards for
commercial buildings
Requires standards to track and increase energy
performance across commercial buildings
5) Electric First Policy for City facilities Requires municipalfacilities collect information for gas and electric equipment, and choose the electric option
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Project Timeline and Next Steps
▪ Original project timeline adjusted to allow for deeper and more robust engagement
▪ July - December 2024: Outreach and strategy development/finalization ▪ 2025: Final Sustainable Buildings Strategy adoption
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Council Feedback Needed: What policy options should the project team include in continued project outreach?
Policy Option Name and Number Description
1) Follow State and BAAQMD
requirements, continue adopted reach
codes & focus on outreach/incentives
Introduce no new building decarbonization policies, increase outreach and education around incentives
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
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
4) Building Performance Standards for
commercial buildings
Requires standards to track and increase energy
performance across commercial buildings
5) Electric First Policy for City facilities Requires municipal facilities collect information for gas and electric equipment, and choose the electric option
Appendix
Appendix A:
Detailed
Costs
Gas-to-Electric Scenario
No Incentives
Electrification implications + Key Takeaways
▪ Avoiding panel upgrades through home
electrification planning, panel splitters, “watt
diet” etc. could save building owners ~$3,700
▪ Because of significant market, labor quote
variation in HVAC system, Rincon ran two cost
scenarios to control for significant variation
(low, median cost)
▪ Note that heat pump HVAC systems provide
both heating and cooling, displacing the need
to have two separate appliances in the ‘gas for
gas’ scenario (gas furnace and AC).
Electrification Scenario: Cost to Replace Gas Appliances with Electric Appliances (No Incentives, Total Costs)
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
25 Gas-For-Gas Scenario
Electrification implications + Key
Takeaways
▪ Most San Mateans (75%) do not have AC
▪ If a building owner were to replace
every electrifiable appliance, with a
similar gas appliance, they would spend
$11,012 w/o AC
▪ Key takeaway: building owners would
have invested in costly appliance
upgrades regardless, in a ‘electrify on
replacement’ scenario
▪ Full appliance replacement with new gas
appliances would cost building owners
$11,012-18,512
Like-for-Like Scenario: Replace Gas Appliances with Similar, New Gas Appliances (Total Costs)
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 T otal Cost without AC $11,012
Whole-Home T otal Cost
with AC $18,512
26 Gas-to-Electric Scenario – Incremental Cost
Electric-Gas Appliance Replacement Costs (No Incentives) Electrification implications + Key Takeaways
▪ If a heat pump HVAC displaces both a
gas furnace and an air conditioning
unit, electric vs. gas reduction reaches
near cost parity [low-cost HVAC
scenario]
▪ Marginal costs to electrify are highest
for space heating and cooling
functions, and lowest for stove and
dryer applications [total cost]
Electrification Scenario Detailed Incremental Costs
Appliance End Use
Electric
Appliance Cost
Gas Equivalent
Cost
Median/ Average
Marginal 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. 27 Electrification Incremental Upfront Costs +
Incentives
Costs to Electrify with Incentives Applied
Electrification implications + Key
Takeaways
▪ Heat pump hot water heaters
are the cheapest available
option to heat water, saving
building owners $2,800.
▪ Electrification of space heating
and cooling will save building
owners money if it displaces
both a gas furnace and an air
conditioner, resulting in cost
savings from $1,622-$5,587
▪ Across all-appliances,
incentives play a critical role
in reducing upfront costs of
electric appliances
• Key Variables: HVAC install costs,
electric panel replacement
needs, AC displacement
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) 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 28 Appendix B:
Detailed
Policy
Options
Option 1: Continue Adopted Reach Codes & Focus on
Outreach and Incentives
▪ Other City Examples
▪ More than 100 Cities in California have
adopted reach codes similar to San Mateo
requiring all-electric new construction
▪ Cons:
▪ Limited impact and reach – majority of
building stock not affected
▪ Outreach and education programs unlikely to
achieve scale of behavior shift needed to
decarbonize all building stock
▪ Pros:
▪ Reach codes already in place with community
support
▪ No additional costs to building owners unless
they voluntary opt-in
▪ Allows community to prepare for upcoming
BAAQMD requirements
30 Option 2: New Reach Codes to Encourage and/or
Require Electrification at Time of Renovation
▪ Other City Examples
▪ City of Piedmont Building Electrification
Ordinance ($25,000 spend threshold)
▪ City of Dublin CALGreen Amendment
requiring electrification if square footage
modified by more than 50%
▪ Cons:
▪ Community resistance to new regulations
▪ Further analysis needed, dependent on
reach code adopted
▪ Pros:
▪ City has experience exploring, and adopting
new reach codes
31 Option 3: Electric Equipment Replacement
Requirements for Space and Water Heating Ahead of
BAAQMD Requirements
▪ Other City Examples [under consideration]
▪ City of Berkeley Electrification Strategy
[Municipal Buildings]
▪ City of Sacramento Existing Building
Electrification Strategy [Space and Water
Heating]
▪ Cons:
▪ Potential upfront costs for residents [gas
furnace with no AC]
▪ Not yet passed by California local governments
([Currently being considered]
▪ Pros:
▪ Ambitious policy and leadership opportunity
▪ Workforce and community preparedness for
BAAQMD regulations
▪ Best GHG reduction option
32 Option 4: Building Performance Standards for
Commercial Buildings
▪ Other City Examples
▪ Well established, adopted by many local
governments including Chula vista, New York, Seattle
St. Louis, Boston.
▪ Local policy example: City of Brisbane Building
Efficiency Program
▪ Cons:
▪ Necessitates new staff time to implement and track
▪ Does not guarantee all-electric end usage in short
term till phased retro commissioning
▪ Best suited to very large buildings – limited building stock reach
▪ Pros:
▪ BPS approach addresses high level of variability
commercial building stock
▪ Phased approach allows for structured guidance by
facility managers, uncovering cost savings over time
▪ Can lead to incremental reductions in energy
efficiency
33 Option 5: Electric First Policy for City Facilities
▪ Other City Examples
▪ City of Mountain View: 2020 Municipal
Green Policy
▪ City of San Diego: Zero Emissions Municipal
Buildings and Operations Policy
▪ Pros:
▪ Demonstrates city leadership in hard to
electrify buildings that mirror the
commercial sector
▪ Availability of significant local government
incentives to electrify
▪ Cons:
▪ Limited reach as policy only covers
municipal buildings
34 Appendix C:
Policy
Selection
Background
& Project
Details
Next Steps: Phase 2 Community Outreach
Summer 2023 Fall 2023 Winter
23-24
Spring
2024
Summer
2024
• Development of Equity
+ Effectiveness
Criteria
• Identify range of
feasible policy options
• Building Inventory and
Market Segmentation
Analsysis
• Phase 1: Community
Outreach: Effectiveness +
Equity Criteria Feedback
• Results of building
inventory and market
segmentation
• Draft prioritized policies list
• Incorporation of community
feedback for equity and
effectiveness critera
• Draft policies & pathways list -
Community feedback
• Phase 2: Outreach:
Community feedback on
policies & pathways
• Incorporation of community
feedback in prioritized policy
list
• Drafting of pathway
• Public review of draft strategy
36 ▪ Reach Climate Action Plan Goals:
▪ BE-2: All-electric existing buildings
▪ 2030: Reduce emissions 40% below 1990 levels
▪ Building emissions make up 38% of the City total
▪ Gas accounts for (85)% of building related
emissions
▪ Electrification of existing buildings is the
most cost-effective way to achieve carbon-
free buildings
▪ Electricity will be carbon free by 2045 (SB
100)- San Mateo is already on the way with
ECO100 from Peninsula Clean Energy
▪ Any replacement of new gas appliances locks in
fossil fuel infrastructure, taking us farther from
achieving climate goals
▪ Building electrification can achieve a host of
other co-benefits, including indoor air quality,
protection from rising gas prices, and
concurrent building upgrades
What is Building For the Future?
Image source: ThisOldHouse
37 How the Policy Selection Process Works
Community feedback shapes Equity & Effectiveness criteria: the values and outcomes that the City will bring forward when selecting policies.
Selected policies must touch on all equity and effectiveness criteria
Building and Market Segmentation Analysis provide
City-specific cost & natural gas data to select the
best-fit policy for San Mateo
Equity and effectiveness criteria + building and
market segmentation data shape final policy
pathway
38 Equity + Analysis = Policy Analysis
Framework
▪ Your feedback will be critical in refining
equity and effectiveness criteria.
▪ Equity Criteria informs direction for
how to equitably electrify existing
residential and commercial buildings;
▪ Effectiveness criteria ensures full
realization of electrification benefits,
and that there will be no unintended
consequences to other City priorities,
or harm to residents or business
owners
▪ Each policy pathway should include
actions that address at least one action
that addresses each effectiveness and
equity criteria.
39 Environmental Justice Communities
in San Mateo
▪ From the Draft San Mateo General Plan 2040:
Equity priority communities are neighborhoods
that experience both higher than average sources
of pollution or contamination (such as poor air
quality or contaminated groundwater) and
population and health characteristics that make
them more vulnerable to negative health
outcomes from that pollution.
▪ North Central, North Shoreview/Shoreview neighborhoods Strive San Mateo: General Plan 2040 Draft July 2023
https://strivesanmateo.org/wp-
content/uploads/2023/07/StriveSanMateo_GP2024_DRAFT_7-28-2023_Web.pdf Image source: General Plan 2040 Draft July 2023
40 Equity Policy Analysis Sources & Approach
▪ Building electrification & equity and
environmental justice is a growing
space for research:
▪ Policy analysis referenced leading
organizations/agencies like Greenlining
Institute*, Rocky Mountain Institute,
U.S. Department of Energy, Equitable
Building Decarbonization, Building
Energy, Equity, and Power (BEEP
Coalition; CARB)
▪ Policy analysis must be informed by
equity-centered community outreach
to reflect : community feedback, lived
experience, equity & cost concerns will
be incorporated into the final equity &
effectiveness criteria
*GreenLining institute was critical in the initial review of Rincon’s Equity Guardrails approach for City of Berkeley
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