Agenda packet — Santa Cruz City Council, November 19, 2024 (part 4 of 5)

CRITERIA
City of Santa Cruz
The proposed site, Parcel 008-222-06 (Woodhouse Blending & Brewing), is a commercial property that is surrounded by other commercial properties on all sides. It is adjacent to train tracks to the west, operating from the Santa Cruz Boardwalk to the Redwoods in Henry Cowell, and River Street to the east, a major thoroughfare into downtown Santa Cruz. The nearest residential zone is approximately 560 feet to the southwest. See Appendix A for more information on the adjacent properties.

Section 24.14.260 of the Santa Cruz Municipal Code addresses noise at commercial property as follows:

2. Noise Limits, Commercial, and Industrial Property. No person shall produce, suffer, or allow to be produced by any machine or device, or any combination of the same, on nonresidential property, a noise level more than six dBA above the local ambient at the points of measurement established in this part. The local ambient shall establish the maximum noise limit. More stringent noise limits may be established for specific uses through the conditions of a use permit.

3. Corrections. The allowable noise level in relation to the ambient level shall be reduced for noise of unusual character. The allowable noise level will be adjusted as follows (in dBA) for unusual noise:
a. Noise with no unusual character 0
b. Noise containing a piercing, pure tone +5*
c. Noise that is impulsive, rattling, rising or falling in pitch or volume, humming, screeching, throbbing, pulsating, etc. +5
d. Noise which contains speech, music or other information content +5 * By adding to the measured noise, the unusual noise is penalized 5 dBA For this project, we are applying Correction 3.d. Therefore, the criterion is 1 dB above the local ambient.

Additionally, Section 9.36.010 of the Santa Cruz Municipal Code applies the following curfew:
a. No person shall between the hours of 10 pm and 8 am make, cause, suffer or permit to be made any offensive noise (1) which is made within one hundred feet of any building or place regularly used for sleeping purposes, or (2) which disturbs, or would lend to disturb any person within hearing distance of such noise.

The proposed site is not expected to be used between the hours of 10 pm and 8 am. It is also more than 100 feet from any sleeping space. Therefore, the curfew ordinance is not applicable.

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MEASUREMENTS
Ambient Noise Level
The Code does not define the metric for ambient noise measurements. However, DNL1 was used for a noise study for another project that was provided by the City of Santa Cruz2.

To quantify the ambient noise level, we conducted three continuous long-term measurements (LT) and seven short-term measurements (ST) at the project site between 23 and 28 May 2024. Trains to the west and vehicular traffic on River Street to the east are the main contributors of noise at the site. See Figure 1 for the measurement locations. See Appendix B for information on the fundamental concepts of environmental noise.

Based on our measurements, we calculated the noise criterion at each property line. The Ordinance states that noise shall not be more than 6 dBA above the ambient noise level. In combination with the correction factor of “+5” (i.e., noise which contains speech, music, or other information content), the criterion is reduced to 1 dB above the ambient noise level. See Table 1 for the measured noise levels at each property line and subsequent noise criteria. We used the lowest (i.e., worst-case) measured DNL at each location to develop the criterion.

Table 1: Measured Ambient Noise Levels and Criteria
Property Line
Measured Noise Level
(DNL, in dB)
Criterion
(DNL, in dB)
North 63 64
West 65 66
South 64 65
East 72 73
Event Noise
We also conducted attended measurements with the installed sound system: music (with the subwoofer on and off) and pink noise (with the subwoofer on and off). Table 2 shows our measurement results. See Figure 1 for the measurement locations.
1 DNL (Day-Night Average Sound Level) – A descriptor for a 24-hour A-weighted average noise level. DNL accounts for the increased acoustical sensitivity of people to noise during the nighttime hours. DNL penalizes sound levels by 10 dB during the hours from 10 PM to 7 AM. For practical purposes, the DNL and CNEL are usually interchangeable. DNL is sometimes written as Ldn.
2 Edward L. Pack Associates, Inc., Santa Cruz Shakespeare project, 17 September 2015

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Table 2: Measured Noise Levels with Music and Pink Noise Location Description
Measurement Condition
Music
(Sub OFF)
Music
(Sub ON)
Pink Noise
(Sub OFF)
Pink Noise
(Sub ON)
ST-1 South property line 65 68 66 66
ST-2 Behind the stage 71 72 69 70
ST-3 Center of event area 83 83 82 82
ST-4 Northwest property line - - - 54
ST-5 Entrance to Woodhouse 59 58 - 56
ST-6 Entrance to “Jewel Theater Co.” - - - 51
ST-7 Entrance to “Santa Cruz Signs” 64 65 - 67
Where no data is shown, the noise from the sound system was not measurable over nearby vehicular traffic.

ANALYSIS AND RECOMENDATIONS
Based on our measured data, we calculated the future noise levels at the nearest adjacent properties with the sound system operating at the preferred average hourly noise level noise level of Leq(h)3 83 dBA at the center of event area. See Table 3 for the calculated noise levels at each property line. See Figure 2 for the outdoor event area and noise calculation locations. 3 Leq – The equivalent steady-state A-weighted sound level that, in a stated period of time, would contain the same acoustic energy as the time-varying sound level during the same period.

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Table 3: Calculated Event Noise Levels
Property Line
Calculated Noise Level
(DNL, in dB)
Criterion
(DNL, in dB)
North 64 64
West 67 66
South 65 65
East 73 73
As shown, the calculated noise level at the west property line exceeds the criterion at the preferred sound system noise level. Therefore, we calculated the maximum allowable noise level of the sound system to remain in compliance with the Ordinance at the adjacent property lines.

In order to meet the Ordinance criteria, the sound system cannot exceed an average hourly noise level (Leq(h)) of 79 dBA at the center of the event area for a maximum of two hours between 7 am to 10 pm within a 24-hour period. This recommended event noise level is 4 dB lower than our measured noise level with the sound system at the brewery’s preferred operating conditions. For reference, 3 dB is considered a “just noticeable” difference (see Appendix B).

Additionally, no amplified music/speech is allowed between 10 pm and 7 am. Noise should be monitored during events to maintain compliance with the Ordinance. The stage and sound system should continue to be oriented to the north, away from the nearest residences to the southwest. Operating within these parameters is calculated to increase the DNL at each adjacent property by 1 dB or less to meet the City of Santa Cruz Noise Ordinance criteria during future events. * * *
This concludes our current comments. Please contact us with any questions.

Best,
SALTER

Niko Abenoja
Consultant
Blake Wells, LEED GA
Senior Associate

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APPENDIX A
Adjacent Properties
West Property Line:

The western perimeter of the proposed site is bordered by active train tracks. The closest parcel to the west is commercial Parcel 001-053-33, located within the Sash Mill area. This parcel is separated from the proposed site by a six-foot-high metal fence, the train tracks, and is approximately 100 feet away. The nearest residential zone to the west is Parcel 001-101-24, which is approximately 1,800 feet from the proposed site.

North Property Line:

The northern perimeter of the proposed site is at Madrone Street, which terminates at a fence that prevents traffic from crossing the train tracks. The nearest building is Parcel 008-221-15, at 111 Madrone Street, which is commercial and approximately 170 feet from the proposed site. The 4,000-square-foot warehouse belonging to Woodhouse Blending & Brewing physically obstructs the northern perimeter.

The nearest residential zone to the north is across the Cabrillo Highway on IG/CC General Industrial/Community Commercial Parcel 008-171-33 at 733 River Street, which is approximately 810 feet from the proposed site.

East Property Line:

The eastern perimeter of the proposed site is at River Street, a busy thoroughfare to downtown Santa Cruz from Highway 1. The nearest building is Parcel 008-601-08, which is commercial and approximately 300 feet from the proposed site. The nearest residential zone is Parcel 008-561-15, which is across the San Lorenzo River. The residential zone is approximately 1,300 feet from the proposed site.

South Property Line:

The southern perimeter of the proposed site is a brick warehouse/commercial building with no windows.

This solid brick wall is 18 feet high and is approximately 60 feet from the proposed site. The commercial building at Parcel 008-222-04 houses Santa Cruz Core Fitness and is zoned commercial. The nearest residential zone to the south is approximately 560 feet from the proposed site.

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APPENDIX B
Fundamental Concepts of Environmental Noise
This section provides background information to aid in understanding the technical aspects of this report.

Three dimensions of environmental noise are important in determining subjective response. These are:
• The intensity or level of the sound
• The frequency spectrum of the sound
• The time-varying character of the sound
Airborne sound is a rapid fluctuation of air pressure above and below atmospheric pressure. Sound levels are usually measured and expressed in decibels (dB), with 0 dB corresponding roughly to the threshold of hearing.

The "frequency" of a sound refers to the number of complete pressure fluctuations per second in the sound. The unit of measurement is the cycle per second (cps) or hertz (Hz). Most of the sounds that we hear in the environment do not consist of a single frequency, but of a broad band of frequencies, differing in level. The name of the frequency and level content of a sound is its sound spectrum. A sound spectrum for engineering purposes is typically described in terms of octave bands, which separate the audible frequency range (for human beings, from about 20 to 20,000 Hz) into ten segments.

Many rating methods have been devised to permit comparisons of sounds having quite different spectra.

Surprisingly, the simplest method correlates with human response practically as well as the more complex methods. This method consists of evaluating all of the frequencies of a sound in accordance with a weighting that progressively de-emphasizes the importance of frequency components below 1000 Hz and above 5000 Hz. This frequency weighting reflects the fact that human hearing is less sensitive at low frequencies and at extreme high frequencies, relative to the mid-range.

The weighting system described above is called "A"-weighting, and the measured level is called the "A-weighted sound level" or "A-weighted noise level." The unit of A-weighted sound level is sometimes abbreviated "dBA." In practice, the sound level is conveniently measured using a sound level meter that includes an electrical filter corresponding to the A-weighting characteristic. All U.S. and international standard sound level meters include such a filter. Typical sound levels found in the environment and industry are shown in Figure A-1.

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Although a single sound level value may adequately describe environmental noise at any instant in time, community noise levels vary continuously. Most environmental noise is a conglomeration of distant noise sources, which results in a relatively steady background noise having no identifiable source. These distant sources may include traffic, wind in trees, industrial activities, etc. and are relatively constant from moment to moment. As natural forces change or as human activity follows its daily cycle, the sound level may vary slowly from hour to hour. Superimposed on this slowly varying background is a succession of identifiable noisy events of brief duration. These may include nearby activities such as single vehicle pass-bys, aircraft flyovers, etc. which cause the environmental noise level to vary from instant to instant.

To describe the time-varying character of environmental noise, statistical noise descriptors were developed. "L10" is the A-weighted sound level equaled or exceeded during 10 percent of a stated time period. The L10 is considered a good measure of the maximum sound levels caused by discrete noise events. "L50" is the A-weighted sound level that is equaled or exceeded 50 percent of a stated time period; it represents the median sound level. The "L90" is the A-weighted sound level equaled or exceeded during 90 percent of a stated time period and is used to describe the background noise.

As it is often cumbersome to quantify the noise environment with a set of statistical descriptors, a single number called the average sound level or "Leq" is now widely used. The term "Leq" originated from the concept of a so-called equivalent sound level which contains the same acoustical energy as a varying sound level during the same time period. In simple but accurate technical language, the Leq is the average A-weighted sound level in a stated time period. The Leq is particularly useful in describing the subjective change in an environment where the source of noise remains the same but there is change in the level of activity. Widening roads and/or increasing traffic are examples of this kind of situation.

In determining the daily measure of environmental noise, it is important to account for the different response of people to daytime and nighttime noise. During the nighttime, exterior background noise levels are generally lower than in the daytime; however, most household noise also decreases at night, thus exterior noise intrusions again become noticeable. Further, most people trying to sleep at night are more sensitive to noise. To account for human sensitivity to nighttime noise levels, a special descriptor was developed. The descriptor is called the Ldn (Day/Night Average Sound Level), which represents the 24-hour average sound level with a penalty for noise occurring at night. The Ldn computation divides the 24-hour day into two periods: daytime (7:00 am to 10:00 pm); and nighttime (10:00 pm to 7:00 am). The nighttime sound levels are assigned a 10 dB penalty prior to averaging with daytime hourly sound levels.

For highway noise environments, the average noise level during the peak hour traffic volume is approximately equal to the Ldn.

The effects of noise on people can be listed in three general categories:
• Subjective effects of annoyance, nuisance, dissatisfaction • Interference with activities such as speech, sleep, and learning • Physiological effects such as startle, hearing loss

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The sound levels associated with environmental noise usually produce effects only in the first two categories. Unfortunately, there has never been a completely predictable measure for the subjective effects of noise nor of the corresponding reactions of annoyance and dissatisfaction. This is primarily because of the wide variation in individual thresholds of annoyance and habituation to noise over time.

Thus, an important factor in assessing a person's subjective reaction is to compare the new noise environment to the existing noise environment. In general, the more a new noise exceeds the existing, the less acceptable the new noise will be judged.

With regard to increases in noise level, knowledge of the following relationships will be helpful in understanding the quantitative sections of this report:

Except in carefully controlled laboratory experiments, a change of only 1 dB in sound level cannot be perceived. Outside of the laboratory, a 3 dB change is considered a just-noticeable difference. A change in level of at least 5 dB is required before any noticeable change in community response would be expected.

A 10 dB change is subjectively heard as approximately a doubling in loudness, and would almost certainly cause an adverse community response.

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A1A1

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PROJECT SITE LT-3 ST-3 ST-2 LT-1 ST-4 ST-5 ST-6 LT-2 ST-7 ST-1 www.salter-inc.com San Francisco San Jose Honolulu Seattle Los Angeles 28.121

WEST PL NORTH PL EAST PL SOUTH PL OUTDOOR EVENT AREA
www.salter-inc.com San Francisco San Jose Honolulu Seattle Los Angeles 28.122 From: Cara Pearson
To: City Council
Subject: Woodhouse Brewery - in support of live entertainment permits Date: Monday, November 4, 2024 2:44:30 PM
Good Afternoon Council Members,
As a business near Woodhouse Brewery we are writing in support of their special use permit for expanded live entertainment. Woodhouse Brewery has been a very conscientious neighbor and for years we have enjoyed the energy they have brought to the neighborhood with live music and events. Our location is in an urban/commercial area which we believe is the perfect place for this type of event programming. We are shocked that a neighbor that has “plans” to build a residential building in this urban area would have any rights to oppose the permits.

Thank you for your consideration and service to our community, Cara, Shelly and Larry Pearson
Owners of Pacific Cookie Company @ 303 Potrero 40 AB St. SC CA 95060

28.123
From: Thomas Ballantyne
To: City Council
Subject: Woodhouse approval
Date: Monday, November 18, 2024 8:51:41 AM
Hi,
Writing to lend my support to allowing Wooodhouse to move forward with outdoor music per the approved master permit.

Santa Cruz needs more night life and support for music, art and community events.

Regards,
Thomas Ballantyne
131 El Sereno Dr.

Scotts Valley, CA 95066

28.124
From: Daniette West
To: City Council
Subject: Woodhouse brewery -- please allow live music to continue Date: Monday, November 18, 2024 8:55:44 AM
To whom it may concern,
Attn: Santa Cruz city Council,
I am a local business owner and supporter of the local brewery and community member, Woodhouse blending and brewing.

I was thrilled to find out that they had received unanimous approval from Santa Cruz Planning to keep their license for occasional live music events.

I’ve seen comedy shows, live bluegrass music, I’ve danced with my nieces and nephews to Samba, and they have been amazing enough to partner with a few community groups to use the space for fundraisers.

Especially important to me to have places for people to gather--- for a range of activities, family-friendly and adult geared events, encourage connection, and the ability to promote and enjoy live talent and music in our city.

I believe the unanimous decision from the planning council showed that is was apparent how vital Woodhouse is as a space, and are welcomed as part of the community as well as a venue.

I understand that an appeal was filed with the city council to have this permission revoked.

I urge you to uphold the planning department and community members' voiced goal of keeping this open as an event space, supporting live music, and support the ability for them to continue to host events into the future.

Thank you sincerely.

Daniette West
Joy Line Homes | Christie's International Sereno Real Estate Group Relocation Specialist| Realtor ®
(831) 291-4045| [email protected]
DRE #02116396, DOH#01512768
77 28.125
From: Erin Wood
To: City Council
Subject: outdoor music and events at Woodhouse
Date: Monday, November 18, 2024 9:12:43 AM
Dear Council,
I have been attending events at Woodhouse for years now and I want to express my support for them being able to have music outside. They have a gorgeous and welcoming outdoor area and I miss being able to enjoy gathering outside, where there is more room, more tables to eat and hang out, and more air circulation so better for public health.

Woodhouse offers a family-friendly, community-oriented place for us (people of ALL backgrounds) to come together, so please consider allowing them to be able to use the outdoor space too. It is already in a commercial area, near the highway and railroad tracks.

And if places like Abbot Square and Shanty Shack can have outdoor music, what is the issue here?
Thanks for considering my input, Erin Wood
Westside Resident
Licensed Acupuncturist
UCSC graduate
--
"Everything is a diamond: precious, complex, multifaceted.

Nothing is one-dimensional. We just don’t do the courtesy of noticing it: the majesty of the mundane." ~Alok
Erin Wood (she/her) L.Ac., M.S.

Acupuncture and Herbal Medicine
510.717.WOOD
www.erinwoodacupuncture.com
Herbal Wellness Check-Ins Virtually
Monday & Wednesday Afternoons,
Fridays All Day @12704 Hwy 9, Boulder Creek,
in the heart of the Santa Cruz Mountains
Tuesdays All Day at Branciforte Plaza at
555 Soquel Avenue, Suite 260, Center for Health

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From: Greg Benoit
To: City Council
Cc: Greg Benoit
Subject: 119 Madrone Street: CP24-0078 (APN 008-222-06) Date: Monday, November 18, 2024 10:11:24 AM
To whom it may concern, I am writing to express my support for the staff recommendation to the City Council to deny the appeal from Stacey and Guy Mitchell, thereby upholding the Planning Commission’s acknowledgement of the environmental determination (Categorical Exemption Sections 15301, 15303, and 15332) and approval of the Master Use Permit and Special Use Permit.

Thank you for the opportunity to support local business and support the Santa Cruz community.

Sincerely,
Greg Benoit
831.345.2438

28.127
From: Dalton Tucker
To: City Council
Subject: Woodhouse Brewing Live Music Application
Date: Monday, November 18, 2024 12:13:08 PM
Good afternoon,
I am writing to you today to voice support for Woodhouse Brewing's live music application.

This local business is vital to our community, and enabling live music is a great way to not only support the business, but also a great way to bring people together in these uncertain times. While it is important to be sensitive to our neighbors, the community cannot be beholden to those who simply are looking out for their own skin.

Please consider discarding the appeal and uphold Woodhouse's application which has already been approved by the Planning Commission. I appreciate your time.

Sincerely,
Dalton Tucker

28.128
From: Brian M
To: City Council
Subject: In support of Woodhouse Brewing
Date: Monday, November 18, 2024 3:50:05 PM
Dear Council,
I am respectfully asking you to confirm the Master Use Permit and Special Use Permit granted to Woodhouse Brewing for outdoor entertainment. Woodhouse is a small business that is a valued asset to the community for me, my family, and friends.

The challenge submitted by the non-resident nearby property owner for an imagined future use of his land should not be sufficient to deny the Woodhouse permit. Thanks for your consideration!
Regards,
Brian MacDonald
Santa Cruz

28.129
From: [email protected]
To: City Council
Subject: Woodhouse and Music SUPPORT
Date: Monday, November 18, 2024 4:24:10 PM
Hello,
As long-time residents of Santa Cruz County, homeowners, a worker at local non-profit and owner of a local business, my husband and I want to offer our FULL SUPPORT of Woodhouse to offer music. What better way than to allow a local business owner the opportunity to have a successful business while at the same time have community residents enjoy music and each other.

Please do not let one or two persons with only their interests in mind manage to discredit this reputable business.

Support WOODHOUSE and OUR Community and Artists,
Thank you
Patricia Ruymen
Mike Ruymen

28.130
From: Chris Wrenn
To: City Council
Subject: I support Woodhouse
Date: Monday, November 18, 2024 4:46:44 PM
Please give Woodhouse a special use permit for outdoor entertainment. They are a great draw to the neighborhood.

I hate to see them pull up shop like NuBo did on 41st street because their neighbors complained too much.

Chris Wrenn, 14502 Stetson Rd, Los Gatos, CA. 610-659-4507. Sent from my iPhone

28.131
119 Madrone Street
Woodhouse Brewing Appeal
City Council
November 19, 2024

28.132
2 Site Location

28.133
3 Background
• 2017 – AUP for beer manufacturing
• 2019 – AUP for low-risk alcohol outlet brewpub (restaurant w beer service)
• 2023 – Formal complaint (loud outdoor music)
• 2024 – 9/19/24 PC approved SUP/MUP for outdoor
entertainment/events
• Appeal received on 9/30/24

28.134
Master/Special Use Permit
• “High-risk alcohol outlet” - A retail outlet where alcoholic beverages are sold such as a bar or winebar, tavern, liquor store, convenience store, nightclub, banquet facility, and/or premises where live entertainment and/or dancing occurs, and/or any on-sale or off-sale alcohol outlet which, as part of its regular operating hours, stays open past midnight on one or more days of the week. • “Live entertainment” - music, comedy, readings, dancing, acting or other entertainment performed by one or more persons, whether or not such person or persons are compensated for such performances. This use includes dancing by patrons to live or recorded music.
4 28.135
Outdoor Area
5 28.136
Noise
• Noise Study prepared by Salter Inc.
• Sound system cannot exceed avg hourly noise level of 79dBA • No amplified music/speech10pm-7am
• Stage/Sound system to be oriented to the north
• COA to implement noise study recommendations
6 28.137
Appeal
• Residential Zoning
• Noise Study
• Noise Monitoring
7 28.138
Amended Management Plan Condition

27. Prior to issuance of a building permit, the applicant, in conjunction with the property owner and a qualified noise consultant approved by the City Planning Division, shall submit a maintenance and management plan to address potential nuisance impacts associated with interior/exterior areas adjacent to the tenant space outlining measures to address trash/litter removal, graffiti, landscape maintenance, abandoned vehicles, noise (including specific criteria a) for the business owner to monitor on an ongoing basis and b) to facilitate enforcement), parking management, and loitering, subject to approval by the Zoning Administrator.

The management plan shall assign a “Neighbor Liaison” to provide a single point of contact between the establishment, neighbors, and City staff. 8 28.139

52. At the applicant’s cost, a third party noise consultant, approved by the City Planning Division, shall monitor one event at the site within the first year of operation to confirm that the use is meeting the requirements of the Salter Inc. noise study as well as the City Noise Ordinance. The City Planning Division shall approve of the event being monitored to ensure that it is representative of the events likely to create the most noise. If any non-compliance is identified, the noise consultant shall identify specific ways in which the applicant can comply with applicable standards.
9 28.140
Recommendation
It is recommended that the City Council make a motion to adopt a resolution denying the appeal from Stacey and Guy Mitchell, thereby upholding the Planning Commission’s acknowledgement of the environmental determination (Categorical Exemption Sections 15301, 15303, and 15332) and approval of the Master Use Permit and Special Use Permit, based on the findings listed in the draft resolution and the Conditions of Approval attached as Exhibit “A.”
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City Council

AGENDA REPORT
DATE: 10/31/2024
AGENDA OF: 11/19/2024
DEPARTMENT: Planning and Community Development
SUBJECT: Amendments to Chapter 18.15 of the Municipal Code Requiring Additional Energy Standards for Alterations and Additions to Existing Single-Family Homes. CEQA: Exempt under general rule, 15061(b)(3) and per Guidelines Section 15308, Class 8, Actions by Regulatory Agencies for Protection of Natural Resources, and Reuse of Climate Action Plan 2030 Negative Declaration. Location and Council District: Citywide. Applicant:

City of Santa Cruz. (PL/CM)
RECOMMENDATION: Motion to introduce for publication an ordinance amending Municipal Code Chapter 18.15 to adopt local amendments to Title 24, Part 6 of the California Code of Regulations (California Energy Code). The ordinance creates an energy reach code that requires additional energy standards for renovations to existing single-family homes with an intent to provide property owners with a range of energy efficiency measure options when undertaking alterations and additions that will also meet goals to reduce greenhouse gas emissions associated with fossil fuel use citywide. Council finds the amendments are consistent with the Negative Declaration approved for the City of Santa Cruz 2030 Climate Action Plan adopted by City Council on September 13, 2022. The ordinance is also exempt under exempt from CEQA under the general rule, 15061(b)(3) and per CEQA Guidelines Section 15308, Class 8, Actions by Regulatory Agencies for Protection of Natural Resources.

BACKGROUND: The City adopted its Climate Action Plan 2030 (CAP 2030) in 2022 with a legal target to reduce emissions 40% from 1990 levels by 2030 and an aspirational target of being carbon neutral by 2035, ten years earlier than the State target. One important way to reduce carbon emission is by targeting energy efficiency in existing buildings, because existing buildings account for 24% of greenhouse gas emissions as regulated by the California Air Resources Board (CARB). The CAP 2030 contains three measures related to existing building energy use:
 Measure BE-2 - Electrify 31% of existing residential buildings by 2030 and 53% by 2035.
 Measure BE-3 -Electrify 26% of existing commercial buildings by 2030 and 45% by 2035.
 Measure BE-5 Increase resiliency through equitable energy efficiency and local solar programs.

29.1 In 2023, City Council approved local modifications to the California Energy Code, referred to as a “reach code,” for newly constructed buildings. The current proposal takes the next step in this process to create reach code requirements for existing buildings.

DISCUSSION: Historically, the Energy Code has prioritized improvements to code sections regarding construction of new buildings. This is largely because new construction code changes are simpler to study, implement, and enforce. However, for every new dwelling unit built annually in California, there are approximately 117 existing buildings, many of which predate the introduction of modern energy efficiency standards. Given this, local governments face an increased need to implement practical policies for reducing emissions in these older buildings, which contribute significantly to overall energy consumption and greenhouse gas emissions.

Additionally, CARB recently introduced draft zero-emission appliance standards with a phased implementation beginning in 2027. These standards aim to reduce greenhouse gas emissions and improve air quality by targeting residential and commercial appliances, including heaters and water heaters, to transition towards cleaner energy sources. By 2030, all new space and water heaters sold in California are expected to meet zero-emission standards. This initiative is part of California's broader strategy to achieve carbon neutrality by 2045. The proposed ordinance is the first of what may be several policies coming forward to prepare existing buildings for the upcoming zero-emission appliance standards and regulate energy use in existing buildings to reach the CAP 2030 targets.

While the reach code for the construction of new buildings was being developed in 2022, staff also began work exploring existing building decarbonization policies. Considering that 96 percent of the City’s building stock is residential, 87 percent of residential buildings are singlefamily homes, and 84 percent of those single-family homes were constructed prior to 1991, staff determined that large renovations to single-family homes are one of the best opportunities to make cost effective improvements that result in lower energy use and reduced unhealthy emissions while also improving living environment, comfort, and satisfaction.

This proposed ordinance would require more stringent energy standards when triggered by new alterations or additions of at least 350 square feet for existing single-family homes.

Staff anticipates this will capture approximately 110 permits per year. Doing so would avoid approximately 315 metric tons of carbon dioxide equivalent per year, an important step in addressing building energy usage in existing buildings to meet the CAP 2030 target.

Applicants have a variety of means through which they can achieve compliance with the more stringent energy code standards by completing one or more identified improvements. Depending on the work being completed and compliance path selected, certain requirements may apply, such as electric readiness to facilitate future conversion of a gas-powered appliance to electric alternatives. A full discussion of the proposed energy reach code and technical analysis can be found in the attached agenda report for the October 17, 2024, Planning Commission meeting.

California Energy Commission Approval
After adoption by City Council, the proposed local amendments to the California Energy Code must be approved by the California Energy Commission prior to becoming effective. Public

29.2 Resources Code Section 25402.1(h)(2) and Section 10-106 of the Building Energy Efficiency Standards establish a process that allows local adoption of energy standards that are more stringent than the statewide standards. Under this process, the California Energy Commission requires any local amendments to the California Energy Code that affect energy use in regulated buildings to be cost effective and use less energy than the standard requirements contained in Title 24, Part 6. The attached cost-effectiveness studies published by the California Energy Codes and Standards Statewide Utility Program, which includes the State's Investor-Owned Utilities (PG& E, SDG&E, and SCE, under the auspices of the California Public Utilities Commission), show that reach codes such as the one proposed are cost-effective.

Community Outreach
Staff conducted extensive outreach on this topic between 2020 and 2022 during the development of the CAP 2030. In the spring of 2022, staff conducted four listening sessions on the topic of existing building decarbonization with the housing and healthcare sector; designers, builders, and contractors; large multifamily property owners and developers; and non-profits and communitybased organizations. In 2023, because staff had to develop a replacement ordinance for the suspended natural gas prohibition in new construction, progress on existing building decarbonization was paused for about a year. Once the new buildings energy reach code was adopted by City Council in November 2023, City staff began immediately developing the energy efficient renovations policy.

On June 13, 2024, staff conducted outreach with the Mayor’s Community Climate Action Task Force, where ten individuals participated. In early June 2024, staff mailed postcards regarding the development of the proposed ordinance to over 500 builders, designers, contractors, and developers listed in the City’s business database. On June 27, 2024, staff conducted a virtual outreach meeting for builders, designers, developers, and contractors who do business in the City of Santa Cruz.  On July 10, 2024, staff conducted a virtual outreach meeting for the public with only six participants, despite heavy promotion of the meeting. All materials from the outreach described above are included at the City’s Building Decarbonization webpage (https://www.cityofsantacruz.com/Home/Components/Topic/Topic/11316/3916).

Feedback from the outreach included questions related to:
 The addition of a low emission refrigerant option for heat pump appliances,  How the policy would accommodate the imminent advance in technology to 110- volt/120-volt appliances versus 240-volt appliances,
 Whether a subpanel addition versus a main panel would trigger the electric readiness requirements for future space and water heating appliances,  How project valuations are computed for the purpose of building permits, and  Where to find assistance to install a heat pump water heater in a homeowners’ association.

One participant expressed concern that the proposed policy could present another barrier to legalizing illegal accessory dwelling units (ADUs) and that the square footage threshold that triggers compliance should be increased to the size of a junior ADU (500 square feet or greater).

29.3 This topic is further discussed below in the Planning Commission section of this report. Another participant suggested that the proposed policy, should it be adopted, go into effect at the same time as the regular code update cycle. An additional concern articulated the need to advise people with pacemakers of the implication of homes with induction cooktops. Although this proposed policy would not require installation of induction cooktops, it could result in making the building’s electric infrastructure ready for induction cooktop appliances.

Feedback also included a suggestion that staff should emphasize the cost effectiveness of the energy efficiency measures that will offset the costs of installing the energy efficiency measures.

Last, another participant offered to host the public to view two different types of heat pump space heating units installed at two dwelling units on one property.

Staff developed the attached Frequently Asked Questions document to address these concerns and other common questions. This document is posted on the website and will be periodically updated based on feedback and questions from the community.

In addition, a City Council study session convened on August 6, 2024 to examine this topic specifically. Staff gave a presentation on the proposed policy and received feedback from City Councilmembers and the public. City Council discussion and questions focused on the cost of these requirements to property owners and what can be done to reduce those costs, how the threshold of 350 square feet of new or substantially modified area was determined, whether the measures apply to ADUs, whether the proposed requirements line up with available grant resources, the need to allocate additional resources for staff time to assist applicants, how the proposed measures align with the green building code, how long it will take for these measures to affect a substantial proportion of the housing stock, and what upgrades are already in place throughout the housing stock.

Planning Commission
The proposed ordinance was brought to the October 17, 2024, Planning Commission meeting to seek feedback and suggestions from commissioners, as well as interested members of the community. With the Municipal Code changes occurring outside of the Zoning Ordinance, the Commission meeting was a courtesy referral, intended to garner additional input from Commissioners, and was not a required meeting for the proposed changes. Six Planning Commissioners attended the meeting (Commissioner Polhamus absent) as well as several members of the public.

Commissioners shared several concerns and suggestions about the proposed ordinance. This feedback included concerns about CAP goals, availability of rebates/incentives, grid reliance, and the cost burden for homeowners to implement these measures, as well as suggestions to increase the square footage threshold or lower the threshold for a cost burden exception and to exempt accessory dwelling units (ADUs) from the requirements. There were also more technical comments provided by Commissioner McKelvey. The attached Planning Commission Feedback document provides a more comprehensive overview of the Planning Commission comments, as well as detailed responses from staff. Public comments at the meeting included support for the proposed policy, comments about whether the policy can legally apply to ADUs, and other comments requesting minor clarifications.

In response to feedback from the Planning Commission and public, staff made several changes to the draft ordinance:

29.4  Creation of a new exemption for statewide exemption ADUs, including Junior ADUs and ADUs converted from existing space within the single-family home, and clarification that modifications to the main house are not required as a result of creating a new ADU/JADU;
 Clarification that projects will receive credit for previously installed measures that will count toward the point total for compliance with the energy reach code; and  Other minor clarifications
Next Steps
If the City Council approves the first reading of the ordinance on November 19, 2024, it will then come back for a second reading on December 10, 2024. After approval by City Council, the ordinance will be submitted to the California Energy Commission (CEC) for approval as local modifications to the California Energy Code. The ordinance is anticipated to become effective April 1, 2025, after the final approval by the City Council and the California Energy Commission.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The municipal code amendments are consistent with the Negative Declaration approved for the CAP 2030 adopted by City Council on September 13, 2022. Therefore, no further environmental review under the California Environmental Quality Act (CEQA) is required. The ordinance is also exempt from CEQA under the general rule, 15061(b)(3), because it can be seen with certainty that the provisions contained herein would not have the potential for causing a significant effect on the environment. Rather, the rules are expected to have a positive effect on the environment by resulting in cleaner energy use and a reduction in greenhouse gas emissions.

Further, this ordinance is exempt per CEQA Guidelines Section 15308, Class 8, Actions by Regulatory Agencies for Protection of Natural Resources, since the proposed ordinance would institute regulatory requirements intended to protect the environment and natural resources.

HEALTH IN ALL POLICIES (HiAP): HiAP is a collaborative approach to improving the community well-being of the City’s residents by prioritizing public health, sustainability and equity into decision-making across sectors and policy areas. The goal of HiAP is to ensure that all decision-makers are informed about the health, equity, and sustainability impacts of various policy options during the policy development process so that they have holistic information upon which to make decisions. The municipal code amendments support the pillars of equity and public health by advancing efforts to ensure existing buildings are safe and healthy while remaining cost effective. The amendments support sustainability by reducing greenhouse gas emissions (projected to be a reduction of approximately 315 metric tons of carbon dioxide equivalent per year) and fossil fuel dependence citywide consistent with the CAP 2030.

Therefore, the proposed code amendments are considered consistent with the three pillars of HiAP.

FISCAL IMPACT: As the proposed ordinance provides more flexibility in building design than the currently-suspended natural gas prohibitions but less flexibility than the standard California Energy Code regulations, it could be argued that the policy could lead to an increase in development applications compared to those received during the natural gas prohibition and a decrease in applications compared to those received prior to implementation of any additional regulations beyond the standard state energy code. An increase in development applications will

29.5 result in increased revenue for the City in the short term and increased tax basis over the longer term as redeveloped properties are reassessed. A decrease in development applications will result in decreased revenue for the City in the short term and decreased tax basis over the longer term as redeveloped properties are reassessed. Overall, however, the implementation of this ordinance is unlikely to create cost shifts of a magnitude that would influence whether an applicant decides to move forward with a project or not, so the overall fiscal impact of the proposed ordinance is likely neutral.

Prepared By:

Tiffany Wise-West
Sustainability and Resiliency
Officer
Clara Stanger
Senior Planner
Matt VanHua, AICP
Principal Planner
Submitted By:

Lee Butler, AICP, LEED AP
Director of Planning &
Community Development
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. EXISTING BUILDING PROPOSED ORDINANCE - CLEAN.DOCX

2. EXISTING BUILDING PROPOSED ORDINANCE – TRACK CHANGES.DOCX

3. AGENDA REPORT FOR OCTOBER 17, 2024 PLANNING COMMISSION MEETING.DOCX

4. FREQUENTLY ASKED QUESTIONS.DOCX

5. 2022 COST-EFFECTIVENESS STUDY - EXISTING SINGLE FAMILY BUILDING UPGRADES.PDF

6. PLANNING COMMISSION FEEDBACK.DOCX

29.6 ORDINANCE NO. 2024-

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ AMENDING CHAPTER 18.15 - ENERGY CODE, ADOPTING LOCAL AMENDMENTS TO THE CALIFORNIA ENERGY CODE, PART 6 OF THE CALIFORNIA BUILDING CONSTRUCTION AND FIRE PREVENTION CODE.

WHEREAS, The State of California has a goal to achieve carbon neutrality by 2045; and WHEREAS, The California Air Resources Board (CARB) has introduced zero-emission appliance standards with a phased implementation beginning in 2027 to reduce greenhouse gas emissions and improve air quality, with an expectation that all new space and water heaters sold in California meet zero-emission standards by 2030; and WHEREAS, The City adopted its Climate Action Plan 2030 (CAP 2030) in 2022 with a legal target to reduce emissions 40% from 1990 levels by 2030 and an aspirational target of carbon neutral by 2035, 10 years earlier than the State target; and WHEREAS, The CAP 2030 contains three measures related to existing building energy use which accounts for 24% of greenhouse gas emissions regulated by CARB, including Measure BE-2, to electrify 31% of existing residential buildings by 2030 and 53% by 2035; Measure BE-3, to electrify 26% of existing commercial buildings by 2030 and 45% by 2035; and Measure BE-5 is to increase resiliency through equitable energy efficiency and local solar programs; and
WHEREAS, Considering that 96% of the City’s building stock is residential and 87% of residential buildings are single family homes older than 1978, large renovations are one of the best opportunities to make improvements to single family homes resulting in reduce energy use and emissions and improved comfort and satisfaction; and
WHEREAS, Public Resources Code Section 25402.1 (h)(2) allows local agencies to adopt local amendments that are cost-effective and that require greater energy reduction/conservation than the California Energy Code; and
WHEREAS, the California Energy Codes and Standards Statewide Utility Program, has determined specific modifications to the 2022 State Energy Code for each climate zone that are cost-effective; and that such modifications will result in designs that consume less energy than they would under the 2022 State Energy Code; and
WHEREAS, staff has reviewed the “2024 Existing Building Cost-Effectiveness Study” and associated data, and find them sufficient to illustrate compliance with the requirements set forth under California Administrative Code Chapter 10-106; and

29.7 WHEREAS, based on these studies, the City finds the proposed local amendments to the 2022 California Energy Code to be cost-effective and consume less energy than permitted by Title 24, Part 6; and
WHEREAS, the 2022 California Energy Code offers compliance options that were established through the public rulemaking process of the code update; and WHEREAS, the Council expressly declares that the proposed amendments to the Energy Code are reasonably necessary because of local climatic, topological, and geological conditions; and
WHEREAS, the requirements specified in this Ordinance were reviewed via public comment and through a publicly noticed public hearing process; and WHEREAS, The municipal code amendments are consistent with the Negative Declaration approved for the City of Santa Cruz 2030 Climate Action Plan adopted by City Council on September 13, 2022, and therefore, no further environmental review under the California Environmental Quality Act (CEQA) is required; the amendments are exempt from CEQA under the general rule, 15061(b)(3), because it can be seen with certainty that the provisions contained herein would not have the potential for causing a significant effect on the environment; and, this ordinance is exempt per CEQA Guidelines Section 15308, Class 8, Actions by Regulatory Agencies for Protection of Natural Resources, since the proposed ordinance would institute regulatory requirements intended to protect the environment and natural resources.

BE IT ORDAINED By the City of Santa Cruz as follows:

Section 1. Section 18.15.040 of Chapter 18.15 of the Santa Cruz Municipal Code is hereby amended to read as follows:

18.050.040 ENERGY CODE – MODIFICATIONS.

The following sections of the code as adopted in Section 18.15.030 are hereby modified as follows:

Section 100.1(b) of the CEnC is amended to add the following:

ELECTRIC HEATING APPLIANCE. A device that produces heat energy to create a warm environment by the application of electric power to resistance elements, refrigerant compressors, or dissimilar material junctions, as defined in the California Mechanical Code.

MAJOR ADDITION is any change to an existing building that increases conditioned floor area by 350 or more square feet in a one-year period.

MAJOR ALTERATION is any construction or renovation to an existing structure other than a repair whose altered components cover 350 or more square feet in a one-year period.

29.8 A project that consists only of roof and/or fenestration replacement is not considered a major alteration.

NET FREE AREA (NFA) is the total unobstructed area of the air gaps between louver and grille slats in a vent through which air can pass. The narrowest distance between two slats, perpendicular to the surface of both slats is the air gap height. The narrowest width of the gap is the air gap width. The NFA is the air gap height multiplied by the air gap width multiplied by the total number of air gaps between slats in the vent.

Section 130.0 of the CEnC is amended to read as follows:
a) The design and installation of all lighting systems and equipment in nonresidential and hotel/motel buildings, outdoor lighting, and electrical power distribution systems within the scope of Section 100.0(a), shall comply with the applicable provisions of Sections 130.0 through 130.6.

Subchapter 4 of the CEnC is amended to add Section 130.6 to be numbered, entitled, and to read as follows:
130.6 Electric Readiness Requirements for Systems Using Gas or Propane Where nonresidential systems using gas or propane are installed, construction drawings shall indicate electrical infrastructure and physical space accommodating the future installation of an electric heating appliance by including the following, as certified by a registered design professional or licensed electrical contractor:
a) Branch circuit wiring, electrically isolated and designed to serve all electric heating appliances in accordance with manufacturer requirements and the California Electrical Code, including the appropriate voltage, phase, minimum amperage, and an electrical receptacle or junction box within five feet of the appliance that is accessible with no obstructions. Appropriately sized conduit may be installed in lieu of conductors.
b) Labeling of both ends of the unused conductors or conduit that includes the terms “For Future Electrical Appliance.”
c) Reserved circuit breakers in the electrical panel for each branch circuit, appropriately labeled (e.g., “Reserved for Future Electric Range”), and positioned on the opposite end of the panel supply conductor connection. d) Connected subpanels, panelboards, switchboards, busbars, and transformers that are sized to serve the future electric heating appliances. The electrical capacity

29.9 requirements shall be adjusted for demand factors in accordance with the California Electric Code.
e) Physical space for future electric heating appliances, including equipment footprint, and if needed, a pathway reserved for routing of ductwork to heat pump evaporator(s), all of which shall be depicted on the construction drawings. The footprint necessary for future electric heating appliances may overlap with nonstructural partitions and with the location of currently designed gas-fueled equipment.

Section 140.0 of the CEnC is amended to read as follows:

Nonresidential and hotel/motel buildings shall comply with all of the following:
a) The requirements of Sections 100.0 through 110.12 applicable to the building project (mandatory measures for all buildings).
b) The requirements of Sections 120.0 through 130.6 (mandatory measures for nonresidential and high-rise residential and hotel/motel buildings). c) Either the performance compliance approach (energy budgets) specified in Section 140.1 or the prescriptive compliance approach specified in Section 140.2. for the climate zone in which the building will be located. Climate zones are shown in Figure 100.1-A.

NOTE to Section 140.0(c): The Commission periodically updates, publishes, and makes available to interested persons and local enforcement agencies precise descriptions of the Climate Zones, which is available by zip code boundaries depicted in the Reference Joint Appendices along with a list of the communities in each zone.

NOTE to Section 140.0: The requirements of Sections 140.1 through 140.10 apply to newly constructed buildings. Section 141.0 specifies which requirements of Section 140.1 through 140.10 also apply to additions or alterations to existing buildings.

Section 140.1 of the CEnC is amended to read as follows:

The following conditions are necessary for a building to comply with the performance approach:

1. The time-dependent valuation (TDV) energy budget calculated for the proposed design building under Subsection (b) is no greater than the TDV energy budget calculated for the Standard Design Building under Subsection (a); and

2. The source energy budget calculated for the proposed design building under Subsection (b) has a source energy compliance margin, relative to the energy budget calculated for the standard design building under Subsection (a), of at least 7 percent for all nonresidential occupancies.

29.10 EXCEPTION 1 to 140.1 item 2 A source energy compliance margin of at least 7 percent is not required when nonresidential occupancies are designed with single zone space-conditioning systems complying with Section 140.4(a)2. (a) – (c): Subsections 140.1 (a) – (c) are adopted without modification.

Section 150.0 of the CEnC is amended as follows:

Single-family residential buildings shall comply with the applicable requirements of Sections 150(a) through 150.0(w).

NOTE: The requirements of Sections 150.0 (a) through (v) apply to newly constructed buildings. Sections 150.2(a) and 150.2(b) specify which requirements of Sections 150.0(a) through 150.0(r) also apply to additions or alterations. The City of Santa Cruz amendments to sections 150.0 (t) do not apply to additions or alterations. (a) – (s): Subsections 150.0(a) – (s) are adopted without modification. (t) Heat pump space heater ready. Systems using a gas or propane furnace to serve individual dwelling units shall include the following:

1. A dedicated 240-volt branch circuit wiring shall be installed within 3 feet from the furnace and accessible to the furnace with no obstructions. The branch circuit conductors shall be rated at 30 amps minimum. The blank cover shall be identified as “240V ready.” All electrical components shall be installed in accordance with the California Electrical Code.

2. The main electrical service panel shall have a reserved space to allow for the installation of a double pole circuit breaker for a future heat pump space heater installation. The reserved space shall be permanently marked as “For Future 240V use.”

3. A designated exterior location for a future heat pump compressor unit with either a drain or natural drainage for condensate and adequate space to maintain the equipment in accordance with California Mechanical Code 304.1 & California Electrical Code 110.26.
(u) – (v): Subsections 150.0(u) – (v) are adopted without modification.

Section 150.0(w) is added to read as follows:
(w) Mandatory Requirements for Existing Building Additions and Alterations. Existing Building Additions and Alterations shall meet the requirements of Items 1 through 3 below, as applicable:

29.11 listed in Table 150.0-I shall be installed. Measure verification shall be explicitly included as an addendum to the Certificate of Compliance to be filed pursuant to 2022 Title 24 Section 10-103. Installed measures shall meet the specifications in Table 150.0-J.

2. Major alteration. Any major alteration shall require installation of a set of measures from the Measure Menu Table, Table 150.0-I to achieve a total score that is equal to or greater than 9. In addition, all mandatory measures listed in Table 150.0-I shall be installed. Measure verification shall be explicitly included as an addendum to the Certificate of Compliance to be filed pursuant to 2022 Title 24 Section 10-103. Installed measures shall meet the specifications in Table 150.0-J.

3. Combination alterations and additions. Any project that includes an addition and alteration whose altered components cover 350 square feet or greater shall require installation of a set of measures from the Measure Menu Table, Table 150.0-I to achieve a total score that is equal to or greater than 9.

In addition, all mandatory measures listed in Table 150.0-I shall be installed.

Measure verification shall be explicitly included as an addendum to the Certificate of Compliance to be filed pursuant to 2022 Title 24 Section 10- 103. Installed measures shall meet the specifications in Table 150.0-J.

4. Water heating system electric readiness. Any project that includes a major addition, major alteration, or combination alteration and addition that requires water heating system electric readiness shall meet Item A below:
a. Systems using gas or propane water heaters to serve individual dwelling units shall designate a space at least 2.5 feet by 2.5 feet wide and 7 feet tall suitable for the future installation of a heat pump water heater (HPWH). All electrical components shall be installed in accordance with the California Electrical Code. The space shall include the following:
i. A dedicated 125 volt, 20 amp electrical receptacle that is connected to the electric panel with a 120/240 volt 3
conductor, 10 AWG copper branch circuit, within 3 feet from the water heater and accessible to the water heater with no obstructions; and
ii. Both ends of the unused conductor shall be labeled with the word “spare” and be electrically isolated; and
iii. A reserved single pole circuit breaker space in the electrical panel adjacent to the circuit breaker for the branch circuit in A above and labeled with the words “Future Use”; and
iv. A condensate drain that is no more than 2 inches higher than the base of the installed water heater, and allows natural draining without pump assistance.

29.12 v. A condensate drain that is no more than 2 inches higher than the base of the installed water heater, and allows natural draining without pump assistance.

Exception 1 to Section 150.0(w): The project is the result of a repair as defined by Title 24 Part 2 Section 202.

Exception 2 to Section 150.0(w): If compliance costs exceed 20% of total project valuation or due to conditions specific to the project, it is technically infeasible to achieve compliance through any available set of measures, the applicant may request an exemption as set forth below. In applying for an exemption, the burden is on the applicant to show hardship or infeasibility.
(1) Application. Based on the following, the applicant shall identify in writing the specific requirements of the standards for compliance that the project is unable to achieve and the circumstances that make it a hardship or infeasible for the project to comply with this chapter. The applicant may not petition for relief from any requirement of the 2022 California Energy Code (Title 24, Part 6) and referenced standards, or the 2022 California Green Building Standards (Title 24, Part 11) of the California Building Standards Code. Circumstances that constitute hardship or infeasibility shall include one of the following:
i. That the cost of achieving compliance is disproportionate to the overall cost of the project;
ii. That it is technically infeasible to achieve compliance through all packages due to conditions specific to the project; That strict compliance with these standards would create or maintain a hazardous condition(s) and present a life safety risk to the occupants.
(2) Granting of exemption. If the chief building official determines that it is a hardship or infeasible for the applicant to fully meet the requirements of this chapter and that granting the requested exemption will not cause the building to fail to comply with the 2022 California Energy Code (Title 24, Part 6) and referenced standards, or the 2022 California Green Building Standards (Title 24, Part 11) of the California Building Standards Code, the chief building official shall determine the minimum feasible threshold of compliance reasonably achievable for the project. If an exemption is granted, the applicant shall be required to comply with this chapter in all other respects and shall be required to achieve the threshold of compliance determined to be achievable by the chief building official. (3) Denial of exemption. If the chief building official determines that it is reasonably possible for the applicant to fully meet the requirements of this chapter, the request shall be denied, and the applicant shall be notified of the decision in

29.13 writing. The project and compliance documentation shall be modified to comply with the standards for compliance.
(4) Appeal. Any aggrieved applicant or person may appeal the determination of the chief building official regarding the granting or denial of an exemption or compliance with any other provision of this chapter. An appeal of a determination of the chief building official shall be filed in writing with the Board of Building and Fire Appeals.

Exception 3 to Section 150.0(w): If the dwelling unit has previously installed measures from the Measure Menu, Table 150.0-I, and compliance can be demonstrated to the building official, then these measures shall not be required to be newly installed, and appropriate credit shall be included in the applicable compliance calculations.

Exception 4 to Section 150.0(w): The applicant may request an exemption to any requirements of this chapter which would impair the historic integrity of any building listed on a local, state, or federal register of historic structures, as determined by the Planning Director or designee and as regulated by the California Historic Building Code (Title 24, Part 8). In making a determination of exemption, the Planning Director or designee may require the submittal of an evaluation by an architectural historian or similar expert.

Exception 5 to Section 150.0(w): An alteration that consists solely of seismic safety improvements.

Exception 6 to Section 150.0(w): Buildings which are temporary (such as construction trailers).

Exception 7 to Section 150.0(w): An alteration that consists solely of roof and/or fenestration projects.

Exception 8 to Section 150.0(w): Mobile Homes, Manufactured Housing, or Factorybuilt Housing as defined in Division 13 of the California Health and Safety 12 Code (commencing with Section 17000 of the Health and Safety Code).

Exception 9 to Section 150.0(w): One accessory dwelling unit and one junior accessory dwelling unit per lot with a proposed or existing single-family dwelling if all of the following apply:
(1) The accessory dwelling unit or junior accessory dwelling unit is within the proposed space of a single-family dwelling or existing space of a single-family dwelling or accessory structure and may include an expansion of not more than 150 square feet beyond the same physical dimensions as the existing accessory structure. An expansion beyond the physical dimensions of the existing accessory structure shall be limited to accommodating ingress and egress. (2) The space has exterior access from the proposed or existing single-family dwelling.

29.14 (3) The side and rear setbacks are sufficient for fire and safety.

Exception 10 to Section 150.0(w): Where the project includes an accessory dwelling unit or junior accessory dwelling unit that is attached to the primary dwelling unit, either as a new addition or converted from within the space of the primary dwelling unit, and there is not an additional combination alteration/addition to the primary dwelling unit of at least 350 square feet, then the primary dwelling unit is exempt from the requirements.

New Table 150.0-I is added to read as follows:

Table 150.0-I: Measure Menu
Measures
Table 150.0-J
ID Points
Water Heating Package E1 1
Induction Cooktop E2 1
Heat Pump Clothes Dryer E3 1
Air Sealing E4 2
Duct Sealing E5 3
R-49 Attic Insulation E6 4
Windows E7 4
R-13 Wall Insulation E8 5
New Ducts + Duct Sealing E9 6
R-19 Floor Insulation E10 9
R-30 Floor Insulation E11 10
Heat Pump Water Heater (HPWH) E12 12
Solar PV + Electric Ready Pre-Wire E13 13
Heat Pump Space Heater E14 18
Utility Room, Kitchen & Laundry-Related
Electric Ready Pre-Wire M1 Mandatory
Panel-Related Electric Ready Pre-Wire M2 Mandatory
Note: the measures in the Measure Menu table shall conform to the specifications in Table 150.0-J

29.15 New Table 150.0-J is added to read as follows:

Table 150.0-J: Measure Specifications
ID Measure Specification
General Measures
E1 Water Heating Package: Add exterior insulation meeting a minimum of R-6 to existing storage water heaters. Insulate all accessible hot water pipes with pipe insulation a minimum of ¾ inch thick. This includes insulating the supply pipe leaving the water heater, piping to faucets underneath sinks, and accessible pipes in attic spaces or crawlspaces. Upgrade fittings in sinks and showers to meet current California Green Building Standards Code (Title 24, Part 11) Section 4.303 water efficiency requirements.

Water heaters 20 gallons or less, or water heaters that are not able to add exterior insulation may not take credit for this measure.

Exception 1: Water heater blanket is not required on water heaters less than 20 gallons.

Exception 2: Water heater blanket not required if application of a water heater blanket voids the warranty on the water heater.

Exception 3: Upgraded fixtures are not required if existing fixtures have rated or measured flow rates of no more than ten percent greater than 2022 California Green Building Standards Code (Title 24, Part 11) Section 4.303 water efficiency requirements.

Exception 4: Water heaters with factory installed insulation of R-24 or greater E2 Heat Pump Space Heater: Replace all existing gas and electric resistance space heating systems with an electric-only heat pump system.

E3 Induction Cooktop: Replace existing gas and electric resistance stove top with inductive stove top and cap the gas line.

E4 Air Sealing: Seal all accessible cracks, holes, and gaps in the building envelope at walls, floors, and ceilings. Pay special attention to penetrations including plumbing, electrical, and mechanical vents, recessed can light luminaires, and windows. Weather-strip doors if not already present. Verification shall be conducted by a certified HERS Rater that either: a) shows at least a 30 percent reduction from pre-retrofit conditions; or b) shows that the number of air changes per hour at 50 Pascals pressure difference (ACH50) does not exceed ten for Pre-1978 vintage buildings, seven for 1978 to 1991 vintage buildings and five for 1992-2010 vintage buildings. Compliance can also be demonstrated with blower door testing conducted by a certified HERS Rater no more than three years prior to the permit application date showing compliance with condition (a) or (b).

If combustion appliances are located within the pressure boundary of the building, conduct a combustion safety test by a professional certified by the Building Performance Institute in accordance with the ANSI/BPI-1200-S-2017 Standard Practice for Basic Analysis of Buildings, the Whole House Combustion Appliance Safety Test Procedure for the Comfortable Home Rebates Program 2020 or the California Community Services and Development Combustion Appliance Safety Testing Protocol.

29.16 Reducing the air leakage of a building can reduce the building’s drying potential. When improving the air sealing of a building, consider if there is a need to add continuous ventilation to the building (if not already present).

E5 Duct Sealing: Air seal all space conditioning ductwork to meet the requirements of the 2022 Title 24 Section 150.2(b)1E. The duct system must be tested by a HERS Rater no more than three years prior to the alteration or addition permit application date to verify the duct sealing and confirm that the requirements have been met. This measure may not be combined with the New Ducts and Duct Sealing measure in this Table. Dwelling units without ductwork or where the ducts are in conditioned space may not take credit for this measure.

Luminaires not rated for insulation contact must be replaced or fitted with a fire-proof cover that allows for insulation to be installed directly over the cover.

Exception: In buildings where existing R-30 is present and existing recessed downlight luminaires are not rated for insulation contact, insulation is not required to be installed over the luminaires.

E7 Windows: Replace at least 50% of existing windows with high performance windows with an area-weighted average U-factor no greater than 0.30.

E8 R-13 Wall Insulation: Install wall insulation in all exterior walls to achieve a weighted U-factor of 0.102 or install wall insulation in all exterior wall cavities that shall result in an installed thermal resistance of R-13 or greater for the insulation alone.

E9 New Ducts + Duct Sealing: Replace existing space conditioning ductwork with new R-8 ducts that meet the requirements of 2022 Title 24 Section 150.0(m)11. This measure may not be combined with the Duct Sealing measure in this Table. To qualify, a preexisting measure must have been installed no more than three years before the alteration or addition permit application date.

E10 R-19 Floor Insulation: Raised-floors shall be insulated such that the floor assembly has an assembly U-factor equal to or less than U-0.037, or shall be insulated between wood framing with insulation having an R-value equal to or greater than R-19. This measure cannot be combined with measure R-30 Floor insulation.

E11 R-30 Floor Insulation: Raised-floors shall be insulated such that the floor assembly has an assembly U-factor equal to or less than U-0.028, or shall be insulated between wood framing with insulation having an R-value equal to or greater than R-30. This measure cannot be combined with measure R-19 Floor insulation.

E12 Heat Pump Water Heater (HPWH): Replace existing electric resistance or natural gas storage water heater with a heat pump water heater.

E13 PV and Electric Ready Pre-Wire: Install a solar PV system that meets the requirements of 2022 Title 24 Section 150.1(c)14.

In addition to the solar PV system, comply with the water heating system electric readiness requirements per Section 150.0(w)4and the heat pump space heaters requirements per Section 150.0(t) and one of the following:

A. Energy Storage Systems (ESS) Ready, as specified in Section 150.0(s), or

29.17 B. EV Charger Ready as specified in the California Green Building Code, Title 24, Part 11, Section A4.106.8.1, which otherwise applies to new construction.

Exception 1: In buildings where the designated space requirement specified in Section 150.0(n)1 can be demonstrated to the building official as infeasible, the electric readiness components per Section 150.0(n)1 are not required.

Mandatory Measures
M1 Utility Room, Kitchen & Laundry-Related Electric Ready Pre-Wire: Where the project includes a kitchen remodel, comply with the electric cooktop ready requirement, as specified in Section 150.0(u). Where the project includes a laundry room remodel, comply with the electric clothes dryer ready requirement, as specified in Section 150.0(v). Where the project includes a utility room remodel, comply with the water heating system electric readiness requirements per Section 150.0(w)4and the heat pump space heater electric readiness requirements per Section 150.0(t):

Exception 1: If an electrical permit is not otherwise required for the project other than compliance with this measure.

Exception 2: If a utility service upgrade is not otherwise required for the project other than compliance with this measure.

Exception 3: In buildings where the designated space requirement specified in Section 150.0(w)4can be demonstrated to the building official as infeasible, the electric readiness components per Section 150.0(w)4are not required.

M2 Panel-Related Electric Ready Pre-Wire: Where the project includes a new electrical panel and electrical service upgrade to 200A or more, comply with the water heating systems electric readiness requirements per Section 150.0(w)4 and the heat pump space heater electric readiness requirements per Section 150.0(t).

Exception 1: In buildings where the designated space requirement specified in Section (150.0(w)4can be demonstrated to the building official as infeasible, the electric readiness components per Section 150.0(w)4 are not required.

Section 150.1 of the CEnC is amended to read as follows:
(a) Section (a) is adopted without modification.
(b) Performance Standards. A building complies with the performance standards if the energy consumption calculated for the proposed design building is no greater than the energy budget calculated for the standard design building using Commissioncertified compliance software as specified by the Alternative Calculation Methods Approval Manual.

29.18 total Energy Design Rating shall account for both the Energy Efficiency Design Rating and the Solar Electric Generation and Demand Flexibility Design Rating. The proposed building shall separately comply with the Source Energy Design Rating, Energy Efficiency Design Rating and the Total Energy Design Rating. A building complies with the performance approach if the TDV energy budget calculated for the proposed design building is no greater than the TDV energy budget calculated for the Standard Design Building with an EDR1 compliance margin of at least 9, relative to the Source Energy Design Rating 1 calculated for the Standard Design building.

EXCEPTION 1 to Section 150.1(b)1. A community shared solar electric generation system, or other renewable electric generation system, and/or community shared battery storage system, which provides dedicated power, utility energy reduction credits, or payments for energy bill reductions, to the permitted building and is approved by the Energy Commission as specified in Title 24, Part 1, Section 10-115, may offset part or all of the solar electric generation system and demand flexibility Energy Design Rating required to comply with the Standards, as calculated according to methods established by the Commission in the Residential ACM Reference Manual.

EXCEPTION 2 to Section 150.1(b)1. A newly constructed building that does not require a PV system in accordance with section 150.1(c)14 does not need a Source Energy compliance margin of at least 9, relative to the Source Energy Design Rating 1 calculated for the Standard Design building.

2. Additions and Alterations to Existing Buildings. The Energy Budget for additions and alterations is expressed in terms of TDV energy.

3. Section (b)(3) is adopted without modification.
(c) Section (c) is adopted without modification.

Section 150.2(a) [ENERGY EFFICIENCY STANDARDS FOR ADDITIONS AND ALTERATIONS TO EXISTING SINGLE FAMILY RESIDENTAL BUILDINGS] is modified to read as follows:

Additions. Additions to existing single-family residential buildings shall meet the requirements of Sections 110.0 through 110.9, Sections 150.0(a) through (n), (p), (q), (w), and either Section 150.2(a)1 or 2.

Section 150.2(b) [ENERGY EFFICIENCY STANDARDS FOR ADDITIONS AND ALTERATIONS TO EXISTING SINGLE FAMILY RESIDENTAL BUILDINGS] is modified to read as follows:

Alterations. Alterations to existing single-family residential buildings or alterations in conjunction with a change in building occupancy to a single-family residential occupancy shall meet either Item 1 or 2 below.

29.19 1. Prescriptive approach. The altered component and any newly installed equipment serving the alteration shall meet the applicable requirements of Sections 110.0 through 110.9 and all applicable requirements of Sections 150.0(a) through (l), 150.0(m)1 through 150.0 (m)10, 150.0(p) through (q), and 150.0 (w); and

2. Performance approach. The altered component(s) and any newly installed equipment serving the alteration shall meet the applicable requirements of Subsections A, B, and C below.

A. The altered components shall meet the applicable requirements of Sections 110.0 through 110.9, Sections 150.0(a) through (l), Sections 150.0(m)1 through 150.0 (m)10, Sections 150.0(p) through (q), and Section 150.0(w). Entirely new or complete replacement mechanical ventilation systems as these terms are used in Section 150.2(b)1L, shall comply with the requirements in Section 150.2(b)1L.

Altered mechanical ventilation systems shall comply with the requirements of Section 150.2(b)1M. Entirely new or complete replacement space-conditioning systems, and entirely new or complete replacement duct systems, as these terms are used in Sections 150.2(b)1C and 150.2(b)1Diia, shall comply with the requirements of Sections 150.0(m)12 and 150.0(m)13.

Section 160.4 of the CEnC is amended to remove subsection (a) as follows:
(a) Reserved.

Sections (b) to (f) are adopted without amendments.

Section 160.9 Sections (a) to (c) of the CEnC are adopted without amendments. Sections (d) and (e) are added as follows:
(d) Systems using gas or propane water heaters to serve individual dwelling units shall include the following:

1. A dedicated 125-volt, 20-amp electrical receptacle that is connected to the electric panel with a 120/240-volt 3 conductor, copper branch circuit rated to 30 amps, within 3 feet from the water heater and accessible to the water heater with no obstructions.

A. Both ends of the unused conductor shall be labeled with the word “spare” and be electrically isolated.

B. A reserved single pole circuit breaker space in the electrical panel adjacent to the circuit breaker for the branch circuit in (A) above shall be included and labeled with the words “Future 240V Use.”

2. A condensate drain that is no more than 2 inches higher than the base of the installed water heater, and allows natural draining without pump assistance.

29.20 3. Construction drawings that indicate the reserved location of the future heat pump water heater with minimum interior dimensions of 39” x 39” x 96.”

4. A ventilation method that incorporates one of the following:

A. A space reserved for the future heat pump water heater with a volume of at least 700 cu. ft.

B. A space reserved for the future heat pump water heater that vents to a communicating space in the same pressure boundary via permanent openings with a minimum total net free area of 250 sq. in., so that the total combined volume connected via permanent openings is 700 cu. ft. or greater. The permanent openings shall be:
i. Fully louvered doors with fixed louvers consisting of a single layer of fixed flat slats; or
ii. Two permanent fixed openings, consisting of a single layer of fixed flat slat louvers or grilles, one commencing within 12 inches from the top of the enclosure and one commencing within 12 inches from the bottom of the enclosure.

C. A space reserved for the future heat pump water heater that includes two 8” capped ducts, venting to the building exterior.
i. All duct connections and building penetrations shall be sealed. ii. Exhaust air ducts and all ducts that cross pressure boundaries shall be insulated to a minimum insulation level of R-6 in compliance with California Mechanical Code 502.0.
iii. Airflow from termination points shall be diverted away from each other. (e) Central Heat Pump Water Heater Electric Ready. Water heating systems using gas or propane to serve multiple dwelling units shall meet the requirements of 160.9(e) and include the following for the future heat pump:

1. A system input capacity of the gas or propane water heating system that is determined as the sum of the input gas or propane capacity of all water heating devices associated with each gas or propane water heating system.

2. A space reserved that includes and complies with the following:

29.21 i. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, the minimum space reserved for the heat pump shall be 2.0 square feet per input 10,000 BTU/ HR of the gas or propane water heating system, and the minimum dimension of reserved spaces shall be 48 inches.
ii. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, the minimum space reserved for the heat pump shall be

3.6 square feet per input 10,000 BTU/ HR of the gas or propane water heating system, and the minimum dimension of reserved spaces shall be 84 inches.

B. Tanks. The minimum space reserved shall include space for service clearances and keep outs. Additionally, unless the space reserved is sufficient to support a heat pump water heater system that meets the total building hot water demand as calculated and documented by the responsible person associated with the project, the space reserved shall comply with the following:
i. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, the minimum space reserved for the storage and temperature maintenance tanks shall be 4.4 square feet per input 10,000 BTU/HR. of the gas or propane water heating system.
ii. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, the minimum physical space reserved for the storage and temperature maintenance tanks shall be 3.1 square feet per input 10,000 BTU/HR. of the gas or propane water heating system.

3. Ventilation, which shall be provided by including the following:

A. A physical space reserved for the heat pump located outside, or B. A pathway reserved for future routing of supply and exhaust air via ductwork from the reserved heat pump location to an appropriate outdoor location. Penetrations through the building envelope for louvers and ducts shall be planned and identified for future use. Additionally, unless the reserved pathway and penetrations are sized to serve a heat pump water heater system that meets the total building hot water demand as calculated and documented by the responsible person associated with the project, the reserved pathway and penetrations through the building envelope shall be sized to comply with one of the following:
i. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, the minimum air flow rate shall be 70 CFM per input 10,000 BTU/HR of the gas or propane water heating system and the total external static pressure drop of ductwork and louvers shall not exceed 0.17” when the future heat pump water heater is installed.
ii. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, the minimum air flow rate shall be 420 CFM per input 10,000 BTU/HR of the gas or propane water heating system and the total external

29.22 static pressure drop of ductwork and louvers shall not exceed 0.17” when the future heat pump water heater is installed.

4. Condensate drainage piping. An approved receptacle that is sized in accordance with the California Plumbing Code to receive the condensate drainage shall be installed within 3 feet of the reserved heat pump location, or piping shall be installed from within 3 feet of the reserved heat pump location to an approved discharge location that is sized in accordance with the California Plumbing Code. Additionally, unless the condensate drainage receptacles and piping are sized to serve a heat pump water heater system that meets the total building hot water demand as calculated and documented by the responsible person associated with the project, the condensate drainage shall comply with the following:

A. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, condensate drainage shall be sized for 0.2 tons of refrigeration capacity per input 10,000 BTU/HR.

B. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, condensate drainage shall be sized for 0.7 tons of refrigeration capacity per input 10,000 BTU/HR.

5. Electrical.

A. Physical space shall be reserved on the bus system of the main switchboard or on the bus system of a distribution board to serve the future heat pump water heater system including the heat pump and temperature maintenance tanks. In addition, the physical space reserved shall be capable of providing adequate power to the future heat pump water heater as follows:
i. Heat Pump. For the Heat Pump, the physical space reserved shall comply with one of the following:
a. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, provide 0.1 kVA per input 10,000 BTU/HR.
b. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, provide 1.1 kVA per input 10,000 BTU/HR. c. The physical space reserved supplies sufficient electrical power required to power a heat pump water heater system that meets the total building hot water demand as calculated and documented by the responsible person associated with the project.
ii. Temperature Maintenance Tank. For the Temperature Maintenance Tank, the physical space reserved shall comply with one of the following:
a. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, provide 1.0 kVA per input 10,000 BTU/HR.

29.23 b. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, provide 0.6 kVA per input 10,000 BTU/HR. c. The physical space reserved supplies sufficient electrical power required to power a heat pump water heater system that meets the total building hot water demand as calculated and documented by the responsible person associated with the project.

The building electrical system shall be sized to meet the future electric requirements of the electric ready equipment specified in sections 160.9(a) – 160.9(e). To meet this requirement the building main service conduit, the electrical system to the point specified in each subsection, and any on-site distribution transformers shall have sufficient capacity to supply full rated amperage at each electric ready appliance in accordance with the California Electric Code.

Section 170.1 of the CEnC is adopted with amendments as follows:

A building complies with the performance approach if the TDV energy budget calculated for the proposed design building under Subsection (b) is no greater than the TDV energy budget calculated for the Standard Design Building under Subsection (a). Additionally,

1. The source energy budget of a newly constructed low-rise multifamily building shall be at least 10% lower than that of the Standard Design Building.

2. The source energy budget of a newly constructed high-rise multifamily building shall be at least 4% lower than that of the Standard Design Building.

Sub-sections (a) to (d) are adopted without amendments.

Section 3. This ordinance shall take effect and be in full force thirty (30) days after final adoption.

PASSED FOR PUBLICATION this 19th day of November 2024, by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: __________________________
Fred Keeley, Mayor
ATTEST: ___________________________
Bonnie Bush, City Clerk Administrator

29.24 PASSED FOR FINAL ADOPTION this 10th day of December 2024 by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: ___________________________
Fred Keeley, Mayor
ATTEST: ___________________________
Bonnie Bush, City Clerk Administrator
This is to certify that the above
and foregoing document is the
original of Ordinance No. 2024-XX
and that it has been published or
posted in accordance with the
Charter of the City of Santa Cruz.
___________________________
City Clerk Administrator

29.25 Items highlighted in yellow were added in response to Planning Commission comments.

ORDINANCE NO. 2024-

29.26 WHEREAS, based on these studies, the City finds the proposed local amendments to the 2022 California Energy Code to be cost-effective and consume less energy than permitted by Title 24, Part 6; and
WHEREAS, the 2022 California Energy Code offers compliance options that were established through the public rulemaking process of the code update; and WHEREAS, the Council expressly declares that the proposed amendments to the Energy Code are reasonably necessary because of local climatic, topological, and geological conditions; and
WHEREAS, the requirements specified in this Ordinance were reviewed via public comment and through a publicly noticed public hearing process; and WHEREAS, The municipal code amendments are consistent with the Negative Declaration approved for the City of Santa Cruz 2030 Climate Action Plan adopted by City Council on September 13, 2022, and therefore, no further environmental review under the California Environmental Quality Act (CEQA) is required; the amendments are exempt from CEQA under the general rule, 15061(b)(3), because it can be seen with certainty that the provisions contained herein would not have the potential for causing a significant effect on the environment; and, this ordinance is exempt per CEQA Guidelines Section 15308, Class 8, Actions by Regulatory Agencies for Protection of Natural Resources, since the proposed ordinance would institute regulatory requirements intended to protect the environment and natural resources.

BE IT ORDAINED By the City of Santa Cruz as follows:

Section 1. Section 18.15.040 of Chapter 18.04 of the Santa Cruz Municipal Code is hereby amended to read as follows:

18.050.040 ENERGY CODE – MODIFICATIONS.

The following sections of the code as adopted in Section 18.15.030 are hereby modified as follows:

Section 100.1(b) of the CEnC is amended to add the following:

MAJOR ADDITION is any change to an existing building that increases conditioned floor area by 350 or more square feet in a one-year period.

29.27 MAJOR ALTERATION is any construction or renovation to an existing structure other than a repair whose altered components cover 350 or more square feet in a one-year period.

A project that consists only of roof and/or fenestration replacement is not considered a major alteration.

NOTE: The requirements of Sections 130.0 through 130.6 apply to newly constructed buildings. Section 141.0 specifies which requirements of Sections 130.0 through 130.6 also apply to additions and alterations to existing buildings. None of the amended requirements of the City of Santa Cruz apply to additions and alterations to existing buildings.

29.28 c) Reserved circuit breakers in the electrical panel for each branch circuit, appropriately labeled (e.g., “Reserved for Future Electric Range”), and positioned on the opposite end of the panel supply conductor connection. d) Connected subpanels, panelboards, switchboards, busbars, and transformers that are sized to serve the future electric heating appliances. The electrical capacity requirements shall be adjusted for demand factors in accordance with the California Electric Code.
e) Physical space for future electric heating appliances, including equipment footprint, and if needed, a pathway reserved for routing of ductwork to heat pump evaporator(s), all of which shall be depicted on the construction drawings. The footprint necessary for future electric heating appliances may overlap with nonstructural partitions and with the location of currently designed gas-fueled equipment.

Section 140.0 of the CEnC is amended to read as follows:

None of the amended requirements of the City of Santa Cruz apply to additions and alterations to existing buildings.

Section 140.1 of the CEnC is amended to read as follows:

The following conditions are necessary for a building to comply with the performance approach:

29.29 1. The time-dependent valuation (TDV) energy budget calculated for the proposed design building under Subsection (b) is no greater than the TDV energy budget calculated for the Standard Design Building under Subsection (a); and

EXCEPTION 1 to 140.1 item 2 A source energy compliance margin of at least 7 percent is not required when nonresidential occupancies are designed with single zone space-conditioning systems complying with Section 140.4(a)2. (a) – (c): Subsections 140.1 (a) – (c) are adopted without modification.

Section 150.0 of the CEnC is amended as follows:

Single-family residential buildings shall comply with the applicable requirements of Sections 150(a) through 150.0(vw).

NOTE: The requirements of Sections 150.0 (a) through (v) apply to newly constructed buildings. Sections 150.2(a) and 150.2(b) specify which requirements of Sections 150.0(a) through 150.0(r) also apply to additions or alterations. None of the amended requirements of the City of Santa Cruz apply to additions and alterations to existing buildings. The City of Santa Cruz amendments to sections 150.0 (t) do not apply to additions or alterations.
(a) – (s): Subsections 150.0(a) – (s) are adopted without modification. (t) Heat pump space heater ready. Systems using a gas or propane furnace to serve individual dwelling units shall include the following:

29.30 (u) – (v): Subsections 150.0(u) – (v) are adopted without modification.

1. Major addition. Any major addition shall require installation of a set of measures from the Measure Menu Table, Table 150.0-I to achieve a total score that is equal to or greater than 9. In addition, all mandatory measures listed in Table 150.0-I shall be installed. Measure verification shall be explicitly included as an addendum to the Certificate of Compliance to be filed pursuant to 2022 Title 24 Section 10-103. Installed measures shall meet the specifications in Table 150.0-J.

In addition, all mandatory measures listed in Table 150.0-I shall be installed.

A. Systems using gas or propane water heaters to serve
individual dwelling units shall designate a space at least

2.5 feet by 2.5 feet wide and 7 feet tall suitable for the future installation of a heat pump water heater (HPWH).

All electrical components shall be installed in accordance with the California Electrical Code. The space shall
include the following:
i. A dedicated 125 volt, 20 amp electrical receptacle that is connected to the electric panel with a 120/240 volt 3
conductor, 10 AWG copper branch circuit, within 3 feet from

29.31 the water heater and accessible to the water heater with no obstructions; and
ii. Both ends of the unused conductor shall be labeled with the word “spare” and be electrically isolated; and
iii. A reserved single pole circuit breaker space in the electrical panel adjacent to the circuit breaker for the branch circuit in A above and labeled with the words “Future Use”; and
iv. A condensate drain that is no more than 2 inches higher than the base of the installed water heater, and allows natural draining without pump assistance.
v. A condensate drain that is no more than 2 inches higher than the base of the installed water heater, and allows natural draining without pump assistance.

Exception 1 to Section 150.0(w): The project is the result of a repair as defined by Title 24 Part 2 Section 202.

29.32 the California Building Standards Code, the chief building official shall determine the minimum feasible threshold of compliance reasonably achievable for the project. If an exemption is granted, the applicant shall be required to comply with this chapter in all other respects and shall be required to achieve the threshold of compliance determined to be achievable by the chief building official. (3) Denial of exemption. If the chief building official determines that it is reasonably possible for the applicant to fully meet the requirements of this chapter, the request shall be denied, and the applicant shall be notified of the decision in writing. The project and compliance documentation shall be modified to comply with the standards for compliance.
(4) Appeal. Any aggrieved applicant or person may appeal the determination of the chief building official regarding the granting or denial of an exemption or compliance with any other provision of this chapter. An appeal of a determination of the chief building official shall be filed in writing with the Board of Building and Fire Appeals.

Exception 4 to Section 150.0(w): The applicant may request an exemption to any requirements of this chapter which would impair the historic integrity of any building listed on a local, state, or federal register of historic structures, as determined by the chief building official Planning Director or designee and as regulated by the California Historic Building Code (Title 24, Part 8). In making a determination of exemption, the chief building official Planning Director or designee may require the submittal of an evaluation by an architectural historian or similar expert.

Exception 5 to Section 150.0(w): An alteration that consists solely of seismic safety improvements.

Exception 6 to Section 150.0(w): Buildings which are temporary (such as construction trailers).

Exception 7 to Section 150.0(w): An alteration that consists solely of roof and/or fenestration projects.

Exception 9 to Section 150.0(w): One accessory dwelling unit and one junior accessory dwelling unit per lot with a proposed or existing single-family dwelling if all of the following apply:

29.33 (1) The accessory dwelling unit or junior accessory dwelling unit is within the proposed space of a single-family dwelling or existing space of a single-family dwelling or accessory structure and may include an expansion of not more than 150 square feet beyond the same physical dimensions as the existing accessory structure. An expansion beyond the physical dimensions of the existing accessory structure shall be limited to accommodating ingress and egress. (2) The space has exterior access from the proposed or existing single-family dwelling.
(3) The side and rear setbacks are sufficient for fire and safety.

New Table 150.0-I is added to read as follows:

29.34 Solar PV + Electric Ready Pre-Wire E13 13
Heat Pump Space Heater E14 18
Utility Room, Kitchen & Laundry-Related
Electric Ready Pre-Wire M1 Mandatory
Panel-Related Electric Ready Pre-Wire M2 Mandatory
Note: the measures in the Measure Menu table shall conform to the specifications in Table 150.0-J
New Table 150.0-J is added to read as follows:

4.303 water efficiency requirements.

Water heaters 20 gallons or less, or water heaters that are not able to add exterior insulation may not take credit for this measure. Water heater blanket is not required on water heaters less than 20 gallons. Dwelling units without individual water heating systems may not take credit for this measure.

Exception 1: Water heater blanket is not required on water heaters less than 20 gallons.

Exception 2: Water heater blanket not required if application of a water heater blanket voids the warranty on the water heater.

E3 Induction Cooktop: Replace existing gas and electric resistance stove top with inductive stove top and cap the gas line.

29.35 windows. Weather-strip doors if not already present. Verification shall be conducted by a certified HERS Rater that either: a) shows at least a 30 percent reduction from pre-retrofit conditions; or b) shows that the number of air changes per hour at 50 Pascals pressure difference (ACH50) does not exceed ten for Pre1978 vintage buildings, seven for 1978 to 1991 vintage buildings and five for 1992-2010 vintage buildings. Compliance can also be demonstrated with blower door testing conducted by a certified HERS Rater no more than three years prior to the permit application date showing compliance with condition (a) or (b).

Reducing the air leakage of a building can reduce the building’s drying potential.

When improving the air sealing of a building, consider if there is a need to add continuous ventilation to the building (if not already present).

E6 R-49 Attic Insulation: Attic insulation shall be installed to achieve a weighted assembly U-factor of 0.020 or insulation installed at the ceiling level shall have a thermal resistance of R-49 or greater for the insulation alone. Recessed downlight luminaires in the ceiling shall be covered with insulation to the same depth as the rest of the ceiling. Luminaires not rated for insulation contact must be replaced or fitted with a fire-proof cover that allows for insulation to be installed directly over the cover.

Exception: In buildings where existing R-30 is present and existing recessed downlight luminaires are not rated for insulation contact, insulation is not required to be installed over the luminaires.

E7 Windows: Replace at least 50% of existing windows with high performance windows with an area-weighted average U-factor no greater than 0.30.

E9 New Ducts + Duct Sealing: Replace existing space conditioning ductwork with new R-8 ducts that meet the requirements of 2022 Title 24 Section 150.0(m)11.

29.36 This measure may not be combined with the Duct Sealing measure in this Table.

To qualify, a preexisting measure must have been installed no more than three years before the alteration or addition permit application date.

E12 Heat Pump Water Heater (HPWH): Replace existing electric resistance or natural gas storage water heater with a heat pump water heater.

E13 PV and Electric Ready Pre-Wire: Install a solar PV system that meets the requirements of 2022 Title 24 Section 150.1(c)14.

In addition to the solar PV system, comply with the electric readiness components water heating system electric readiness requirements per Section 150.0(w)4n)1 and the heat pump space heaters requirements per Section 150.0(t) and one of the following:

A. Energy Storage Systems (ESS) Ready, as specified in Section 150.0(s), or B. EV Charger Ready as specified in the California Green Building Code, Title 24, Part 11, Section A4.106.8.1,which otherwise applies to new construction.

Mandatory Measures
M1 Utility Room, Kitchen & Laundry-Related Electric Ready Pre-Wire: If Where the project includes a kitchen remodel, comply with the electric cooktop ready requirement, as specified in Section 150.0(u). Where the project includes a laundry room remodel, comply with the electric clothes dryer ready requirement, as specified in Section 150.0(v). Where the project includes a utility room remodel, comply with the electric readiness componentswater heating system electric readiness requirements per Section 150.0(w)4n)1 and the heat pump space heater electric readiness requirements per Section 150.0(t):

Exception 1: If an electrical permit is not otherwise required for the project other than compliance with this measure.

Exception 2: If a utility service upgrade is not otherwise required for the project other than compliance with this measure.

Exception 3: In buildings where the designated space requirement specified in Section 150.0(w)4n)1 can be demonstrated to the building official as infeasible, the electric readiness components per Section 150.0(w)4n)1 are not required.

29.37 M2 Panel-Related Electric Ready Pre-Wire: If Where the project includes a new electrical panel and electrical service upgrade to 200A or more, comply with the Wwater heating systems electric readiness requirements Ready requirements, as specified in per Section 150.0(w)4n)1 and the Space Heating Ready Requirement heat pump space heater electric readiness requirements per Section 150.0(t).

Exception 1: In buildings where the designated space requirement specified in Section 150.0(150.0(w)4n)1 can be demonstrated to the building official as infeasible, the electric readiness components per Section 150.0(w)4n)1 are not required.

1. Newly Constructed Buildings. The Energy Budget for newly constructed buildings is expressed in terms of the Energy Design Ratings, which are based on source energy and time-dependent valuation (TDV) energy. The Energy Design Rating 1 (EDR1) is based on source energy. The Energy Design Rating 2 (EDR2) is based on TDV energy and has two components, the Energy Efficiency Design Rating, and the Solar Electric Generation and Demand Flexibility Design Rating. The total Energy Design Rating shall account for both the Energy Efficiency Design Rating and the Solar Electric Generation and Demand Flexibility Design Rating. The proposed building shall separately comply with the Source Energy Design Rating, Energy Efficiency Design Rating and the Total Energy Design Rating. A building complies with the performance approach if the TDV energy budget calculated for the proposed design building is no greater than the TDV energy budget calculated for the Standard Design Building with an EDR1 compliance margin of at least 9, relative to the Source Energy Design Rating 1 calculated for the Standard Design building.

29.38 EXCEPTION 2 to Section 150.1(b)1. A newly constructed building that does not require a PV system in accordance with section 150.1(c)14 does not need a Source Energy compliance margin of at least 9, relative to the Source Energy Design Rating 1 calculated for the Standard Design building.

2. Additions and Alterations to Existing Buildings. The Energy Budget for additions and alterations is expressed in terms of TDV energy. None of the amended requirements of the City of Santa Cruz apply to additions and alterations to existing buildings.

3. Section (b)(3) is adopted without modification.
(c) Section (c) is adopted without modification.

Section 150.2(a) [ENERGY EFFICIENCY STANDARDS FOR ADDITIONS AND ALTERATIONS TO EXISTING SINGLE FAMILY RESIDENTAL BUILDINGS] is modified to read as follows:

Section 150.2(b) [ENERGY EFFICIENCY STANDARDS FOR ADDITIONS AND ALTERATIONS TO EXISTING SINGLE FAMILY RESIDENTAL BUILDINGS] is modified to read as follows:

1. Prescriptive approach. The altered component and any newly installed equipment serving the alteration shall meet the applicable requirements of Sections 110.0 through 110.9 and all applicable requirements of Sections 150.0(a) through (l), 150.0(m)1 through 150.0 (m)10, 150.0(p) through (q), and 150.0 (w); and

2. Performance approach. The altered component(s) and any newly installed equipment serving the alteration shall meet the applicable requirements of Subsections A, B, and C below.

29.39 are used in Sections 150.2(b)1C and 150.2(b)1Diia, shall comply with the requirements of Sections 150.0(m)12 and 150.0(m)13.

Section 160.4 of the CEnC is amended to remove subsection (a) as follows:
(a) Reserved.

Sections (b) to (f) are adopted without amendments.

A. Both ends of the unused conductor shall be labeled with the word “spare” and be electrically isolated.

2. A condensate drain that is no more than 2 inches higher than the base of the installed water heater, and allows natural draining without pump assistance.

3. Construction drawings that indicate the reserved location of the future heat pump water heater with minimum interior dimensions of 39” x 39” x 96.”

4. A ventilation method that incorporates one of the following:

A. A space reserved for the future heat pump water heater with a volume of at least 700 cu. ft.

29.40 ii. Two permanent fixed openings, consisting of a single layer of fixed flat slat louvers or grilles, one commencing within 12 inches from the top of the enclosure and one commencing within 12 inches from the bottom of the enclosure.

2. A space reserved that includes and complies with the following:

A. Heat Pump. The minimum space reserved shall include space for service clearances, air flow clearances, and compliant working spaces. Additionally, unless the space reserved is sufficient to support a heat pump water heater system that meets the total building hot water demand as calculated and documented by the responsible person associated with the project, the space reserved shall comply with the following:
i. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, the minimum space reserved for the heat pump shall be 2.0 square feet per input 10,000 BTU/ HR of the gas or propane water heating system, and the minimum dimension of reserved spaces shall be 48 inches.
ii. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, the minimum space reserved for the heat pump shall be

3.6 square feet per input 10,000 BTU/ HR of the gas or propane water heating system, and the minimum dimension of reserved spaces shall be 84 inches.

29.41 i. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, the minimum space reserved for the storage and temperature maintenance tanks shall be 4.4 square feet per input 10,000 BTU/HR. of the gas or propane water heating system.
ii. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, the minimum physical space reserved for the storage and temperature maintenance tanks shall be 3.1 square feet per input 10,000 BTU/HR. of the gas or propane water heating system.

3. Ventilation, which shall be provided by including the following:

A. If the system input capacity of the gas water heating system is less than 200,000 BTU/HR, condensate drainage shall be sized for 0.2 tons of refrigeration capacity per input 10,000 BTU/HR.

29.42 B. If the system input capacity of the gas water heating system is greater than or equal to 200,000 BTU/HR, condensate drainage shall be sized for 0.7 tons of refrigeration capacity per input 10,000 BTU/HR.

5. Electrical.

Section 170.1 of the CEnC is adopted with amendments as follows:

29.43 A building complies with the performance approach if the TDV energy budget calculated for the proposed design building under Subsection (b) is no greater than the TDV energy budget calculated for the Standard Design Building under Subsection (a). Additionally,

1. The source energy budget of a newly constructed low-rise multifamily building shall be at least 10% lower than that of the Standard Design Building.

2. The source energy budget of a newly constructed high-rise multifamily building shall be at least 4% lower than that of the Standard Design Building.

Sub-sections (a) to (d) are adopted without amendments.

Section 3. This ordinance shall take effect and be in full force thirty (30) days after final adoption.

PASSED FOR PUBLICATION this 19th day of November 2024, by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: __________________________
Fred Keeley, Mayor
ATTEST: ___________________________
City Clerk Administrator
PASSED FOR FINAL ADOPTION this 10th day of December 2024 by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: ___________________________
Fred Keeley, Mayor
ATTEST: ___________________________
Bonnie Bush, City Clerk Administrator

29.44 This is to certify that the above
and foregoing document is the
original of Ordinance No. 2024-XX
and that it has been published or
posted in accordance with the
Charter of the City of Santa Cruz.
___________________________
City Clerk Administrator

29.45 PLANNING COMMISSION

AGENDA REPORT
DATE: October 11, 2024
AGENDA OF: October 17, 2024
DEPARTMENT: City Manager’s Office and Planning & Community Development ITEM NO: Municipal Code Amendments to Title 18 – Buildings and Construction Chapter 18.04: Building Code, Creating an Energy Reach Code for Major Renovations and Additions to Existing SingleFamily Homes LOCATION: Citywide
CEQA
DETERMINATION:

These amendments are consistent with the Negative Declaration approved for the City of Santa Cruz 2030 Climate Action Plan adopted by City Council on September 13, 2022.

APPLICANT: City of Santa Cruz
RECOMMENDATION: That the Planning Commission review and provide feedback on amendments to the municipal code creating an energy reach code for renovations and additions to existing single-family homes with an intent to provide developers with a range of options that will also meet goals to reduce greenhouse gas emissions associated with fossil fuel use citywide.

BACKGROUND: The California Air Resources Board (CARB) has introduced draft zeroemission appliance standards with a phased implementation beginning in 2027. These standards aim to reduce greenhouse gas emissions and improve air quality by targeting residential and commercial appliances, including heaters and water heaters, to transition towards cleaner energy sources. By 2030, all new space and water heaters sold in California are expected to meet zeroemission standards. This initiative is part of California's broader strategy to achieve carbon neutrality by 2045.

The City adopted its Climate Action Plan 2030 (CAP 2030) in 2022 with a legal target to reduce emissions 40% from 1990 levels by 2030 and an aspirational target of carbon neutral by 2035, 10 years earlier than the State target. The CAP 2030 contains three measures related to existing building energy use which accounts for 24% of greenhouse gas emissions regulated by CARB:

29.46 2
 Measure BE-2 is to electrify 31% of existing residential buildings by 2030 and 53% by 2035.
 Measure BE-3 is to electrify 26% of existing commercial buildings by 2030 and 45% by 2035.
 Measure BE-5 is to increase resiliency through equitable energy efficiency and local solar programs.

In 2023, City Council approved an energy reach code for newly constructed buildings. The current proposal takes the next step in this process to create requirements for existing buildings.

While the newly constructed buildings code was created first, staff had already begun work on exploring existing building decarbonization policies in 2022, initially considering building performance standards, building system replacement upon time of property transfer, and building system replacement upon time of permit. Considering that 96 percent of the City’s building stock is residential, 87 percent of residential buildings are single family homes, and 84 percent of those single-family homes were constructed prior to 1991, staff determined that large renovations are one of the best opportunities to make improvements to single family homes resulting in reduced energy use and emissions and improved comfort and satisfaction. With the incentives available and planned, the proposed energy efficient renovations ordinance is the first of what may be several policies coming forward to prepare existing buildings for the upcoming zero-emission appliance standards and regulate energy use in existing buildings to reach the CAP 2030 targets.

DISCUSSION:

Policy Overview
The proposed policy would require major residential additions and/or alteration projects to include energy efficiency measures and, in some cases, provide electric readiness for future zero emission appliances. A major addition or alteration would trigger the ordinance and includes the addition or alteration of 350 square feet or more of floor area. If the ordinance applies, the permit applicant would choose from and install any number of energy efficiency measures that meet a point score in addition to the mandatory electric ready pre-wiring and outlet requirements. The state requires that at least one cost effective option must exist to meet the point score; there are at least five cost effective combinations in the proposed energy efficient renovations ordinance.

The proposed policy does not require electrification and considers special onsite challenges or circumstances. The proposed ordinance would not apply to small projects, repairs, appliance replacements (e.g., kitchen appliances or gas stoves), window projects, roof projects, cosmetic changes, and work that does not require a permit. There are also exemptions for pre-compliance, incompatibility with historical building status, seismic retrofits, temporary structures, and when upgrades present a significant cost burden.

One quarter of housing occupants are highly sensitive to energy bills, according to a 2022 building stock analysis completed by TRC, a consultant. Thus, promotion and availability of incentives are critical for the proposed energy efficient renovations policy to succeed and not increase energy burden of residents, especially those with lower incomes. Rebates are available from Central Coast Community Energy and 30% tax credits are available for most residential energy upgrades with caps per measure and total in a given tax year. Other incentives and services to help residents navigate complex projects are also in development.

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Staff estimate that the proposed policy will impact approximately 300 permits annually, with a median project valuation at $130,000, increasing project costs, on average, by 5%.

Proposed Policy Applicability
Staff reviewed construction and compliance measure cost estimates, previously submitted building permits, and examples from the nearly 20 statewide existing building energy reach codes to identify the appropriate applicability for buildings in Santa Cruz. Based on cost of construction and compliance and in seeking to adopt a policy that effectively fits into major construction projects, staff propose that the policy apply to single-family homes under the following definitions and thresholds for applicability:
 Major Addition - Any change to an existing building that increases conditioned floor area by 350 or more square feet.
 Major Alteration - Any construction or renovation to an existing structure other than a repair whose work area covers 350 or more square feet of the total floor area of the existing building.
 Major Addition and Alteration – Any project whose combined addition and alteration has a work area equal to or greater than 350 square feet.
 Compliance Period - Per the draft ordinance, work that is completed within a one-year period would count toward the thresholds noted above.

Proposed Policy Compliance Requirements
As proposed, projects that are identified as a Major Addition, Major Alteration, or Major Addition and Alteration, would have to complete the first requirement listed below, and in some cases would also be required to complete the second and third requirements.  Requirement 1 - Select from one of the following: a. A combination of energy efficient measures from Table 1 (below) totaling nine (9) or more points, or b. A heat pump hot water heater, or c. A heat pump HVAC system, or d. A rooftop solar energy system.  Requirement 2 - Projects that are subject to the policy and that are electively upgrading their electrical service to 200 amps and their electrical panel must install breakers in the panel, run conduit and wiring to the location of a future heat pump hot water heater and heat pump HVAC system, and install outlets for those future systems.  Requirement 3 – Projects that are subject to the policy and that are electively upgrading a kitchen, laundry room, or utility room, must comply with the new construction electric readiness requirements for the respective appliance type. If these requirements alone would necessitate a utility service upgrade, then they will not be required.

Table 1. Energy Efficiency Measures
Measures
Table 150.0-J
ID Points
Water Heating Package E1 1
Induction Cooktop E2 1
Heat Pump Clothes Dryer E3 1
Air Sealing E4 2
Duct Sealing E5 3
R-49 Attic Insulation E6 4

29.48 4
Windows E7 4
R-13 Wall Insulation E8 5
New Ducts + Duct Sealing E9 6
R-19 Floor Insulation E10 9
R-30 Floor Insulation E11 10
Utility Room, Kitchen & Laundry-Related
Electric Ready Pre-Wire M1 Mandatory
Panel-Related Electric Ready Pre-Wire M2 Mandatory
Note: the measures in the Measure Menu table shall conform to the specifications in Table 150.0-J
Proposed Exemptions
To accommodate the wide variability in existing buildings, the proposed ordinance would provide for the following exceptions:

1. Repairs are expressly exempt from the Policy.

2. Projects with a hardship, meaning that compliance costs that are more than 20 percent of total project cost, or that have building specific conditions that make compliance technically infeasible, may request a hardship exemption. Hardship exemptions will also cover unexpected circumstances. Approval of an infeasibility claim will be at the discretion of the Chief Building Official. As with all building code determinations and interpretations, decisions are appealable to the Construction Board of Appeals.

3. Projects that can demonstrate that they have previously installed compliance measures will be given credit for those measures.

4. Historic buildings that could not comply without affecting their listing or registry status would be exempt.

5. Alterations completed solely for seismic safety upgrades would be exempt.

6. Temporary buildings, such as construction trailers.

7. Alterations that consist solely of roof and/or window projects would be exempt.

8. Mobile, manufactured, or factory-built housing as defined in Division 13 of the California Health and Safety Code
Examples of Applicable Projects and Compliance
The types of projects that would be applicable to the Energy Efficient Renovation Policy under the definitions proposed above would be elective major construction projects that are closer to new construction than a typical smaller addition or alteration might be. These types of projects require a building permit and are required to comply with state and local codes and requirements.

As such, depending on the project scope, applicants of these types of projects typically already have an architect, engineer, and energy code compliance expert on their design team. In many cases, the construction teams of such projects include a general contractor and both plumbing and electrical sub-contractors. Staff reviewed recent permits and standard construction cost estimates to develop an example major addition and major alteration. Since it is unlikely that most people in the community have considered adding 350 square feet to their home or altering 350 square feet of their home, it is helpful to provide examples of both types of projects. Note that costs are estimates and may be higher or lower depending on specific situations.

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Major Addition Example:
 1,000 sq ft single family home adds 350 square feet as in a second story addition with two new bedrooms and a full bathroom
 Project valuation reported at $230,000
Major Alteration Example:
 Single family home that alters 350 square feet of floor area, such as conversing two bedrooms and a hallway into three bedrooms and a new bathroom  Project valuation reported at $135,000
The major addition example can be used to illustrate how compliance works. In this project, it is likely that the project would include replacing a hot water heater, so the builder/owner would likely choose to comply with the heat pump hot water heater measure. Since they are electively upgrading their electric service and panel, they would also add a breaker, conduit and wire, and an outlet for a future HVAC system. Taken together, the LED lighting upgrades, zero emission building readiness requirements, and heat pump hot water heater installation is estimated to cost $5,000-$15,000. Compliance would result in an approximately 2-6% increase in project costs.

However, much of these costs could be offsets by available rebates and incentives as described below.

Cost Effectiveness
The California Energy Commission (CEC) requires any local energy standards that exceed the California Energy Code to be cost effective and to use less energy than the state requirements.

The CEC requires the local agency to adopt a determination, at a public meeting, that the energy standards are cost effective. Staff has provided recommended findings that meet these standards below and in the draft Ordinance. The determination must subsequently be filed with the CEC, which would be completed by staff upon adoption of the draft Ordinance.

The CEC provides two different cost effectiveness metrics. “On-bill” cost effectiveness refers to the direct cost experienced by the homeowner. For something to be cost effective “on-bill”, the energy bill savings of a measure must at least pay for the cost of that measure over a 20-year period. The other approach is “Long-Term Systemwide Cost” (LSC). LSC considers the cost to install energy efficiency measures, the on-bill savings from those measures, and larger system costs that everyone pays for like energy infrastructure costs and the impacts of climate change.

For CEC approval, a local amendment to the California Energy Code must show a compliance pathway that is either “on-bill” or “LSC” cost effective. As described below, staff’s proposed policy has “on-bill” and “LSC” cost effective compliance pathways.

In support of reach code development, the California Energy Codes and Standards Statewide Utility Program, which includes the State's Investor-Owned Utilities (Pacific Gas, and Electric (PG&E), San Diego Gas and Electric (SDG&E), and Southern California Edison (SCE), under the auspices of the California Public Utilities Commission) developed and published the 2024 Single Family Cost Effectiveness Report. This study and the associated cost-effectiveness data are highly detailed and are included in the record to support Council’s findings and policy decisions. The study and the associated cost-effectiveness data include a calculated benefit-tocost ratio for a wide variety of measures and climate zones. A benefit-cost value of “1” or greater illustrates that the measures save more than they cost and are therefore “cost effective.” The study and the associated cost-effectiveness data are the basis for staff’s recommended cost

29.50 6
effectiveness findings and are sufficient to illustrate compliance with the requirements set forth under California Administrative Code Chapter 10-106.

Based on the study, staff recommends finding that the proposed local additions and alterations amendments to the 2022 California Energy Code to be cost-effective and consume less energy than otherwise permitted by Title 24, Part 6. The following additional detail is included for transparency and to facilitate the California Energy Commission’s review of the City’s cost effectiveness findings:
 The City’s requirement that major additions or alterations install energy efficiency measures includes at least five cost effective measure packages:
o Package 1, installing the efficiency measure of R-30 Floor Insulation would save energy relative to the base code and would achieve a benefit to cost ratio of 1.7 on an on-bill basis.
o Package 2, installing the efficiency measure of R-19 Floor Insulation would save energy relative to the base code and would achieve a benefit to cost ratio of 1.7 on an on-bill basis.
o Package 3 to installing a Heat Pump Water Heater (HPWH), would save energy relative to the base code and would achieve a benefit to cost ratio of 1.7 on an LSC basis.
o Package 4, Heat Pump Space Heater, would also save energy relative to the base code and would achieve a benefit to cost ratio of 8.4 on an LSC basis. o Package 5 to install PV + Electric Ready Pre-Wiring would also save energy relative to the base code and would achieve a benefit to cost ratio of 1.1 on an onbill basis.

Available Resources for Lower Cost Renovations
Many of the compliance measures have rebates, incentives, and tax credits associated with them which could substantially reduce the cost of compliance. Financial resources and technical assistance include:
 Central Coast Community Energy provides the Electrify Your Home program, which provides rebates and incentives to contractors completing heat pump hot water heater ($4,600 to $6,385), heat pump HVAC ($1,500 to $5,000), and associated electrical work (lesser of $2,000 or 50% of total project cost).
 The Inflation Reduction Act added new provisions to the federal tax code that allows for tax credits for certain energy efficiency measures (30% off of total project cost, up to $1,200), heat pump hot water heaters (30% up to $2,000), heat pump HVAC systems (30% off of total project cost up to $2,000) and rooftop solar generation systems (30% off of total project cost with no maximum).
 The Association of Monterey Bay Area Governments is launching a Regional Energy Network (REN) in 2025. Other RENs across the state provide incentives for energy efficiency measures and it is expected the Monterey Bay REN will do so as well.

Additionally, RENs often offer no-cost personalized support to help building professionals and local government staff navigate the Energy Code, including local amendments adopted by the City and help desk support service to answer applicant questions about compliance with the Energy Efficient Renovations Policy.

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General Plan consistency
The proposed municipal code amendments are consistent with several general plan policies that promote rehabilitating the city’s housing stock, reducing greenhouse gases, and improving energy efficiency in the built environment. These policies include:
 CD2.4 Improve neighborhood quality and housing through rehabilitation and code enforcement;
 LU3.9 Protect and improve existing residential areas;  HZ2.1.1 Support and implement local actions and County, State and federal legislation promoting the reduced emission of carbon dioxide and other greenhouse gases;  HZ2.2 Address localized air quality issues, including indoor air quality;  Goal N RC4 Effective leadership and action in reducing and responding to global warming;
 NRC4.1 Reduce communitywide greenhouse gas emissions (GHG) 30 percent by 2020 and 80 percent by 2050 (compared to 1990 levels);
 NRC4.1.9 Promote efficiency upgrades and renewable energy projects over the use of carbon offsets to meet climate reduction goals;
 NRC4.3.2 Involve the public to identify additional City incentives necessary to improve community energy efficiency upgrades; and
 NRC7.1 Improve local energy efficiency and conservation.

COMMUNITY OUTREACH:

Staff conducted extensive outreach on this topic between 2020 and 2022 during the development of the CAP 2030. In the spring of 2022, staff conducted four listening sessions on the topic of existing building decarbonization with the housing and healthcare sector, designers, buildings and contractors, large multifamily property owners and developers, and non-profits and community-based organizations. In 2023, because staff had to develop a replacement ordinance for the suspended natural gas prohibition in new construction, progress on existing building decarbonization was paused for about a year. Once the new buildings energy reach code was adopted by City Council in November 2023, City staff began immediately developing the energy efficient renovations policy.

On June 13, 2024, staff conducted outreach with the Mayor’s Community Climate Action Task Force, where ten individuals participated. In early June 2024, staff mailed postcards regarding the development of the proposed ordinance to over 500 builders, designers, contractors, and developers listed in the City’s business database. On June 27, 2024, staff conducted a virtual outreach meeting for builders, designers, developers, and contractors who do business in the City of Santa Cruz. On July 10, 2024, staff conducted a virtual outreach meeting for the public with only six participants, despite heavy promotion of the meeting. All materials from the outreach described above are included at the City’s Building Decarbonization webpage (https://www.cityofsantacruz.com/Home/Components/Topic/Topic/11316/3916).

Feeback from the outreach included questions related to:
 The addition of a low emission refrigerant option for heat pump appliances,  How the policy would accommodate the imminent advance in technology to 110-volt/120- volt appliances versus 240-volt appliances,
 Whether a subpanel addition versus a main panel would trigger the electric readiness requirements for future space and water heating appliances,

29.52 8
 How project valuations are computed for the purpose of building permits, and  Where to find assistance to install a heat pump water heater in a homeowners’ association.

In response, staff is confirming how the policy will apply to ADUs given recent state law changes. Another participant suggested that the proposed policy, should it be adopted, go into effect at the same time as the regular code update cycle. An additional concern articulated the need to advise people with pacemakers of homes with induction cooktops. Although this proposed policy would not require installation of induction cooktops, it could result in making the building’s electric infrastructure ready for induction cooktop appliances.

Feedback also included a suggestion that staff better emphasize the cost effectiveness of the energy efficiency measures that will offset the costs of installing the energy efficiency measures.

Last, another participant offered to host the public to view two different types of heat pump space heating units installed at two dwelling units on one property.

Staff developed the attached Frequently Asked Questions document to address these concerns and other common questions. This document will be periodically updated based on feedback and questions from the community.

In addition, a City Council study session convened on August 6, 2024 to examine this topic specifically. Staff gave a presentation on the proposed policy and received feedback from City Councilmembers and the public. City council discussion and questions focused on the cost of these requirements to property owners and what can be done to reduce those costs, how the threshold of 350 square feet of new or substantially modified area was determined, whether the measures apply to ADUs, whether the proposed requirements line up with available grant resources, the need to allocate additional resources for staff time to assist applicants, how the proposed measures align with the green building code, how long it will take for these measures to affect a substantial proportion of the housing stock, and what upgrades are already in place throughout the housing stock.

NEXT STEPS:

This item will be scheduled for a first and second hearing with the City Council in November and December. Two readings are required, and if approved by the City Council, the ordinance is anticipated to become effective April 1, 2025, after the final approval by the City Council and the California Energy Commission.

HEALTH IN ALL POLICIES (HiAP)
HiAP is a collaborative approach to improving the community well-being of the City’s residents by prioritizing public health, sustainability and equity into decision-making across sectors and policy areas. The goal of HiAP is to ensure that all decision-makers are informed about the health, equity, and sustainability impacts of various policy options during the policy development process so that they have holistic information upon which to make decisions. The municipal code amendments support the pillars of equity and public health by advancing efforts to ensure existing buildings are safe and healthy while remaining cost effective. The amendments support sustainability by reducing GHG emissions (projected to be approximately 850 metric tons of carbon dioxide equivalent per

29.53 9
year) and fossil fuel dependence citywide consistent with the CAP 2030. Therefore, the proposed code amendments are considered consistent with the three pillars of HiAP.

ENVIRONMENTAL REVIEW
The municipal code amendments are consistent with the Negative Declaration approved for the City of Santa Cruz 2030 Climate Action Plan adopted by City Council on September 13, 2022.

Therefore, no further environmental review under the California Environmental Quality Act (CEQA) is required. The ordinance is also exempt from CEQA under the general rule, 15061(b)(3), because it can be seen with certainty that the provisions contained herein would not have the potential for causing a significant effect on the environment. Further, this ordinance is exempt per CEQA Guidelines Section 15308, Class 8, Actions by Regulatory Agencies for Protection of Natural Resources, since the proposed ordinance would institute regulatory requirements intended to protect the environment and natural resources.

Submitted by:

Clara Stanger
Senior Planner
Tiffany Wise-West, P.E.

Sustainability and Resiliency Officer
Approved by:

Matt VanHua, AICP
Principal Planner – Advance Planning
Attachments:
 Existing Building Proposed Ordinance, Strikeout-Underline  Existing Building Proposed Ordinance, Clean
 Frequently Asked Questions
 2022 Cost-Effectiveness Study: Existing Single Family Building Upgrades

29.54 Proposed Energy Efficient Renovations
Frequently Asked Questions
(updated 9/19/2024)
What is the purpose of the proposed Energy Efficient Renovations Ordinance? The proposed ordinance aims to improve energy efficiency and reduce greenhouse gas (GHG) emissions from existing residential buildings in Santa Cruz, in line with the City’s Climate Action Plan 2030 adopted in 2022. Key statistics include:
 26% of our community’s carbon emissions come from buildings.  96% of buildings are residential.
 87% of residential buildings are single-family homes.  84% of the housing stock was built before 1991.

By targeting existing single-family homes, the ordinance helps Santa Cruz achieve its climate goals.

How many projects would this impact?
The reach code is expected to impact approximately 110 permits annually.

Why adopt existing building reach codes?
This reach code focuses on situations where a large scope of work is already being pursued, making it the right time to consider additional measures that benefit the environment and our homes through improved comfort, health and safety.
 Impact on Energy Usage: Single-family homes constitute a significant portion of the residential building stock in Santa Cruz. Improving energy efficiency in these homes can greatly reduce overall energy consumption and GHG emissions.  Benefits to the Occupant: Measures will improve the quality of living in older housing, making homes more comfortable, and improving both indoor and outdoor air quality.  Infrequent Renovation: Many properties are renovated only once per long-term owner, making it important to capture these opportunities when they present themselves.  Future Ready: To prepare homes for future zero-emissions standards.  Long-term Benefits: Upgrading single-family homes can lead to substantial savings on energy bills, enhance property values, and improve living conditions, including control, comfort, safety, and indoor air quality.
 Climate Action Goals: Policies related to decarbonizing existing buildings have the potential to reduce over 17% of the emissions needed to meet the City’s 2030 target of reducing carbon emissions by 40% from 1990 levels.

29.55 What if I've already upgraded my home?
There is an exception that allows credit to be claimed for previously installed measures, provided that compliance can be demonstrated to the building official.

How can I dig into more details about the research used to inform this policy? Please visit Single Family Residential Retrofits Cost Effectiveness Study or Cost-Effectiveness Explorer to view more in-depth information about the analysis behind this policy.

Are there contractors available to do this work in Santa Cruz? Yes, there are many qualified designers and contractors in Santa Cruz and surrounding areas.

We recommend obtaining multiple quotes to ensure competitive pricing and quality work.

How is this different from the Green Building Program?
The proposed reach code is different, but complementary to the Green Building Program. The Green Building Program focuses on many areas of sustainability, such as water conservation, waste reduction, site development, and more. In contrast, this reach code is specific to energy efficiency.

Are new housing developments required to be energy efficient? Yes, the state’s energy code (Title 24) mandates energy efficiency for new housing.

Additionally, the City’s new construction energy ordinance, adopted in November 2023, requires new housing developments to meet stricter energy efficiency standards than Title 24.

What qualifies as a "major" addition or alteration under this policy? A "major" addition or alteration is defined as:
 An addition of 350 or more square feet of floor area.  An alteration affecting 350 square feet or more of an existing building’s floor area.

What energy efficiency measures will be required?
In addition to mandatory measures, applicants must select from the table below to achieve a total score of 9 or higher. Several combinations are possible, including at least five costeffective options.

29.56 Measures Points
LED lamps and Exterior Photocells Mandatory
Water Heating Package 1
Air Sealing 2
R-49 Attic Insulation 4
Duct Sealing 3
New Ducts + Duct Sealing 6
Windows 4
R-13 Wall Insulation 5
R-19 Floor Insulation 9
R-30 Floor Insulation 10
Heat Pump Water Heater (HPWH) 12
Heat Pump Space Heater 18
Induction Cooktop 1
Heat Pump Clothes Dryer 1
Solar PV + Electric Ready 13
Pre-Wire Panel-related Mandatory
Pre-wiring for Mechanical, Kitchen, and Laundry Room Electric Ready Mandatory
What does “cost-effective” mean?
Two metrics assess the cost-effectiveness of upgrades, considering incremental costs and energy savings over 30 years:
 On-Bill Cost-Effectiveness: A customer-based lifecycle cost (LCC) approach that values energy savings based on site usage and utility bill savings using current electricity and gas rates.
 Long-term Systemwide Cost (LSC): The California Energy Commission’s LCC methodology for the 2025 Title 24 code cycle, capturing long-term projected energy costs, including peak demand, carbon emissions, and grid impacts.

What is electric readiness?

29.57 Electric readiness refers to installing electrical circuits and outlets to support future electric appliances. It is required in the following scenarios:
 Electrical Panel Upgrade: If a new panel or service upgrade to 200 amps is installed, electric readiness for future electric appliances must be included.  Utility, Kitchen, or Laundry Spaces: If work involves these spaces, electric readiness for future appliances (e.g., water heaters, stoves) is required.  Solar PV Installation: Projects installing solar photovoltaic (PV) systems must also include electric readiness for future water heating, space heating, and energy storage systems or EV chargers.

Will there be requirements for zero-emission appliances? The proposed ordinance does not require installing electric or zero-emission appliances but may require electric readiness for future zero-emission appliances. The California Air Resources Board is considering zero-emission appliance rules starting in 2027.

Some of the measures that can be taken to meet the proposed ordinance requirements involve electric systems and equipment. Is the electrical grid able to handle electric homes?
The US Grid is one of the most reliable in the world with an average uptime of 99.9% with just seven hours cumulative downtime. Electricity outages also limit the ability of most gas fired appliances with electronic ignition, supplemental fans, and safety features that all require electricity. However, making sure that the grid can support all-electric homes is a critical part of the clean energy transition and requires a multifaceted approach.

Modernizing the grid to make it smarter and more flexible through advanced metering, smart devices, demand response, smart electric vehicle charging, and other methods for balancing and shift loads away from peak times will be critical. Upgrading physical grid hardware to support a net-zero future and increased electrification demands will also be important.

The good news is that all of these things are already happening. To play your part, consider incorporating energy efficiency measures into your electrification journey. Where available, signing up for demand response program is an easy way to earn cash for reducing your energy consumption at times when the grid is stressed.

Are there any exemptions to the ordinance?
Yes, the proposed ordinance includes several exemptions to ensure flexibility:

1. Repairs: Routine repairs and maintenance are exempt.

2. Pre-Compliance: Measures installed before a new project may contribute to compliance.

3. Historic Buildings: Exemptions can be requested if requirements impair historic integrity.

29.58 4. Hazard Mitigation: Projects focused on hazard mitigation, such as seismic retrofitting, are exempt.

5. Temporary Structures: Exempt from the ordinance.

6. Cost Burden: If compliance costs exceed 20% of the project’s valuation, a reduced point threshold may be permitted.

7. Roof and/or Windows: Projects involving only roofs or windows are exempt.

8. Manufactured Homes: Factory-built, manufactured, and commercial modular homes are exempt.

What types of projects would not trigger compliance with this ordinance? Projects that do not trigger compliance include:
 Appliance replacements, including but not limited to gas stove replacements  Window or roof projects
 Cosmetic changes or small projects (e.g., flooring, kitchen upgrades)  Work that does not require a permit
Are ADUs exempt from the ordinance?
Statewide Exemption Accessory Dwelling Units (ADUs), or ADUs that are converted from an existing portion of the house and that may include an addition of up to 150 square feet to accommodate ingress and egress, are exempt from the energy efficiency requirements. ADUs created as a new addition to the house are not exempt and must comply with the same energy efficiency requirements.

How much will this proposed ordinance cost for an addition or alteration project? The cost of compliance depends on the specifics of your project. For example:
 Median Project Valuation: $130,000
 Estimated Typical Cost of Compliance: $6,600
 Percentage Increase in Project Cost: Approximately 5% What is “project valuation” and how is it calculated?
Project valuation determines building permit fees and is calculated based on occupancy, type of construction, square footage, and cost per square foot, using a formula developed by the International Conference of Building Officials (ICBO). It is not the same as the actual cost of construction, which in Santa Cruz is typically much higher than the project valuation.

29.59 Will there be financial assistance for complying with the ordinance? Yes, various programs provide financial assistance. Please find links on the City’s building decarbonization website:
 Local Incentives: Central Coast Energy Services, Central Coast Community Energy.  Search Tools: Switch is On, Rewiring America, EnergyStar, DSIRE, Quit Carbon.

Is there help available to navigate compliance or find incentives? Yes, services like Quit Carbon offer free home upgrade assistance, including equipment selection and rebates. The Planning and Community Development counter is also open Monday through Thursday, 7:30 AM to 11:30 AM, for additional support. Incentives can also be located at the search tools available at the City’s decarbonization webpage.

How does the ordinance account for people with pacemakers and induction cooktops? The ordinance does not require installing induction cooktops. However, it does allow for the selection of induction cooktops as a measure for compliance and may require electric readiness for future installations. Check with your healthcare provider if you have concerns about certain electric appliances.

How can I provide feedback on the proposed ordinance?
Community feedback is encouraged. You can access slides from meetings, at the City’s decarbonization webpage. You can also provide public comment virtually on this form or at an upcoming City Council hearing on 11/19/24 and 12/10/24. The agenda and meeting time will be posted on the City’s online meeting agenda website at least 72 hours in advance of the meeting date.

29.60 Prepared by:

Ada Shen, Alea German, Rebecca Evans, & Marc Hoeschele, Frontier Energy, Inc Misti Bruceri, Misti Bruceri & Associates, LLC
Prepared for:

Kelly Cunningham, Codes and Standards Program, Pacific Gas and Electric Last modified: 2024/04/25
Revision: 1.0

29.61 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
2 Legal Notice
This report was prepared by Pacific Gas and Electric Company and funded by the California utility customers under the auspices of the California Public Utilities Commission.

Neither PG&E nor any of its employees makes any warranty, express or implied; or assumes any legal liability or responsibility for the accuracy, completeness or usefulness of any data, information, method, product, policy or process disclosed in this document; or represents that its use will not infringe any privately-owned rights including, but not limited to, patents, trademarks or copyrights.

Acronym List
2023 PV$ – Present value costs in 2023
ACH50 – Air Changes per Hour at 50 pascals pressure differential ACM – Alternative Calculation Method
ADU – Accessory Dwelling Unit
AFUE – Annual Fuel Utilization Efficiency
B/C – Lifecycle Benefit-to-Cost Ratio
BEopt – Building Energy Optimization Tool
BSC – Building Standards Commission
CA IOUs – California Investor-Owned Utilities
CASE – Codes and Standards Enhancement
CBECC-Res – Computer program developed by the California Energy Commission for use in demonstrating compliance with the California Residential Building Energy Efficiency Standards CEER – Combined Energy Efficiency Rating
CFI – California Flexible Installation
CFM – Cubic Feet per Minute
CO2 – Carbon Dioxide
CPAU – City of Palo Alto Utilities
CPUC – California Public Utilities Commission
CZ – California Climate Zone
DFHP – Dual Fuel Heat Pump
DHW – Domestic Hot Water
DOE – Department of Energy
DWHR – Drain Water Heat Recovery
EDR – Energy Design Rating
EER – Energy Efficiency Ratio
EF – Energy Factor

29.62 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
3 GHG – Greenhouse Gas
HERS Rater – Home Energy Rating System Rater
HPA – High Performance Attic
HPSH – Heat Pump Space Heater
HPWH – Heat Pump Water Heater
HSPF – Heating Seasonal Performance Factor
HVAC – Heating, Ventilation, and Air Conditioning
IECC – International Energy Conservation Code
IOU – Investor Owned Utility
kBtu –British thermal unit (x1000)
kWh – Kilowatt Hour
LBNL – Lawrence Berkeley National Laboratory
LCC – Life Cycle Cost
LLAHU – Low Leakage Air Handler Unit
VLLDCS – Verified Low Leakage Ducts in Conditioned Space LSC – Long-term Systemwide Cost
MF – Multifamily
MSHP – Mini-Split Heat Pump
NEEA – Northwest Energy Efficiency Alliance
NEM – Net Energy Metering
NPV – Net Present Value
NREL – National Renewable Energy Laboratory
PG&E – Pacific Gas and Electric Company
POU – Publicly-Owned-Utilities
PV – Photovoltaic
SCE – Southern California Edison
SDG&E – San Diego Gas and Electric
SEER – Seasonal Energy Efficiency Ratio
SF – Single Family
SMUD – Sacramento Municipal Utility District
SoCalGas – Southern California Gas Company
TDV – Time Dependent Valuation
Therm – Unit for quantity of heat that equals 100,000 British thermal units Title 24 – Title 24, Part 6
TOU – Time-Of-Use
UEF – Uniform Energy Factor
VCHP – Variable Capacity Heat Pump, Title 24 compliance credit ZNE – Zero-net Energy

29.63 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
4 Summary of Revisions
Date Description Reference (page or section)
4/25/2024 Original Release N/A

29.64 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
5 TABLE OF CONTENTS
Executive Summary.......................................................................................................................................................... 1 1 Introduction................................................................................................................................................................ 6 2 Methodology and Assumptions............................................................................................................................... 7

2.1 Analysis for Reach Codes..................................................................................................................................................... 7

2.1.1 Modeling ....................................................................................................................................................................... 7

2.1.2 Prototype Characteristics.............................................................................................................................................. 7

2.1.3 Cost-Effectiveness Approach...................................................................................................................................... 10

2.1.4 Utility Rates................................................................................................................................................................. 11

2.1.5 Measure Cost Data Collection Approach .................................................................................................................... 12

2.2 Measure Details and Cost................................................................................................................................................... 12

2.2.1 Building Envelope & Duct Measures........................................................................................................................... 13

2.2.2 PV Measures .............................................................................................................................................................. 14

2.2.3 Equipment Fuel Substitution Measures – Heat Pump Equipment............................................................................... 15 3 Results......................................................................................................................................................................21

3.1 Cost-Effectiveness Results ................................................................................................................................................. 22

3.1.1 HPSH Measures ......................................................................................................................................................... 22

3.1.2 HPWH Measures ........................................................................................................................................................ 24

3.2 Climate Zone Case Studies ................................................................................................................................................ 26

3.2.1 HPSH Cost-Effectiveness ........................................................................................................................................... 26

3.2.2 HPWH Cost-Effectiveness .......................................................................................................................................... 27

3.2.3 Envelope & Duct Improvement Cost-Effectiveness..................................................................................................... 28

3.2.4 Sensitivities................................................................................................................................................................. 29

3.3 Gas Pathways for Heat Pump Replacements..................................................................................................................... 30 4 Recommendations and Discussion.......................................................................................................................32 5 References ...............................................................................................................................................................36 6 Appendices ..............................................................................................................................................................37

6.1 Map of California Climate Zones......................................................................................................................................... 37

6.2 Utility Rate Schedules......................................................................................................................................................... 38

6.2.1 Pacific Gas & Electric.................................................................................................................................................. 39

6.2.2 Southern California Edison ......................................................................................................................................... 47

6.2.3 Southern California Gas.............................................................................................................................................. 51

6.2.4 San Diego Gas & Electric............................................................................................................................................ 53

6.2.5 City of Palo Alto Utilities.............................................................................................................................................. 63

6.2.6 Sacramento Municipal Utilities District (Electric Only)................................................................................................. 65

6.2.7 Fuel Escalation Assumptions...................................................................................................................................... 67

29.65 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
6 LIST OF TABLES
Table 1. Prototype Characteristics........................................................................................................................................................ 8 Table 2. Efficiency Characteristics for Three Vintage Cases ................................................................................................................ 9 Table 3. Measure Cost Assumptions – Efficiency & Duct Measures .................................................................................................. 14 Table 4. Measure Descriptions & Cost Assumptions – PV ................................................................................................................. 15 Table 5. Lifetime Analysis Replacement Assumptions for DFHP (Existing Furnace) Scenario .......................................................... 16 Table 6. System Sizing by Climate Zone ............................................................................................................................................ 17 Table 7. Ducted HVAC Measure Cost Assumptions – 4-Ton Electric Replacements ......................................................................... 18 Table 8. Non-Ducted HVAC Measure Cost Assumptions – 4-Ton Electric Replacements ................................................................. 18 Table 9. Water Heating Measure Cost Assumptions – Existing Gas .................................................................................................. 19 Table 10. Water Heating Measure Cost Assumptions – Existing Electric Resistance ........................................................................ 20 Table 11. HPSH CZ 12 [1992-2010]................................................................................................................................................... 26 Table 12. HPSH CZ 16 [1992-2010]................................................................................................................................................... 26 Table 13. HPWH CZ 12 [1992-2010].................................................................................................................................................. 27 Table 14. HPWH CZ 16 [1992-2010].................................................................................................................................................. 27 Table 15. Envelope and Duct Measures CZ 3 [Pre-1978] .................................................................................................................. 28 Table 16. Envelope and Duct Measures CZ 10 [Pre-1978]................................................................................................................. 28 Table 17. Envelope and Duct Measures CZ 12 [Pre-1978]................................................................................................................. 28 Table 18. Sensitivity Analysis Results for On-Bill NPV Cost-Effectiveness in Climate Zone 12, PG&E.............................................. 29 Table 19. Electric Panel Upgrade Sensitivity for CZ 12 [1992-2010] .................................................................................................. 29 Table 20. PG&E Baseline Territory by Climate Zone.......................................................................................................................... 39 Table 21. PG&E Monthly Gas Rate ($/therm)..................................................................................................................................... 39 Table 22: SCE Baseline Territory by Climate Zone ............................................................................................................................ 47 Table 23. SoCalGas Baseline Territory by Climate Zone ................................................................................................................... 51 Table 24. SoCalGas Monthly Gas Rate ($/therm) .............................................................................................................................. 51 Table 25. SDG&E Baseline Territory by Climate Zone ....................................................................................................................... 53 Table 26. SDG&E Monthly Gas Rate ($/therm).................................................................................................................................. 53 Table 27. CPAU Monthly Gas Rate ($/therm)..................................................................................................................................... 63 Table 28: Real Utility Rate Escalation Rate Assumptions, CPUC En Banc and 2022 TDV Basis ...................................................... 67 Table 29: Real Utility Rate Escalation Rate Assumptions, 2025 LSC Basis ....................................................................................... 68

29.66 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
7 LIST OF FIGURES
Figure 1: DFHP with Existing Furnace............................................................................................................................................ 22 Figure 2: Standard Efficiency HPSH............................................................................................................................................... 22 Figure 3: High Efficiency HPSH...................................................................................................................................................... 23 Figure 4: Ducted MSHP.................................................................................................................................................................. 23 Figure 5: HPSH + PV...................................................................................................................................................................... 23 Figure 6: 240V Federal Minimum HPWH........................................................................................................................................ 24 Figure 7: 240V Market Standard NEEA HPWH .............................................................................................................................. 24 Figure 8: 120V Market Standard NEEA HPWH .............................................................................................................................. 24 Figure 9: 240V Federal Minimum HPWH + PV............................................................................................................................... 24 Figure 10: R-6 Ducts....................................................................................................................................................................... 25 Figure 11: 10% Duct Leakage ........................................................................................................................................................ 25 Figure 12: R-13 Wall Insulation....................................................................................................................................................... 25 Figure 13: R-49 Attic Insulation....................................................................................................................................................... 25 Figure 14. Heat pump space heater path compared to the air conditioner path. ............................................................................ 31 Figure 15. Heat pump water path compared to gas with solar thermal........................................................................................... 31 Figure 16. Map of California climate zones..................................................................................................................................... 37

29.67 29.68
Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
1 California Energy Codes & Standards | A statewide utility program 2024-04-25 Executive Summary
The California Codes and Standards (C&S) Reach Codes program provides technical support to local governments considering adopting a local ordinance (reach code) intended to support meeting local and/or statewide energy efficiency and greenhouse gas (GHG) reduction goals. The program facilitates adoption and implementation of the code when requested by local jurisdictions by providing resources such as cost-effectiveness studies, model language, sample findings, and other supporting documentation.

This report documents cost-effective measure upgrades in existing single family buildings that exceed the minimum state requirements. It evaluates efficiency measures such as adding insulation, replacing windows, and duct upgrades, fuel substitution measures that upgrade space heating and water heating to heat pumps, and solar photovoltaics (PV) across all 16 California climate zones. A 1,665 square foot single family home prototype with an attached garage was evaluated in this study.

This analysis used two different metrics to assess the cost-effectiveness of the proposed upgrades. Both methodologies require estimating and quantifying the incremental costs and energy savings associated with each energy efficiency measure over a 30-year analysis period. On-Bill cost-effectiveness is a customer-based lifecycle cost (LCC) approach that values energy based upon estimated site energy usage and customer utility bill savings using today’s electricity and natural gas utility tariffs. Long-term Systemwide Cost (LSC) is the California Energy Commission’s LCC methodology for the 2025 Title 24, Part 6 (Title 24) code cycle (previously referred to as Time Dependent Valuation (TDV)), which is intended to capture the long-term projected cost of energy including costs for providing energy during peak periods of demand, carbon emissions, grid transmission and distribution impacts. This is the methodology used by the Energy Commission in evaluating cost-effectiveness for efficiency measures in Title 24 code development.

The following summarizes key results from the study:

Conclusions and Discussion:

1. Envelope measures. Improving envelope performance is very cost-effective in many older homes. In addition to reducing utility costs, these measures provide many other benefits such as improving occupant comfort and satisfaction and increasing a home’s ability to maintain temperatures during extreme weather events and power outages. Below is a discussion of the results of specific measures. a. Adding attic insulation is cost-effective based on both LSC and On-Bill in many climate zones in homes with no more than R-19 existing attic insulation levels. Increasing attic insulation from R-30 to R-49 was still found to be cost-effective based on at least one metric in the colder and hotter climates of Climate Zone 10 (SDG&E territory only) through 16.
b. Insulating existing uninsulated walls is very cost-effective based on both metrics everywhere except Climate Zones 6 and 7 (in Climate Zone 8 it’s only cost-effective based on LSC). c. Adding R-19 or R-30 floor insulation is cost-effective based on LSC in the older two vintages (Pre-1978 and 1978-1991) in all CZ except CZ 6-10.
d. Replacing old single pane windows with new high-performance windows has a very high cost and is typically not done for energy savings alone. However, energy savings are substantial and justify costeffectiveness of this measure based on at least one metric in Climate Zones 4, 8 through 12 (PG&E territory only), and 13 through 16.
e. At time of roof replacement, a cool roof with an aged solar reflectance of 0.25 was found to be costeffective in Climate Zones 4, 6 through 12 (PG&E territory only), and 13 through 15. When the roof deck is replaced during a roof replacement, adding a radiant barrier is low cost and provides substantial cooling energy savings, and was found to be cost-effective in almost all climate zones and homes.

29.69 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
2 California Energy Codes & Standards | A statewide utility program 2024-04-25 the 1978-1991 vintage. If duct systems still have remaining life they should be sealed and tested to meet 10% leakage or lower; however, duct upgrades alone were only found to be cost-effective for newer homes in Climate Zones 10 (SDG&E territory only), 11, and 13 through 16. Duct upgrades may be able to be coupled with other measures to reduce the cost.

3. Heat pump space heating: HPSHs were found to be LSC cost-effective in many cases. The Dual Fuel Heat Pump (existing furnace) was LSC cost-effective everywhere except Climate Zone 15. The HPSH was LSC cost-effective everywhere except Climate Zones 8 and 15. a. Challenges to On-Bill cost-effectiveness include higher first costs and higher first-year utility costs due to higher electricity tariffs relative to gas tariffs. SMUD and CPAU are two exceptions where first year utility costs are lower for heat pumps than for gas equipment. Table 11 shows the impact of utility rates on cost-effectiveness of HPSH where the standard and high efficiency HPSH and the HPSH + PV measures are cost-effective under SMUD but not PG&E. Even with higher first year utility bills, there were some cases that still proved On-Bill cost-effective including the DFHP with an existing furnace in the central valley and northern coastal PG&E territories, the ducted MSHP in the central valley as well as Climate Zone 14 in SDG&E territory, and the HPSH + PV measure in CZ 3-5 (PGE), 7-11, and 12 (SMUD) – 15.
b. The ductless MSHPs were only found to be cost-effective based on either metric in Climate Zones 1 and 16. Ductless MSHPs have a high incremental cost because it is a more sophisticated system than the base model of a wall furnace with a window AC unit. However, the ductless MSHP would provide greater comfort benefits if properly installed to directly condition all habitable spaces (as is required under the VCHP compliance credit as evaluated in this study) which may be an incentive for a homeowner to upgrade their system.
c. Higher efficiency equipment lowered utility costs in all cases and improved cost-effectiveness in many cases, particularly with a ducted MSHP.

4. Heat pump water heating: All the HPWH measures were LSC cost-effective in all climate zones. Most measures were not On-Bill cost-effective with the exception of the HPWH + PV which was cost-effective OnBill in CPAU, SMUD, and SDG&E territories in addition to Climate Zones 11, 13, 14, and 15. The HPWH measures share many of the same challenges as the HPSH measures to achieving cost-effectiveness including high first costs and utility rates and assumptions. Table 13 shows the impact of utility rates on costeffectiveness where some HPWH measures are cost-effective under SMUD utility rates but are not costeffective anywhere under PG&E rates in Climate Zone 12. a. Various HPWH locations were also explored, however there are some factors outside of costeffectiveness that should also be considered. i. HPWHs in the conditioned space can provide benefits such as free-cooling during the summer, reduced tank losses, and shorter pipe lengths, and in some cases show improved cost-effectiveness over garage located HPWHs. However, there are various design considerations such as noise, comfort concerns, an additional heating load in the winter, and condensate removal. Ducting the inlet and exhaust air resolves comfort concerns but adds costs and complexity. Split heat pump water heaters address these concerns, but currently there are limited products on the market and there is a cost premium relative to the packaged products.
ii. Since HPWHs extract heat from the air and transfer it to water in the storage tank, they must have adequate ventilation to operate properly. Otherwise, the space cools down over time, impacting the HPWH operating efficiency. This is not a problem with garage installations but needs to be considered for water heaters located in interior or exterior closets. For the 2025 Title 24 code the CEC is proposing that all HPWH installations meet mandatory ventilation requirements (California Energy Commission, 2023).

29.70 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
3 California Energy Codes & Standards | A statewide utility program 2024-04-25 new initiatives to obtain current costs including the TECH Clean California program1 that publishes heat pump data and costs; however, at the time of this analysis, the TECH data did not contain incremental costs because it only had the heat pump costs but not the gas base case costs.

6. Table 18 shows how CARE rates and escalation rate assumptions will impact cost-effectiveness. a. Applying CARE rates in the IOU territories has the overall impact to increase utility cost savings for an all-electric building compared to a code compliant mixed fuel building, improving On-Bill costeffectiveness. This is due to the CARE discount on electricity being higher than that on gas. The reverse occurs with efficiency measures where lower utility rates reduce savings and subsequently reduce cost-effectiveness.
b. If gas tariffs are assumed to increase substantially over time, in-line with the escalation assumption from the 2025 LSC development, cost-effectiveness substantially improves for the heat pump measures over the 30-year analysis period and many cases become cost-effective that were not found to be cost-effective under the CPUC / 2022 TDV escalation scenario. There is much uncertainty surrounding future tariff structures as well as escalation values. While it’s clear that gas rates will increase, how much and how quickly is not known. Future electricity tariff structures are expected to evolve over time, and the CPUC has an active proceeding to adopt an income-graduated fixed charge that benefits low-income customers and supports electrification measures for all customers.2 The CPUC will make a decision in mid-2024 and the new rates are expected to be in place later that year or in 2025. While the anticipated impact of this rate change is lower volumetric electricity rates, the rate design is not finalized. While lower volumetric electricity rates provide many benefits, it also will make building efficiency measures harder to justify as cost-effective due to lower utility bill cost savings.

7. Under NBT, utility cost savings for PV are substantially less than what they were under prior net energy metering rules (NEM 2.0); however, savings are sufficient to be On-Bill cost-effective in all climate zones except Climate Zones 1 through 3, 5, and 6.
a. Combining a heat pump with PV allows the additional electricity required by the heat pump to be offset by the PV system while also increasing on-site utilization of PV generation rather than exporting the electricity back to the grid at a low rate.
b. While not evaluated in this study, coupling PV with battery systems can be very advantageous under NBT increasing utility cost savings because of improved on-site utilization of PV generation and fewer exports to the grid.

Recommendations:

29.71 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
4 California Energy Codes & Standards | A statewide utility program 2024-04-25 iii. A gas path should also be prescriptively allowed to safely satisfy federal preemption requirements considering the CRA v. Berkeley case.3 Additional requirements may apply to the gas path, as described in Section 3.3, as long as the paths are reasonably energy or cost equivalent.
c. “Flexible Path”, minimum energy savings target: This flexible approach establishes a target for required energy savings based on a measure or a set of measures that were found to be cost-effective based on either LSC or On-Bill. A points menu compares various potential upgrades ranging from efficiency, PV, and fuel substitution measures, based on site or source energy savings. The applicant must select upgrades that individually or in combination meet the minimum energy savings target. The maximum target value shown in the Cost-effectiveness Explorer is based on a combination of costeffective, non-preempted measures.

2. Equipment replacement ordinances should consider appropriate exceptions for scenarios where it will be challenging to meet the requirements, such as location of the HPWH, total project cost limitations, or the need for service panel upgrades that wouldn’t have been required as part of the proposed scope of work in absence of the reach code.

3. Consider extending relevant proposals made by the CEC for the 2025 Title 24 code (California Energy Commission, 2023) in ordinances that apply under the 2022 Title 24 code, such as the following:
a. Mandatory ventilation requirements for HPWH installations (Section 110.3(c)7). The cost-effectiveness analysis can be found in the Multifamily Domestic Hot Water CASE report (Statewide Team, 2023). b. Requirement for HERS verified refrigerant charge verification for heat pumps in all climate zones (Table 150.1-A4). The cost-effectiveness analysis can be found in the Residential HVAC Performance CASE report (Statewide Team, 2023).

4. When evaluating reach code strategies, the Reach Codes Team recommends that jurisdictions consider combined benefits of energy efficiency alongside electrification. Efficiency and electrification have symbiotic benefits and are both critical for decarbonization of buildings. As demand on the electric grid is increased through electrification, efficiency can reduce the negative impacts of additional electricity demand on the grid, reducing the need for increased generation and storage capacity, as well as the need to upgrade upstream transmission and distribution equipment.

5. Education and training can play a critical role in ensuring that heat pumps are installed, commissioned, and controlled properly to mitigate grid impacts and maximize occupant satisfaction. Below are select recommended strategies.
a. The Quality Residential HVAC Services Program5 is an incentive program to train California contractors in providing quality installation and maintenance while advancing energy-efficient technologies in the residential HVAC industry. Jurisdictions can market this to local contractors to increase the penetration of contractors skilled in heat pump design and installation. b. Educate residents and contractors of available incentives, tax credits, and financing opportunities. c. Educate contractors on code requirements. Energy Code Ace provides free tools, training, and resources to help Californians comply with the energy code. Contractors can access interactive compliance forms, fact sheets, and live and recorded trainings, among other things, on the website:
https://energycodeace.com/. Jurisdictions can reach out to Energy Code Ace directly to discuss offerings.

6. Health and safety
a. Combustion Appliance Safety and Indoor Air Quality: Implementation of some of the recommended measures will affect the pressure balance of the home which can subsequently impact the safe operation of existing combustion appliances as well as indoor air quality. Buildings with older gas appliances can present serious health and safety problems which may not be addressed in a remodel 3 https://www.publichealthlawcenter.org/sites/default/files/2024-01/CRA-v-Berkeley-Ninth-Circuit-Opinion-Jan2024.pdf 4 This requirement does not show up in the Express Terms for alterations in Section 150.2(b)1F, but the Statewide Reach Codes Team expects that it will be added to the next release of the proposed code language in the 45-day language as it aligns with the proposal made by the Codes and Standards Enhancement Team (Statewide CASE Team, 2023). 5 https://qualityhvac.frontierenergy.com/

29.72 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Executive Summary
5 California Energy Codes & Standards | A statewide utility program 2024-04-25 if the appliances are not being replaced. It is recommended that the building department require inspection and testing of all combustion appliances located within the pressure boundary of the building after completion of retrofit work that involves air sealing or insulation measures. b. Jurisdictions may consider requiring mechanical ventilation in homes where air sealing has been conducted. In older buildings, outdoor air is typically introduced through leaks in the building envelope.

After air sealing a building, it may be necessary to forcefully bring in fresh outdoor air using supply and/or exhaust fans to minimize potential issues associated with indoor air quality.

Local jurisdictions may also adopt ordinances that amend different Parts of the California Building Standards Code or may elect to amend other state or municipal codes. The decision regarding which code to amend will determine the specific requirements that must be followed for an ordinance to be legally enforceable. For example, reach codes that amend Part 6 of the CA Building Code and require energy performance beyond state code minimums must demonstrate the proposed changes are cost-effective and obtain approval from the Energy Commission as well as the Building Standards Commission (BSC). Amendments to Part 11, such as requirements for increased water efficiency or electric vehicle infrastructure only require BSC approval. Although a cost-effectiveness study is only required to amend Part 6 of the CA Building Code, this study provides valuable context for jurisdictions pursuing other ordinance paths to understand the economic impacts of any policy decision. This study documents the estimated costs, benefits, energy impacts and greenhouse gas emission reductions that may result from implementing an ordinance based on the results to help residents, local leadership, and other stakeholders make informed policy decisions.

This report documents the key results and conclusions from the Reach Codes Team analysis. A full dataset of all results can be downloaded at https://localenergycodes.com/content/resources. Results alongside policy options can also be explored using the Cost-effectiveness Explorer at https://explorer.localenergycodes.com/. Model ordinance language and other resources are posted on the C&S Reach Codes Program website at LocalEnergyCodes.com.

Local jurisdictions that are considering adopting an ordinance may contact the program for further technical support at [email protected].

29.73 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Introduction
6 California Energy Codes & Standards | A statewide utility program 2024-04-25 1 Introduction
This report documents cost-effective measure upgrades in existing single family buildings that exceed the minimum state requirements, the 2022 Building Energy Efficiency Standards, effective January 1, 2023. Local jurisdictions in California may consider adopting local energy ordinances to achieve energy savings beyond what will be accomplished by enforcing building efficiency requirements that apply statewide. This report was developed in coordination with the California Statewide Investor-Owned Utilities (IOUs) Codes and Standards Program, key consultants, and engaged cities—collectively known as the Statewide Reach Codes Team.

The focus of this study is on existing single family buildings and does not apply to low or high-rise multifamily buildings.

Each jurisdiction must establish the appropriate structure and threshold for triggering the proposed requirements.

Some common jurisdictional structures include triggering the requirements at major remodels, additions, or date-certain (upgrades must be completed by a specific date). Some of these measures could be triggered with a permit for another specific measure, such as a re-roofing project. The analysis includes scenarios of individual measures and identifies cost-effective options based on the existing conditions of the building in all 16 California Climate Zones (CZ) (see CostEffectiveness Results for a graphical depiction of climate zone locations).

The California Codes and Standards (C&S) Reach Codes program provides technical support to local governments considering adopting a local ordinance (reach code) intended to support meeting local and/or statewide energy efficiency and greenhouse gas reduction goals. The program facilitates adoption and implementation of the code when requested by local jurisdictions by providing resources such as cost-effectiveness studies, model language, sample findings, and other supporting documentation.

The California Building Energy Efficiency Standards Title 24, Part 6 (Title 24) (CEC, 2019) is maintained and updated every three years by two state agencies: the California Energy Commission (the Energy Commission) and the Building Standards Commission (BSC). In addition to enforcing the code, local jurisdictions have the authority to adopt local energy efficiency ordinances—or reach codes—that exceed the minimum standards defined by Title 24 (as established by Public Resources Code Section 25402.1(h)2 and Section 10-106 of the Building Energy Efficiency Standards).

Local jurisdictions must demonstrate that the requirements of the proposed ordinance are cost-effective and do not result in buildings consuming more energy than is permitted by Title 24. In addition, the jurisdiction must obtain approval from the Energy Commission and file the ordinance with the BSC for the ordinance to be legally enforceable.

The Department of Energy (DOE) sets minimum efficiency standards for equipment and appliances that are federally regulated under the National Appliance Energy Conservation Act, including heating, cooling, and water heating equipment (E-CFR, 2020). Since state and local governments are prohibited from adopting higher minimum efficiencies than the federal standards require, the focus of this study is to identify and evaluate cost-effective packages that do not include high efficiency heating, cooling, and water heating equipment. High efficiency appliances are often the easiest and most affordable measure to increase energy performance. While federal preemption limits reach code mandatory requirements for covered appliances, in practice, builders may install any package of compliant measures to achieve the performance requirements.

29.74 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Methodology and Assumptions
7 California Energy Codes & Standards | A statewide utility program 2024-04-25 2 Methodology and Assumptions

2.1 Analysis for Reach Codes
This section describes the approach to calculating cost-effectiveness including benefits, costs, metrics, and utility rate selection.

2.1.1 Modeling
The Reach Codes Team performed energy simulations using the 2025 research version of the Residential California Building Energy Code Compliance software (CBECC). The 2025 version of CBECC was used instead of the 2022 version to take advantage of updated weather files and metrics. Site energy results are similar between CBECC-Res 2022 and 2025; however, the 2025 compliance metrics applies assumptions reflective of an electrified future, such as high escalation for natural gas retail rates, which favors electric buildings. In addition, in 2025 the weather stations were changed in Climate Zones 4 and 6 from San Jose to Paso Robles and Torrance to Los Angeles International Airport, respectively.

Three unique building vintages are considered: pre-1978, 1978-1991, and 1992-2010. The vintages were defined based on review of historic Title 24 code requirements and defining periods with distinguishing features. Prospective energy efficiency measures were identified and modeled to determine the projected site energy (therm and kWh), source energy, GHG emissions, and LSC (long-term systemwide cost) impacts. Annual utility costs were calculated using hourly data output from CBECC, and current (as of 11/01/2023) electricity and natural gas tariffs for each of the investor-owned utilities (IOUs) appropriate for that climate zone.

Equivalent CO2 emission reductions were calculated based on outputs from the CBECC-Res simulation software.

Electricity emissions vary by region and by hour of the year. CBECC-Res applies two distinct hourly profiles, one for Climate Zones 1 through 5 and 11 through 13 and another for Climate Zones 6 through 10 and 14 through 16. Natural gas emissions do not vary hourly. To compare the mixed-fuel and all-electric cases side-by-side, GHG emissions are presented as lbs CO2-equivalent (CO2e) emissions.

The Statewide Reach Codes Team designed the analysis approach and selected measures for evaluation based on the 2019 existing building single family reach code analysis (Statewide Reach Codes Team, 2021) and work to support the 2025 Title 24 code development cycle as well as from outreach to architects, builders, and engineers.

2.1.2 Prototype Characteristics
The Energy Commission defines building prototypes which it uses to evaluate the cost-effectiveness of proposed changes to Title 24 requirements. Average home size has steadily increased over time,6 and the Energy Commission single family new construction prototypes are larger than many existing single family homes across California. For this analysis, a 1,665 square foot prototype was evaluated. Table 1 describes the basic characteristics of the single family prototype. Additions are not evaluated in this analysis as they are already addressed in Section 150.2 of Title 24, Part

6. The CEC has proposed changes to the 2025 Energy Code that would remove the allowance of gas space heating and water heating equipment for additions and instead require additions to follow the same space heating and water heating equipment requirements as new construction (California Energy Commission, 2023). The proposed prescriptive requirements for single family new construction homes are heat pump space heaters and water heaters, with gas equipment only allowed in the performance approach. 6 https://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf

29.75 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Methodology and Assumptions
8 California Energy Codes & Standards | A statewide utility program 2024-04-25 Table 1. Prototype Characteristics
Specification
Existing Conditioned Floor Area 1,665 ft2
Num. of Stories 1
Num. of Bedrooms 3
Window-to-Floor Area Ratio 13%
Attached Garage 2-car garage
Three building vintages were evaluated to determine sensitivity of existing building performance on cost-effectiveness of upgrades. For example, it is widely recognized that adding attic insulation in an older home with no insulation is costeffective, however, newer homes will likely have existing attic insulation reducing the cost-effectiveness of an incremental addition of insulation. The building characteristics for each vintage were determined based on either prescriptive requirements from Title 24 that were in effect or standard construction practice during that time period.

Homes built under 2001 Title 24 are subject to prescriptive envelope code requirements very similar to homes built under the 2005 code cycle, which was in effect until January 1, 2010.

Table 2 summarizes the assumptions for each of the three vintages. Additionally, the analysis assumed the following features when modeling the prototype buildings. Efficiencies were defined by year of the most recent equipment replacement based on standard equipment lifetimes.
• Individual space conditioning and water heating systems, one per single family building. • Split-system air conditioner with natural gas furnace. o Scenarios with an existing natural gas wall furnace without AC were also evaluated. • Small storage natural gas water heater.
o Scenarios with an existing electric resistance storage water heater were also evaluated. • Gas cooktop, oven, and clothes dryer.

The methodology applied in the analyses begins with a design that matches the specifications as described in Table 2 for each of the three vintages. Prospective energy efficiency measures were modeled to determine the projected energy performance and utility cost impacts relative to the baseline vintage. In some cases, where logical, measures were packaged together.

29.76 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades Methodology and Assumptions
9 California Energy Codes & Standards | A statewide utility program 2024-04-25 Table 2. Efficiency Characteristics for Three Vintage Cases Building Component Efficiency
Feature
Vintage Case
Pre-1978 1978-1991 1992-2010
Envelope
Exterior Walls 2x4, 16-inch on center wood frame,
R-0a
2x4 16 inch on center wood frame,
R-11
2x4 16 inch on center wood frame,
R-13
Foundation Type & Insulation Uninsulated slab (CZ 2-15) Raised floor, R-0 (CZ 1 & 16)
Uninsulated slab (CZ 2-15)
Raised floor, R-0 (CZ 1 & 16)
Uninsulated slab (CZ 2-15)
Raised floor, R-19 (CZ 1 & 16)
Ceiling Insulation & Attic Type
Vented attic, R-5 @ ceiling level for CZ
6 & 7,
Vented attic, R-11 @ ceiling level
(all other CZs)
Vented attic, R-19 @ ceiling level Vented attic, R-30 @ ceiling level Roofing Material & Color Asphalt shingles, dark
(0.10 reflectance, 0.85 emittance)
Asphalt shingles, dark
(0.10 reflectance, 0.85 emittance)
Asphalt shingles, dark
(0.10 reflectance, 0.85 emittance)
Radiant Barrier No No No
Window Type: U-factor/SHGCb Metal, single pane: 1.16/0.76 Metal, dual pane: 0.79/0.70 Vinyl, dual pane Low-E: 0.55/0.40 House Infiltration at 50 Pascals 15 ACH50 10 ACH50 7 ACH50 HVAC Equipment
Heating Efficiency 78 AFUE (assumes 2 replacements) 78 AFUE (assumes 1 replacement) 78 AFUE Cooling Efficiency 10 SEER (assumes 2 replacements) 10 SEER (assumes 1 replacement) 13 SEER, 11 EER Duct Location & Details Attic, R-2.1, 30% leakage at 25 Pa Attic, R-2.1, 25% leakage at 25 Pa Attic, R-4.2, 15% leakage at 25 Pa Whole Building Mechanical
Ventilation None None None
Water Heating Equipment
Water Heater Efficiency 0.575 Energy Factor (assumes 2
replacements)

0.575 Energy Factor (assumes 1
replacement) 0.575 Energy Factor
Water Heater Type 40-gallon gas storage 40-gallon gas storage 40-gallon gas storage Pipe Insulation None None None
Hot Water Fixtures Standard, non-low flow Standard, non-low flow Standard, non-low flow a Pre-1978 wall modeled with R-5 cavity insulation to better align wall system performance with monitored field data and not overestimate energy use. b Window type selections were made based on conversations with window industry expert, Ken Nittler. If a technology was entering the market during the time period (e.g., Low-E during 1992-2010 or dual-pane during 1978-1991) that technology was included in the analysis. This provides a conservative assumption for overall building performance and additional measures may be cost-effective for buildings with lower performing windows, for example buildings with metal single pane windows in the 1978- 1991 vintage.

29.77 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 10 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25

2.1.3 Cost-Effectiveness Approach

2.1.3.1 Benefits
This analysis used two different metrics to assess the cost-effectiveness of the proposed upgrades. Both methodologies require estimating and quantifying the incremental costs and energy savings associated with each energy efficiency measure. The main difference between the methodologies is the way they value energy impacts (the numerator in the benefit cost calculation):

Utility Bill Impacts (On-Bill): This customer-based lifecycle cost (LCC) approach values energy based upon estimated site energy usage and customer utility bill savings using the latest electricity and natural gas utility tariffs available at the time of writing this report. Total savings are estimated over a 30-year duration and include discounting of future utility costs, as well as assumed energy cost inflation over time.

Long-term Systemwide Cost (LSC): Formerly known as Time Dependent Valuation (TDV) energy cost savings, LSC reflects the Energy Commission’s current LCC methodology, which is intended to capture the total value or cost of energy use over 30 years. This method accounts for the hourly cost of marginal generation, transmission and distribution, fuel, capacity, losses, and cap-and-trade-based CO2 emissions (California Energy Commission, 2023).

This is the methodology used by the Energy Commission in evaluating cost-effectiveness for efficiency measures in the 2025 Energy Code.

2.1.3.2 Costs
The Reach Codes Team assessed the incremental costs of the measures and packages over a 30-year analysis period. Incremental costs represent the equipment, installation, replacement, and maintenance costs of the proposed measure relative to the 2022 Title 24 Standards minimum requirements or standard industry practices. Present value of replacement cost is included only for measures with lifetimes less than the 30-year evaluation period. In cases where at the end of the analysis period the measure has useful life remaining, the value of this remaining life is calculated and credited in the total lifetime cost.

2.1.3.3 Metrics
Cost-effectiveness is presented using net present value (NPV) and benefit-to-cost (B/C) ratio metrics.

NPV: Equation 1 demonstrates how lifetime NPV is calculated. If the NPV of a measure or package is positive, it is considered cost-effective. A negative value represents a net increase in costs over the 30-year lifetime.

B/C Ratio: This is the ratio of the present value of all benefits to the present value of all costs over 30 years (present value benefits divided by present value costs). A value of one indicates the NPV of the savings over the life of the measure is equivalent to the NPV of the lifetime incremental cost of that measure. A value greater than one represents a positive return on investment. The B/C ratio is calculated according to Equation 2.

Equation 1
𝑁𝑁𝑁𝑁𝑁𝑁 = 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑜𝑜𝑜𝑜 𝑙𝑙 𝑙𝑙𝑙𝑙 𝑏𝑏 − 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑜𝑜𝑜𝑜 𝑙𝑙 𝑙𝑙𝑙𝑙 𝑐𝑐 Equation 2
𝐵𝐵 − − 𝐶𝐶 𝑅𝑅 = 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑜𝑜𝑜𝑜 𝑙𝑙 𝑙𝑙𝑙𝑙 𝑏𝑏
𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑜𝑜𝑜𝑜 𝑙𝑙 𝑙𝑙𝑙𝑙 𝑐𝑐
Improving the efficiency of a project often requires an initial incremental investment. In most cases the benefit is represented by annual On-Bill utility or LSC savings, and the cost is represented by incremental first cost and future replacement costs. Some packages result in initial construction cost savings relative to the assumed base case scenario, and either energy cost savings (positive benefits), or increased energy costs (negative benefits). In cases where both construction costs and energy-related savings are negative, the construction cost savings are treated as the ‘benefit’ while the increased energy costs are the ‘cost.’ In cases where a measure or package is costeffective immediately (i.e., upfront construction cost savings and lifetime energy cost savings), B/C ratio costeffectiveness is represented by “>1”.

29.78 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 11 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 The lifetime costs or benefits are calculated according to Equation 3.

Equation 3
𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 𝑜𝑜𝑜𝑜 𝑙𝑙 𝑙𝑙𝑙𝑙 𝑐𝑐 𝑜𝑜 𝑏𝑏 = �(𝐴𝐴 𝑐𝑐 𝑜𝑜 𝑏𝑏 )𝑡𝑡
(1 + )𝑡𝑡
𝑛𝑛
𝑡𝑡=0
Where:

1. n = analysis term in years

2. r = discount rate
The following summarizes the assumptions applied in this analysis to both methodologies.

3. Analysis term of 30 years

4. Real discount rate of three percent
Both base case measures and alternative energy efficiency measures may have different lifetime assumptions which impact life cycle economics. Future costing of many of the evaluated electrification measures are only based on current cost assumption, which may be overly conservative as the expected growth in heat pump-based technologies is growing rapidly and will likely lead to future cost reductions (at least relative to current fossil fueled equipment) as production volumes increase.

2.1.4 Utility Rates
In coordination with the CA IOU rate team (comprised of representatives from Pacific Gas and Electric (PG&E), Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E)) and two Publicly-Owned-Utilities (POUs) (Sacramento Municipal Utility District (SMUD) and City of Palo Alto Utilities (CPAU)), the Reach Codes Team determined appropriate utility rates for each climate zone to calculate utility costs and determine On-Bill costeffectiveness for the proposed measures and packages. The utility tariffs, summarized in Chapter 6.2, were determined based on the appropriate rate for each case in each territory. Utility rates were applied to each climate zone based on the predominant IOU serving the population of each zone, with a few climate zones evaluated multiple times under different utility scenarios. Climate Zones 10 and 14 were evaluated with both SCE for electricity and Southern California Gas Company (SoCalGas) for gas and SDG&E tariffs for both electricity and gas since each utility has customers within these climate zones. Climate Zone 5 is evaluated under both PG&E and SoCalGas natural gas rates.

Two POU or municipal utility rates were also evaluated: SMUD in Climate Zone 12 and CPAU in Climate Zone 4.

For cases with onsite generation (i.e. solar photovoltaics (PV)), the approved NBT tariffs were applied along with monthly service fees and hourly export compensation rates for 2024.7 In December 2022, the California Public Utilities Commission (CPUC) issued a decision adopting NBT as a successor to NEM 2.0 that went into effect April of 20238.

Utility rates are assumed to escalate over time according to the assumptions from the CPUC 2021 En Banc hearings on utility costs through 2030 (California Public Utilities Commission, 2021a). Escalation rates through the remainder of the 30-year evaluation period are based on the escalation rate assumptions within the 2022 TDV factors. The Statewide Natural Gas Residential Average Rate for 2023 through 2030 is projected to be 4.6%. The Electric Residential Average Rate for PG&E, SCE and SDG&E for 2023 through 2030 is projected to be 1.8%,1.6% and 2.8% respectively. A second set of escalation rates were also evaluated to demonstrate the impact that utility cost changes have on cost-effectiveness over time. This utility rate escalation sensitivity analysis, presented in Section 3.2.4, was based on those used within the 2025 LSC factors (LSC replaces TDV in the 2025 code cycle) which assumed steep 7 Hourly export compensation rates were based on the NBT spreadsheet model created by E3 for the CPUC. https://www.cpuc.ca.gov/-/media/cpuc-website/divisions/energy-division/documents/net-energy-meteringnem/nemrevisit/nbt-model--12142022.xlsb 8 https://www.cpuc.ca.gov/nemrevisit

29.79 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 12 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 increases in gas rates in the latter half of the analysis period. See Appendix 6.2.7 Fuel Escalation Assumptions for details.

Future electricity tariff structures are expected to evolve over time, and the CPUC has an active proceeding to adopt an income-graduated fixed charge that benefits low-income customers and supports electrification measures.10 These were not included in this analysis but may be evaluated later in 2024 once the rates are finalized.

2.1.5 Measure Cost Data Collection Approach
To support this effort, a detailed cost study was completed in the summer of 2023 to gather data from a range of contractors to inform actual installed costs in the areas they provide services. These areas include HVAC, plumbing, envelope and air-sealing, and PV installation. Home performance contractors were also approached to collect this data. Collecting this type of data is challenging, both due to contractor reticence to share cost information and due to the timing of the survey which unfortunately coincided with the summer busy season for most contractors, especially HVAC installers. With these known challenges, the outreach effort focused on leveraging existing relationships between the analysis team and contractors to both gain access and provide assurance that all cost data would remain confidential and aggregated. Contractors that provided feedback were nominally compensated for their time.

The collected cost data was intended to represent recent costs for a “typical” retrofit installation. Each home in which a contractor does work has different site-specific issues that will likely affect costs. In addition, different jurisdictions have different levels of building department installation oversight and permit fees. Finally, each contractor typically has a different manufacturer product line they prefer to install. All these factors will influence installed costs11.

The most detailed and broad cost request was for the HVAC contractors, as there are a wide range of equipment replacement scenarios available for an existing ducted gas furnace with central split-system air conditioning. Options range from a base case scenario (like for like swap out), split-system heat pump replacement, dual fuel heat pumps (DFHP), ducted mini-split heat pumps, non-ducted mini-splits, etc. For plumbing contractors, a range of scenarios existed for water heater replacements including like-for-like replacement, HPWHs (in different locations- garage, indoor), need for electrical upgrade for HPWH installation, need for HPWH ducting, etc. Envelope measures focused on attic and wall insulation, window replacement, re-roofing (with Cool Roof materials or not), and attic ceiling plane airsealing. PV costing included different system sizes, panel upgrades costs, and battery costs. Home performance contractors were asked to provide as much data as they could on the different measure options. All costing information requested was intended to represent most recent installations, in an effort to capture current pricing as best as possible.

The contractors that responded with their cost estimates work in different regions of the state, operate in different markets with (potentially) different local efficiency incentives, do varying amounts of work based on the size of their company, target different market demographic sectors, and install different brands of equipment. All these factors will contribute to price variability. The Team considered applying climate zone specific cost adjustments to reflect some of these differences, but ultimately decided not to since a climate zone is not a monolithic entity with uniform customer pricing throughout. The Team recognizes that “zip code” pricing is a reality, but for simplicity, as well as consistency with Title 24, Part 6 code development costing approaches, applied uniform statewide costs to all measures.

2.2 Measure Details and Cost
This section describes the details of the measures and documents incremental costs. All measure costs were obtained from the contractor survey unless otherwise noted. All contractor provided costs reflect the cost to the customer and 10 https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/electric-costs/demand-response-dr/demandflexibility-rulemaking 11 One HVAC contractor mentioned that equipment brand alone may contribute to a +/-%5 variation in the total bid cost.

29.80 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 13 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 include equipment, labor, permit fees, and required HERS testing. Additional details of the measures can be found in Appendix Section Error! Reference source not found..

All measures are evaluated assuming they are not otherwise required by Title 24. For example, duct sealing is required by code whenever HVAC equipment is altered. For this analysis duct sealing was evaluated for those projects where it is not already triggered by code (i.e., no changes to the heating or cooling equipment). Where appropriate, measure requirements align with those defined in Title 24. In some cases, cost-effective measures were identified that exceed Title 24 requirements, such as attic insulation, cool roofs, and duct sealing.

2.2.1 Building Envelope & Duct Measures
The following are descriptions of each of the efficiency upgrade measures applied in this analysis.

Attic Insulation: Add attic insulation in buildings with vented attic spaces to meet either R-38 or R-49. The pre-1978 vintage assumes an existing condition of R-11, the 1978-1991 vintage assumes an existing condition of R-19, and the 1992-2010 vintage assumes R-30 as the existing insulation level. For pre-1978 vintage homes this measure was also evaluated to include air sealing of the attic. A 14% leakage reduction was modeled such that 15 ACH50 was reduced to 12.9 ACH50 in this measure. The costs for this measure include removing existing insulation.

Air Sealing and Weather-stripping: Apply air sealing practices throughout all accessible areas of the building. For this study, it was assumed that older vintage homes would be leakier than newer buildings and that approximately 30 percent improvement in air leakage is achievable through air sealing of all accessible areas. For modeling purposes, it was assumed that air sealing can reduce infiltration levels from 15 to ten air changes per hour at 50 Pascals pressure difference (ACH50) in the oldest vintages (pre-1978), to ten to seven ACH50 for the 1978-1991 vintage, and seven to five ACH50 in the 1992-2010 vintage.

Cool Roof: For steep slope roofs, install a roofing product rated by the Cool Roof Rating Council (CRRC) with an aged solar reflectance of 0.20 or 0.25 and thermal emittance of 0.75 or higher. This measure only applies to buildings that are installing a new roof as part of the scope of the remodel; the cost and energy savings associated with this upgrade reflects the incremental step between a standard roofing product with one that is CRRC rated with an aged solar reflectance of 0.20 or 0.25. This is similar to cool roof requirements in 2022 Title 24 Section 150.2(b)1Ii but assumes a higher solar reflectance.

Radiant Barrier: Add radiant barrier to any existing home vintage. This measure only applies to buildings that are installing a new roof as part of the scope of the remodel; the cost and energy savings associated with this upgrade reflects the incremental step between a standard roofing product with one that includes a laminated radiant barrier.

Raised Floor Insulation: In existing homes with raised floors and no insulation (pre-1978 and 1978-1991 vintages), add R-19 insulation. An upgraded R-30 floor insulation, assuming no current insulation, was evaluated in the pre-1978 and 1978-1991 vintages.

Wall Insulation: Blow-in R-13 wall insulation in existing homes without wall insulation (pre-1978 vintages).

Window Replacement: Replace existing windows with a non-metal dual-pane product, which has a U-factor equal to

0.28 Btu/hour-ft2-°F or lower and a Solar Heat Gain Coefficient (SHGC) equal to 0.23 or lower, except in heating dominated climates (Climate Zones 1, 3, 5, and 16) where an SHGC of 0.35 was evaluated.

Duct Sealing, New Ducts, and Duct Insulation: Air seal all ductwork to meet the requirements of the 2022 Title 24, Part 6 Section 150.2(b)1E. For this analysis, final duct leakage values of ten percent (proposed revised leakage rate for 2022 Title 24) was evaluated. The pre-1978 and 1978-1992 vintages assume leaky existing ducts (25-30% leakage).

The 1992-2010 vintage assumes moderately leaky existing ducts (15-20% leakage).

Replacing existing ductwork with entirely new ductwork to meet Sections 150.2(b)1Di and 150.2(b)1Diia of the 2022 Title 24 was also evaluated. This assumed new ducts meet 5% duct leakage and the option of R-6 and R-8 duct insulation in all climate zones.

29.81 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 14 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 Table 3 summarizes the cost assumptions for the building envelope and HVAC duct improvement measures evaluated.

All the measures in Table 3 assume a 30-year effective useful life.

Table 3. Measure Cost Assumptions – Efficiency & Duct Measures Measure Performance Level
Incremental Cost –
Single Family Building
Pre 1978 1978 – 1991 1992 - 2010
Wall Insulation R-13 $2,950 N/A N/A
Raised Floor
Insulation
R-19 $3,633 $3,633 N/A
R-30 $4,113 $4,113 $4,113
Attic Insulation
R-38 $6,762 $2,555 $1,781
R-49 $7,446 $3,612 $1,827
Air Sealing
10 ACH50 $4,684 N/A N/A
7 ACH50 N/A $4,684 N/A
5 ACH50 N/A N/A $4,684
Cool Roof

0.25 Aged Solar Reflectance
CZs 1-3,5-7,16 $2,407 $2,407 $2,407

0.25 Aged Solar Reflectance
CZs 4, 8-15 $1,203 $1,203 $1,203
Window
U-factor/SHGC

0.28 U-factor. 0.23 SHGC in
CZs 2,4,6-15. $11,463 $11,463 $11,463

0.28 U-factor. 0.35 SHGC in
CZs 1,3,5,26 $11,871 $11,871 $11,871
Radiant Barrier Add Radiant Barrier $893 $893 $893
Duct Sealing 10% nominal airflow $2,590 $2,590 $1,400
All New Duct
System
R-6 ducts;
5% duct leakage $4,808 $4,808 $4,808
R-8 ducts;
5% duct leakage $6,311 $6,311 $6,311

2.2.2 PV Measures
Installation of on-site PV is required in the 2022 Title 24 code for new construction homes, but there are no PV requirements for additions or alterations to existing buildings. PV was evaluated in CBECC-Res according to the California Flexible Installation (CFI) 1 assumptions and 98% solar access. To meet CFI eligibility, the requirements of 2022 Reference Appendices JA11.2.2 (California Energy Commission, 2021b) must be met. A 3 kW PV system was modeled both as a standalone measure as well as coupled with heat pump installations.

The costs for installing PV are summarized in Table 4. They include the first cost to purchase and install the system, future inverter replacement costs, and annual maintenance costs. Upfront solar PV system costs are estimated from the contractor surveys to be $4.58/WDC and are reduced by 30 percent to account for the federal income Residential Clean Energy Credit. The solar panels are estimated to have an effective useful life of 30 years and the inverter 25 years. The inverter replacement cost of $7,000 (future value) is also from the contractor surveys. System maintenance costs are taken from the 2019 PV CASE Report (California Energy Commission, 2017) and are assumed to be

29.82 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 15 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 $0.31/WDC present value. These costs do not include costs associated with electrical panel upgrades, which will be necessary in some instances.

Table 4. Measure Descriptions & Cost Assumptions – PV
Measure Performance
Level
Incremental Cost
Pre 1978 1978 – 1991 1992 - 2010
PV 3 kW $9,608

2.2.3 Equipment Fuel Substitution Measures – Heat Pump Equipment The fuel substitution measures are evaluated as replacements at the end of the life of the existing equipment. This means the baseline compared against is usually a like-for-like change-out of the natural gas equipment, and the upgrade is a heat pump.

For most of the space heating and water heating cases, costs for electrical service panel upgrades are not included as it is assumed many existing homes have the service capacity to support converting one appliance from gas to electric.

For homes with existing air conditioners, any incremental electric capacity necessary to support a heat pump space heater is marginal. The same applies for homes with existing electric resistance equipment. Section 3.2.4 presents the impacts for select cases where an upgrade to the electric panel is required.

Heat Pump Space Heating
All the heat pump space heater (HPSH) measures are described below. All were evaluated with HERS verified refrigerant charge aligned with the proposed code requirements for the 2025 Title 24 code. Dual fuel heat pumps (DFHPs) were controlled to lockout furnace operation above 35°F.

DFHP (Existing Furnace): Replace existing ducted air conditioner (AC) with an electric heat pump and install controls to operate the heat pump to use the existing gas furnace for backup heat. A minimum federal efficiency (14.3 SEER2,

11.7 EER2, 7.5 HSPF2) heat pump was evaluated. Savings are compared to a new AC (14.3 SEER2, 11.7 EER2) alongside the existing furnace (78 AFUE).

DFHP (New Furnace): Replace existing ducted AC and natural gas furnace with an electric heat pump and new gas furnace plus controls to operate the heat pump and use the new gas furnace for backup heat. A minimum federal efficiency (14.3 SEER2, 11.7 EER2, 7.5 HSPF2) heat pump and furnace (80 AFUE) were evaluated to replace existing equipment. Savings are compared to a new ducted AC and natural gas furnace (14.3 SEER2, 11.7 EER2, 80 AFUE).

Heat Pump Space Heater: Replace existing ducted AC and natural gas furnace with an electric heat pump. Minimum federal efficiency (14.3 SEER2, 11.7 EER2, 7.5 HSPF2) and higher efficiency (17 SEER2, 12.48 EER2, 9.5 HSPF2) heat pumps were evaluated. Savings are compared to a new ducted natural gas furnace and AC (14.3 SEER2, 11.7 EER2, 80 AFUE).

Ducted Mini-Split Heat Pump (MSHP): Replace existing ducted AC and natural gas furnace with a ducted high efficiency MSHP (16.5 SEER2, 12.48 EER2, 9.5 HSPF2). Savings are compared to a new ducted AC and natural gas furnace (14.3 SEER2, 11.7 EER2, 80 AFUE).

Ductless MSHP: In a home without AC, replace existing wall furnace with a ductless MSHP. A standard efficiency unit meeting minimum federal efficiency standards (14.3 SEER2, 11.7 EER2, 7.5 HSPF2) was evaluated by modeling the variable capacity heat pump (VCHP) compliance credit in CBECC-Res. A premium, higher efficiency upgrade was also

29.83 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 16 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 evaluated using CBECC-Res’ detailed VCHP model12 by simulating the performance of a representative high efficiency product (14.3 SEER2, 11.7 EER2, 7.5 HSPF2). Savings are compared to a new natural gas wall furnace with fan distribution (75% AFUE) and window AC (9 CEER).

Over the 30-year analysis period, certain changes are assumed when the equipment is replaced that impact both lifetime costs and energy use. Table 5 presents the lifetime scenario for the DFHP (existing furnace) measure. The analysis assumed a 20-year effective useful lifetime (EUL) for a furnace, a 15-year EUL for an air conditioner and a 15- year EUL for a heat pump. Lifetimes are based on the Database for Energy Efficient Resources (DEER) (California Public Utilities Commission, 2021b). The existing furnace is assumed to be halfway through its EUL at the beginning of the analysis period. After 10 years when the furnace reaches the end of its life and needs to be replaced, it will be subject to new federal efficiency standards for residential gas furnaces that go into effect in 2028 requiring 95 AFUE13. 5 years later the air conditioner reaches the end of its life and is replaced with a new air conditioner.

For the DFHP upgrade case, after 10 years when the furnace fails it’s expected that the furnace will be abandoned in place since the heat pump serves primary heating and was sized to provide the full design heating load. In this case it is assumed that the fan motor would be replaced with a new aftermarket unit and would operate another 5 years until the heat pump fails and is replaced with a new heat pump and air handler.

The other ducted heat pump cases similarly apply a 95 AFUE furnace in the baseline when the furnace reaches its EUL after 20 years.

Table 5. Lifetime Analysis Replacement Assumptions for DFHP (Existing Furnace) Scenario Year Baseline Upgrade
0 AC fails, install new AC,
keep existing furnace
AC fails, install new HP,
keep existing furnace
10 Furnace fails, install new
95AFUE furnace
Furnace fails, replace fan
motor
15 AC fails, install new AC HP fails, install new HP
and air handler
Costs were applied based on the system capacity from heating and cooling load calculations in CBECC-Res as presented in Table 6. Air conditioner nominal capacity was calculated as the CBECC-Res cooling load, rounded up to the nearest half ton. Heat pump nominal capacity was calculated as the maximum of either the CBECC-Res heating or cooling load, rounded up to the nearest half ton. In both cases a minimum capacity of 1.5-ton was applied as this represents the typical smallest available split system heat pump equipment. Load calculations demonstrated that Climate Zones 2 - 15 were cooling-dominated while Climate Zones 1 and 16 were heating-dominated. In the heating dominated climate zones the heat pump needed to be upsized relative to an air conditioner that only provides cooling. 12 The detailed VCHP option allows for the user to input detailed specifications based on the published National Energy Efficiency Partnership (NEEP) manufacturer specific performance data. It is not currently available for compliance analysis.
13 https://www.energy.gov/articles/doe-finalizes-energy-efficiency-standards-residential-furnaces-save-americans-15- billion#:~:text=These%20furnace%20efficiency%20standards%20were,heat%20for%20the%20living%20space.

29.84 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 17 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 Table 6. System Sizing by Climate Zone
Climate
Zone
Air Conditioner
Capacity (tons)
Heat Pump
Capacity (tons)
1 1.5 3.0
2 3.5 3.5
3 2.5 2.5
4 3.5 3.5
5 3.0 3.0
6 3.0 3.0
7 3.0 3.0
8 4.0 4.0
9 4.0 4.0
10 4.0 4.0
11 4.5 4.5
12 4.0 4.0
13 4.5 4.5
14 4.0 4.0
15 5.0 5.0
16 3.5 4.0
Table 7 presents estimated first and lifetime costs for the various ducted baseline and heat pump scenarios for 4-ton equipment. Costs include all material and installation labor including providing new 240 V electrical service to the air handler location for all new air handler installations and decommissioning of the furnace for the cases where the furnace is removed. DFHP costs incorporate controls installation and commissioning to ensure the heat pump and the furnace communicate properly and don’t operate at the same time. Future replacement costs do not include any initial costs associated with 240V electrical service or furnace decommissioning.

Table 8 presents estimated first and lifetime costs for the ductless baseline and 2 heat pump scenarios, also for 4-ton heat pump equipment. EULs are based on 20 years for the gas wall furnace, 10 years for the window AC, and 15 years for the heat pump.14
14 The gas wall furnace and heat pump EULs were based on DEER (California Public Utilities Commission, 2021b).

Gas wall furnace lifetime was assumed to be the same as for central gas furnace equipment. Room air conditioner EUL was based on the DOE’s latest rulemaking for room air conditioned (Department of Energy, 2023). DOE determined an average lifetime of 9.3 years, which was rounded up to 10 years for this analysis.

29.85 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 18 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 Table 7. Ducted HVAC Measure Cost Assumptions – 4-Ton Electric Replacements Case AC + Coil
Gas
Furnace
/AC
DFHP
(Existing
Furnace)
DFHP (New
Furnace)
Min. Eff.

Heat Pump
High Eff.

Heat
Pump
Ducted
MSHP
Base Case - - AC + Coil
Gas
Furnace
/AC
Gas
Furnace
/AC
Gas
Furnace
/AC
Gas
Furnace
/AC
First Cost $10,402 $16,653 $12,362 $20,676 $17,825 $20,802 $18,075 Replacement Cost
(Future Value) $19,365 $19,365 $19,025 $19,025 $16,825 $19,802 $18,075 Replacement Cost
(Present Value) $13,346 $11,639 $12,334 $12,897 $10,800 $12,710 $11,601 Remaining Value
at Year 30 $0 ($1,846) $0 ($1,846) $0 $0 $0
Total Lifecycle
Cost $23,748 $26,446 $24,696 $31,727 $28,625 $33,512 $29,676 Incremental Cost - - $948 $5,281 $2,179 $7,066 $3,230
Table 8. Non-Ducted HVAC Measure Cost Assumptions – 4-Ton Electric Replacements Wall Furnace
+ Window AC
Min. Eff.

Ductless
MSHP
High Eff.

Ductless
MSHP
First Cost $4,075 $17,412 $21,342
Replacement Cost (Future Value) $4,075 $17,412 $21,342
Replacement Cost (Present Value) $3,365 $11,176 $13,698 Remaining Value at Year 30 ($532) $0 $0
Total Lifecycle Cost $6,908 $28,588 $35,040
Incremental Cost - $21,680 $28,132
Heat Pump Water Heating:

The heat pump water heater (HPWH) measures are described below, and costs are presented in Table 9 and Table

10. The most typical scenario in California is a home with existing natural gas storage tank water heaters. However, there are also many existing homes with existing electric resistance storage tank water heaters and this work considers both baselines. This analysis evaluates the following 65-gallon replacement HPWHs:

1. HPWH that meets the federal minimum efficiency requirements of UEF 2.0

2. HPWH that meets the Northwest Energy Efficiency Alliance (NEEA)15 Tier 3 rating (3.45 UEF)

3. HPWH that meets the NEEA Tier 4 rating and that has demand response (DR) or load shifting control capability (4.02 UEF)

4. 120V HPWH that meets the NEEA Tier 3 rating (3.3 UEF). 15 Based on operational challenges experienced in the past, NEEA established rating test criteria to ensure newly installed HPWHs perform adequately, especially in colder climates. The NEEA rating requires an Energy Factor equal to the ENERGY STAR® performance level and includes requirements regarding noise and prioritizing heat pump use over supplemental electric resistance heating.

29.86 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 19 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 The four cases above were evaluated with the HPWH located within an attached garage. Additionally, three separate cases for the federal minimum efficiency HPWH were analyzed to consider the impacts of location on performance and cost-effectiveness. These locations included the following:

1. Exterior closet.

2. Interior closet, no ducting.

3. Interior closet, ducted to the outside.

Additional costs for providing electrical wiring to these locations and for providing ductwork were included. Savings are compared to a new 50-gallon natural gas storage water heater (UEF 0.63) or a new 50-gallon electric water heater (UEF 0.92).

For this analysis, a HPWH that just meets the federal minimum efficiency standards of close to 2.0 Uniform Energy Factor (UEF) was evaluated in order to satisfy preemption requirements. However, the Reach Codes Team is not aware of any 2.0 UEF products that are available on the market. The lowest UEF reported for certified products in the Northwest Energy Efficiency Alliance (NEEA)16 database is 2.73. In fact, of the four certification tiers offered by NEEA for high efficiency HPWHs, those meeting Tier 3 or Tier 4 are the dominant products on the market today. According to NEEA all major HPWH manufacturers are represented in NEEA’s qualified product list17 and there are fewer than 10 integrated products certified as Tier 1 or Tier 2, all of which have UEFs greater than 3.0.18 Therefore, in this analysis, we refer to the NEEA rated HPWH as the “market standard” HPWH.

The HPWH costs for the 120V and NEEA certified units are based on a larger (60 or 65 gallon) HPWH, as most contractors are upsizing the HPWH tank size relative to an equal volume, but higher capacity gas storage water heater.

Costs include all material and installation labor including providing a new 240 V electrical service to the water heater location (not needed for the 120V product). Water heating equipment lifetimes are based on DOE’s recent water heater rulemaking (Department of Energy, 2022) and assume 15-year EULs for both the baseline water heaters and the HPWHs.19 Future replacement costs for 240V HPWHs do not include any initial costs associated with 240V electrical service, condensate disposal, etc.

Table 9. Water Heating Measure Cost Assumptions – Existing Gas Gas
Storage
Water
Heater
240V
Fed.

Min.

HPWH
240V
Market
Std. NEEA
HPWH
240V
Market
Std. NEEA
HPWH +
DR
120V
Market
Std. NEEA
HPWH
240V Fed.

Min.

HPWH,
Exterior
Closet
240V Fed.

Min. HPWH,
Interior
Closet, Not
Ducted
240V Fed.

Min. HPWH,
Interior
Closet,
Ducted
First Cost $2,951 $7,283 $8,144 $8,144 $5,844 $7,702 $7,363 $8,442 Replacement Cost
(Future Value) $2,951 $6,413 $7,274 $7,274 $5,101 $6,413 $6,413 $6,413 Replacement Cost
(Present Value) $1,894 $4,116 $4,669 $4,669 $3,274 $4,116 $4,116 $4,116 Total Lifecycle Cost $4,845 $11,399 $12,813 $12,813 $9,118 $11,818 $11,479 $12,558 Incremental Cost - $6,554 $7,968 $7,968 $4,273 $6,973 $6,634 $7,713 16 Based on operational challenges experienced in the past, NEEA established rating test criteria to ensure newly installed HPWHs perform adequately, especially in colder climates. The NEEA rating requires products comply with ENERGY STAR and includes requirements regarding noise and prioritizing heat pump use over supplemental electric resistance heating.
17 https://neea.org/success-stories/heat-pump-water-heaters 18 As of 12/21/23: https://neea.org/img/documents/residential-unitary-HPWH-qualified-products-list.pdf 19 The recent DOE rulemaking references a lifetime of 14 years for gas storage water heaters and 14.8 years for electric storage water heaters. 15 years for each was used in this analysis for both types for simplification.

29.87 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 20 Methodology and Assumptions
California Energy Codes & Standards | A statewide utility program 2024-04-25 Table 10 presents similar costs to Table 9, except that the costs assume replacement of an existing 50-gallon electric storage water heater and does not include the 240 V electrical service cost.

Table 10. Water Heating Measure Cost Assumptions – Existing Electric Resistance Electric
Storage
Water
Heater
240V
Fed. Min.

HPWH
240V
Market
Std. NEEA
HPWH
240V
Market
Std. NEEA
HPWH +
DR
120V
Market
Std. NEEA
HPWH
240V Fed.

Min.

HPWH,
Exterior
Closet
240V Fed.

Min. HPWH,
Interior
Closet, Not
Ducted
240V Fed.

Min. HPWH,
Interior
Closet,
Ducted
First Cost $2,583 $6,413 $7,274 $7,274 $5,101 $6,413 $6,413 $7,492 Replacement Cost
(Future Value)
$2,583 $6,413 $7,274 $7,274 $5,101 $6,413 $6,413 $6,413 Replacement Cost
(Present Value)
$1,658 $4,116 $4,669 $4,669 $3,274 $4,116 $4,116 $4,116 Total Lifecycle Cost $4,241 $10,529 $11,943 $11,943 $8,375 $10,529 $10,529 $11,608 Incremental Cost - $6,288 $7,702 $7,702 $4,134 $6,288 $6,288 $7,367

29.88 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 21 Results
California Energy Codes & Standards | A statewide utility program 2024-04-25 3 Results
The primary objective of the evaluation is to identify cost-effective energy upgrade measures and packages for existing single family buildings, to support the design of local ordinances requiring upgrades, which may be triggered by different events, such as at the time of a significant remodel or at burnout of mechanical equipment. In this report, the 1992-2010 vintage is shown for the equipment measures because it is the most conservative case (lowest loads), while the pre-1978 vintage is shown for the envelope and duct measures because some of those measures only apply to the pre-1978 vintage. A full dataset of all results can be downloaded at https://localenergycodes.com/content/resources.

Results alongside policy options can also be explored using the Cost-effectiveness Explorer at https://explorer.localenergycodes.com/.

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3.1 Cost-Effectiveness Results
The extensive analysis for this type of report leads to an overwhelming number of scenarios including different base cases, house vintages, replacement options, and climate zones. To simplify the reporting, the Statewide Reach Codes Team has relied on graphical representation of select key cases indicating high level measure cost effectiveness from either an On-Bill perspective, an LSC perspective, both metrics, or neither. Figure 1 through Figure 13 present this reduced set of results of the LSC and On-Bill cost-effectiveness conclusions across the 16 climate zones. In the cases where there are multiple utilities serving a single climate zone, an asterisk “*” label is added to separately show the alternate utility cases. These graphs provide a general sense of the findings. A full dataset of all results can be downloaded at https://localenergycodes.com/content/resources. Results alongside policy options can also be explored using the Cost-effectiveness Explorer at https://explorer.localenergycodes.com/.

3.1.1 HPSH Measures
Figure 1 through Figure 5 show the cost-effectiveness of space heating equipment replacement measures for the 1992-2010 vintage including the following cases. The 1992-2010 vintage results are presented here as this is the most conservative scenario for HPSH measures. In general, where a HPSH measure is cost-effective for a new home it was also found to be cost-effective for older homes.
• Dual fuel heat pump with existing furnace as backup.
• Standard efficiency ducted central heat pump replacement. • High efficiency ducted central heat pump replacement. • Ducted mini-split heat pump replacement.
• Standard efficiency ducted central heat pump replacement with 3kW PV system.

Figure 1: DFHP with Existing Furnace Figure 2: Standard Efficiency HPSH

29.90 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 23 Results
California Energy Codes & Standards | A statewide utility program 2024-04-25 Figure 3: High Efficiency HPSH Figure 4: Ducted MSHP
Figure 5: HPSH + PV

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3.1.2 HPWH Measures
Figure 6 through Table 11 show the cost-effectiveness of water heater measures for the 1992-2010 vintage including the following cases. HPWH energy savings and LSC cost-effectiveness is not sensitive to home vintage but rather depends on the magnitude of hot water loads, which are typically driven by the number of occupants. On-Bill costeffectiveness does vary slightly by vintage due to the impact of the electrification tariff relative to the load profile of the existing home. The impact is largest for the HPWH + PV case where On-Bill cost-effectiveness improves for older homes or homes with overall higher energy use resulting in less exports to the grid for a fixed size PV system. • 240V federal minimum HPWH
• 240V market standard NEEA HPWH
• 120V market standard NEEA HPWH
• 240V federal minimum HPWH with 3kW PV
Figure 6: 240V Federal Minimum HPWH Figure 7: 240V Market Standard NEEA HPWH Figure 8: 120V Market Standard NEEA HPWH Figure 9: 240V Federal Minimum HPWH + PV

29.92 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 25 Results
California Energy Codes & Standards | A statewide utility program 2024-04-25 • Envelope and Duct Measures
Figure 10 through Figure 13 show the cost-effectiveness results of envelope and duct measures for the pre-1978 vintage including the following measures. The pre-1978 vintage is presented as representing the most favorable existing conditions for cost-effective upgrades. Newer homes with higher performing envelope may still benefit from these types of upgrade measures, but cost-effectiveness is reduced. Some measures, like R-13 wall insulation, aren’t applicable to newer homes which would have been constructed originally with insulated walls. • New R-6 ducts
• 10% duct leakage
• R-13 wall insulation
• R-49 attic insulation
Figure 10: R-6 Ducts Figure 11: 10% Duct Leakage
Figure 12: R-13 Wall Insulation Figure 13: R-49 Attic Insulation

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3.2 Climate Zone Case Studies
To better understand the details of the results, a few climate zones were selected to provide a more detailed presentation of cost-effectiveness results. Section 3.2.1 through 3.2.3 show the first-year incremental cost, first-year utility savings, and NPV for a variety of cases. Section 3.2.4 shows the sensitivity of the cost effectiveness results due to varying utility escalation rates, the impact of CARE rates, future equipment cost assumptions, and the need for electrical panel upgrades. The climate zones were selected to be representative of areas of significant reach code activity. Please refer to the Cost-Effectiveness Explorer (Statewide Reach Codes, 2023) or the source dataset for the full analysis.

3.2.1 HPSH Cost-Effectiveness
Cost-effectiveness of heat pump space heating measures for Climate Zones 12 and 16 is summarized in Table 11 and Table 12 below. In Climate Zone 12, HPSH measures are cost-effective based on LSC in all cases except the ductless MSHP cases and are cost-effective On-Bill with SMUD rates in all cases except the DFHP case with a new furnace and the ductless MSHP cases. These measures are cost-effective On-Bill with PGE for the DFHP with an existing furnace and ducted MSHP measures. Climate Zone 16 provides an example of HPSH cost-effectiveness in a cold climate where almost all HPSH measures are cost effective based on LSC but not cost-effective On-Bill.

Table 11. HPSH CZ 12 [1992-2010]
Measure
First
Incremental
Cost
2025 LSC
NPV

PGE SMUD
First-year
Utility
Savings
On-Bill
NPV
First-year
Utility
Savings
On-Bill
NPV
DFHP Existing Furnace $1,960 $7,093 ($19) $1,633 $247 $7,693 DFHP New Furnace $4,023 $3,915 ($34) ($3,134) $234 $2,979 HPSH (Std Efficiency) $1,172 $6,990 ($147) ($2,151) $246 $6,812 HPSH (High Efficiency) $4,149 $5,366 $13 ($3,368) $300 $3,160 Ducted MSHP $1,421 $9,136 $10 $378 $298 $6,951
Ductless MSHP (Std Efficiency) $13,336 ($9,175) $30 ($18,039) $276 ($12,428) Ductless MSHP (High Efficiency) $17,266 ($6,753) $409 ($15,853) $423 ($15,532) HPSH + PV $10,780 $5,289 $452 ($59) $885 $9,821
Table 12. HPSH CZ 16 [1992-2010]
Measure
First
Incremental
Cost
2025 LSC
NPV
PGE
First-year
Utility Savings On-Bill NPV
DFHP Existing Furnace $2,397 $7,289 ($116) ($1,891)
DFHP New Furnace $4,757 $2,457 ($133) ($6,322)
HPSH (Std Efficiency) $2,725 $11,142 ($480) ($8,532)
HPSH (High Efficiency) $5,701 $12,099 ($204) ($7,125)
Ducted MSHP $2,155 $16,554 ($221) ($2,853)
Ductless MSHP (Std Efficiency) $13,336 ($134) ($170) ($19,742) Ductless MSHP (High Efficiency) $17,266 $9,397 $539 ($10,031) HPSH + PV $12,333 $10,640 $316 ($1,949)

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3.2.2 HPWH Cost-Effectiveness
Cost-effectiveness of heat pump water heating measures for Climate Zones 12 and 16 is summarized in Table 13 and Table 14 below. This sensitivity study looks at a wider range of HPWH tank locations and whether or not the unit has ducting for supply and exhaust air. All the HPWH measures in Climate Zones 12 and 16 are cost effective based on LSC.

Table 13. HPWH CZ 12 [1992-2010]
Measure
First
Incremental
Cost
2025 LSC
NPV

PGE SMUD
First-Year
Utility
Savings
On-Bill
NPV
First-Year
Utility
Savings
On-Bill
NPV
240V Fed. Min. HPWH $4,332 $3,536 ($213) ($8,738) $191 $477 240V Market Std. NEEA
HPWH $5,193 $4,304 ($82) ($7,164) $230 ($56)
240V Market Std. NEEA
HPWH + DR $5,193 $5,536 ($21) ($5,773) $248 $362
120V Market Std. NEEA
HPWH $2,893 $9,730 ($2) ($1,651) $254 $4,203
240V Fed. Min. HPWH
(Exterior Closet) $4,751 $2,834 ($224) ($9,431) $186 ($78) 240V Fed. Min. HPWH
(Interior Closet) $4,413 $3,123 ($71) ($6,138) $188 ($235) 240V Fed. Min. HPWH
(Interior Closet, ducted) $5,492 $3,359 ($202) ($9,505) $205 ($231) 240V Fed. Min. HPWH + PV $13,940 $3,567 $577 ($2,300) $831 $3,486 Table 14. HPWH CZ 16 [1992-2010]
Measure
First
Incremental
Cost
2025 LSC
NPV
PGE
First-Year Utility
Savings On-Bill NPV
240V Fed. Min. HPWH $4,332 $4,186 ($250) ($9,307)
240V Market Std. NEEA HPWH $5,193 $4,088 ($160) ($8,652) 240V Market Std. NEEA HPWH + DR $5,193 $5,653 ($79) ($6,804 120V Market Std. NEEA HPWH $2,893 $10,646 ($13) ($1,602) 240V Fed. Min. HPWH (Exterior Closet) $4,751 $3,317 ($268) ($10,154) 240V Fed. Min. HPWH (Interior Closet) $4,413 $5,004 ($18) ($4,690) 240V Fed. Min. HPWH (Interior Closet,
ducted) $5,492 $4,857 ($202) ($9,174)
240V Fed. Min. HPWH + PV $13,940 $5,049 $620 ($1,043)

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3.2.3 Envelope & Duct Improvement Cost-Effectiveness
Cost-effectiveness of envelope and duct measures for Climate Zones 3, 10, and 12 is summarized in Table 15 through Table 17.

Table 15. Envelope and Duct Measures CZ 3 [Pre-1978]
Measure
First
Incremental
Cost
2025 LSC
NPV
PG&E
First-year Utility
Savings On-Bill NPV
R-6 Ducts $4,808 $2,851 $188 $463
R-8 Ducts $6,311 $1,747 $198 ($776)
10% Duct Sealing $2,590 $1,956 $104 $397
R-13 Wall Insulation $2,950 $3,476 $144 $1,221
R-38 Attic Insulation $6,762 ($1,567) $127 ($3,178)
R-49 Attic Insulation $7,446 ($1,768) $139 ($3,520)
R-30 Raised Floor Insulation $4,113 $9,008 $224 $2,975
Cool Roof (0.20 Ref) $893 ($2,419) ($18) ($1,811)
Table 16. Envelope and Duct Measures CZ 10 [Pre-1978]
Measure
First
Incremental
Cost
2025 LSC
NPV

SCE/SCG SDGE
First-year
Utility
Savings
On-Bill
NPV
Firstyear
Utility
Savings
On-Bill
NPV
R-6 Ducts $4,808 $7,463 $783 $13,168 $1,100 $22,155
R-8 Ducts $6,311 $6,326 $800 $12,076 $1,125 $21,268
10% Duct Sealing $2,590 $3,438 $370 $5,969 $518 $10,166 R-13 Wall Insulation $2,950 $1,795 $179 $1,476 $250 $3,494 R-38 Attic Insulation $6,762 $664 $416 $2,951 $582 $7,654 R-49 Attic Insulation $7,446 $796 $467 $3,435 $655 $8.756 R-30 Raised Floor Insulation $4,113 ($999) ($29) ($4,235) ($46) ($4,687) Cool Roof (0.20 Ref) $893 $428 $174 $2,647 $246 $4,656
Table 17. Envelope and Duct Measures CZ 12 [Pre-1978]
Measure
First
Incremental
Cost
2025 LSC
NPV

PG&E SMUD
First-year
Utility
Savings
On-Bill
NPV
Firstyear
Utility
Savings
On-Bill
NPV
R-6 Ducts $4,808 $11,609 $804 $14,727 $413 $5,816
R-8 Ducts $6,311 $10,722 $828 $13,849 $427 $4,711
10% Duct Sealing $2,590 $6,418 $397 $7,280 $222 $3,281
R-13 Wall Insulation $2,950 $5,774 $262 $4,054 $187 $2,342 R-38 Attic Insulation $6,762 $3,727 $499 $5,461 $261 $19 R-49 Attic Insulation $7,446 $4,092 $552 $6,063 $288 $33 R-30 Raised Floor Insulation $4,113 $5,245 $27 ($1,176) $156 $1,175 Cool Roof (0.20 Ref) $893 ($354) $154 $2,123 $44 ($386)

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3.2.4 Sensitivities
Table 18 shows the On-Bill NPV results of Climate Zone 12 with PG&E utility rates and the impacts of escalation rates, and CARE rates. The “Standard Results” in Table 18 assumes the escalation rates used in the analysis presented elsewhere in this report. Table 19 shows the impact of electrical panel upgrades. The “Standard Results” in Table 19 does not assume a panel upgrade is required.

Table 18. Sensitivity Analysis Results for On-Bill NPV Cost-Effectiveness in Climate Zone 12, PG&E Measure Vintage Standard
Results
2025 LSC
Escalation CARE
DFHP Existing Furnace 1992-2010 $1,063 $8,443 $1,884
DFHP New Furnace 1992-2010 ($6,770) $383 ($5,846)
HPSH (Std Efficiency) 1992-2010 ($2,151) $6,011 ($220)
HPSH (High Efficiency) 1992-2010 ($3,368) $4,987 ($2,721) Ducted MSHP 1992-2010 $378 $8,729 $1,057
Ductless MSHP (Std Efficiency) 1992-2010 ($18,039) ($10,732) ($17,623) Ductless MSHP (High Efficiency) 1992-2010 ($15,853) ($8,091) ($18,460) HPSH + PV 1992-2010 ($59) $8,822 ($1,255)
240V Fed. Min. HPWH 1992-2010 ($8,738) ($2,433) ($6,448) 240V Market Std. NEEA HPWH 1992-2010 ($7,164) ($694) ($5,918) 240V Market Std. NEEA HPWH + DR 1992-2010 ($5,773) $770 (5,014) 120V Market Std. NEEA HPWH 1992-2010 ($1,651) $4,930 (1,038) 240V Fed. Min. HPWH (Exterior Closet) 1992-2010 ($9,431) ($3,184) ($7,055) 240V Fed. Min. HPWH (Interior Closet) 1992-2010 ($6,138) ($1,000) ($5,098) 240V Fed. Min. HPWH (Interior Closet, ducted) 1992-2010 ($9,505) ($2,836) ($7,271) 240V Fed. Min. HPWH + PV 1992-2010 ($2,300) $4,952 ($4,858) R-6 Ducts Pre-1978 $14,727 $18,685 $8,592
R-8 Ducts Pre-1978 $13,849 $17,990 $7,532
10% Duct Sealing Pre-1978 $7,280 $9,752 $4,294
R-13 Wall Insulation Pre-1978 $4,054 $6,898 $2,196
R-38 Attic Insulation Pre-1978 $5,461 $8,126 $1,668
R-49 Attic Insulation Pre-1978 $6,063 $8,978 $1,864
R-30 Raised Floor Insulation Pre-1978 ($1,776) $2,468 ($1,602) Cool Roof (0.20 Ref) Pre-1978 $2,123 $1,848 $851
Table 19. Electric Panel Upgrade Sensitivity for CZ 12 [1992-2010] Measure Standard Results Electric Panel Upgrade
On-Bill NPV LSC NPV On-Bill NPV LSC NPV
HPSH (Std Efficiency) ($2,151) $6,990 ($4,931) $4,210
240V Fed. Min. HPWH ($8,738) $3,536 ($11,624) $756

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California Energy Codes & Standards | A statewide utility program 2024-04-25

3.3 Gas Pathways for Heat Pump Replacements
Many jurisdictions are exploring policy options to accelerate the decarbonization of existing homes. A recent Ninth Circuit Court ruling in California Rest. Ass'n v. City of Berkeley20 invalidated Berkeley’s ordinance banning the installation of gas infrastructure in new construction. The ruling stated that the ordinance effectively banned covered products and was preempted by the Energy Policy and Conservation Act (“EPCA”), 42 U.S.C. § 6297(c). Given the possible impacts of that ruling, the Reach Codes Team analyzed policy options targeting equipment replacements that allow for the installation of either electric or gas-fueled equipment. These packages include gas equipment combined with additional efficiency measures resulting in options that are reasonably energy or LSC cost equivalent, to the extent feasible.

For space heating, the heat pump path is a DFHP (existing furnace).. The gas pathway is a new air conditioner with the following list of efficiency upgrades:
• 400 cfm/ton system airflow (HERS verified).
• 0.35 W/cfm fan efficacy (HERS verified).
• Refrigerant charge verification (HERS verified).
• R-8 ducts, 5% leakage (HERS verified).
• R-49 (from R-30) attic insulation.
• Air sealing of the ceiling from 7 to 6.5 ACH50.

The two pathways are presented in Figure 14 comparing total LSC energy use relative to the existing home for the 1992-2010 vintage. In most climate zones, the DFHP (existing furnace) path results in higher energy savings, in the milder climates the air conditioner path saves marginally more energy. A reach code that establishes requirements when an air conditioner is replaced or installed new, could allow for either a heat pump to be installed or an air conditioner as long as the performance measures listed above are met. Note that in this analysis a DFHP (existing furnace) was used; however, a reach code could require a different heat pump measure for the heat pump path. This approach aligns with the CEC’s proposal for the 2025 Title 24 code cycle for heat pump alterations in single family homes (California Energy Commission, 2023).
20 California Rest. Ass'n v. City of Berkeley, 65 F.4th 1045 (9th Cir. 2023) amended by 89 F.4th 1094 (9th Cir. 2024).

29.98 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 31 Results
California Energy Codes & Standards | A statewide utility program 2024-04-25 Figure 14. Heat pump space heater path compared to the air conditioner path.

For water heating, the federal minimum HPWH case was used to develop the package. The HPWH was compared to a new gas storage water heater with a 50% solar thermal backup system.

The two pathways are presented in Figure 15 comparing total LSC energy use relative to the existing home for the 1992-2010 vintage. In all climate zones, the heat pump path results in higher energy savings than the gas path. A reach code that establishes requirements when a water heater is replaced could allow for either a HPWH to be installed or a gas water heater in combination with a solar thermal system that meets the solar fraction requirements listed above.

Figure 15. Heat pump water path compared to gas with solar thermal.

29.99 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 32 Recommendations and Discussion
California Energy Codes & Standards | A statewide utility program 2024-04-25 4 Recommendations and Discussion
This analysis evaluated the feasibility and cost-effectiveness of retrofit measures in California existing homes built before 2010. The Statewide Reach Codes Team used both On-Bill and LSC-based LCC approaches to evaluate costeffectiveness and quantify the energy cost savings associated with energy efficiency measures compared to the incremental costs associated with the measures.

Conclusions and Discussion:

1. Envelope measures. Improving envelope performance is very cost-effective in many older homes. In addition to reducing utility costs these measures provide many other benefits such as improving occupant comfort and satisfaction and increasing a home’s ability to maintain temperatures during extreme weather events and power outages. Below is a discussion of the results of specific measures. a. Adding attic insulation is cost effective based on both LSC and On-Bill in many climate zones in homes with no more than R-19 existing attic insulation levels. Increasing attic insulation from R-30 to R-49 was still found to be cost-effective based on at least one metric in the colder and hotter climates of Climate Zone 10 (SDG&E territory only) through 16.
b. Insulating existing uninsulated walls is very cost-effective based on both metrics everywhere except Climate Zones 6 and 7 (in Climate Zone 8 it’s only cost-effective based on LSC). c. Adding R-19 or R-30 floor insulation is cost-effective based on LSC in the older two vintages (Pre-1978 and 1978-1991) in all climate zones except Climate Zones 6-10. d. Replacing old single pane windows with new high-performance windows has a very high cost and is typically not done for energy savings alone. However, energy savings are substantial and justify costeffectiveness of this measure based on at least one metric in Climate Zones 4, 8 through 12 (PG&E territory only), and 13 through 16.
e. At time of roof replacement, a cool roof with an aged solar reflectance of 0.25 was found to be costeffective in Climate Zones 4, 6 through 12 (PG&E territory only), and 13 through 15. When the roof deck is replaced during a roof replacement, adding a radiant barrier is low cost and provides substantial cooling energy savings to be cost-effective in almost all climate zones and homes.

2. Duct measures: Many older homes have old, leaky duct systems that should be replaced when they reach the end of life, typically 20-30 years. In this case, installing new ducts was found to be cost-effective based on at least one metric (both in most cases) everywhere except mild Climate Zone 7 and Climate Zones 5 and 6 in the 1978-1991 vintage. If duct systems still have remaining life they should be sealed and tested to meet 10% leakage or lower; however, duct upgrades alone were only found to be cost-effective for newer homes in Climate Zones 10 (SDG&E territory only), 11, and 13 through 16. Duct upgrades may be able to be coupled with other measures to reduce the cost.

3. Heat pump space heating: HPSHs were found to be LSC cost-effective in many cases. The DFHP (existing furnace) was LSC cost-effective everywhere except Climate Zone 15. The HPSH was LSC cost-effective everywhere except Climate Zones 8 and 15.
a. Challenges to On-Bill cost-effectiveness include higher first costs and higher first-year utility costs due to higher electricity tariffs relative to gas tariffs. SMUD and CPAU are two exceptions where first year utility costs are lower for heat pumps than for gas equipment. Table 11 shows the impact of utility rates on cost-effectiveness of HPSH where the standard and high efficiency HPSH and the HPSH + PV measures are cost-effective under SMUD but not PG&E. Even with higher first year utility bills, there were some cases that still proved On-Bill cost-effective including the DFHP with an existing furnace in the central valley and northern coastal PG&E territories, the ducted MSHP in the central valley as well as Climate Zone 14 in SDG&E territory, and the HPSH + PV measure in CZ 3-5 (PGE), 7-11, and 12 (SMUD) – 15.
b. The ductless MSHPs, evaluated for homes with existing ductless systems, were only found to be costeffective based on either metric in Climate Zones 1 and 16. Ductless MSHPs have a high incremental cost because it is a more sophisticated system than the base model of a wall furnace with a window AC unit. However, the ductless MSHP would provide greater comfort benefits if properly installed to

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California Energy Codes & Standards | A statewide utility program 2024-04-25 directly condition all habitable spaces (as is required under the VCHP compliance credit as evaluated in this study) which may be an incentive for a homeowner to upgrade their system. c. Higher efficiency equipment lowered utility costs in all cases and improved cost-effectiveness in many cases, particularly with a ducted MSHP.

4. Heat pump water heating: All the HPWH measures were LSC cost-effective in all climate zones. Most measures were not On-Bill cost-effective with the exception of the HPWH + PV which was cost-effective OnBill in CPAU, SMUD, and SDG&E territories in addition to Climate Zones 11, 13, 14, and 15. The HPWH measures share many of the same challenges as the HPSH measures to achieving cost-effectiveness including high first costs and utility rates and assumptions. Table 13 shows the impact of utility rates on costeffectiveness where some HPWH measures are cost-effective under SMUD utility rates but are not costeffective anywhere under PG&E rates in Climate Zone 12. a. Various HPWH locations were also explored, however there are some factors outside of costeffectiveness that should also be considered. i. HPWHs in the conditioned space can provide benefits such as free cooling during the summer, reduced tank losses, and shorter pipe lengths, and in some cases show improved cost-effectiveness over garage located HPWHs. However, there are various design considerations such as noise, comfort concerns, and condensate removal. Ducting the inlet and exhaust air resolves comfort concerns but adds costs and complexity. Split heat pump water heaters address these concerns, but currently there are limited products on the market and there is a cost premium relative to the packaged products. ii. Since HPWHs extract heat from the air and transfer it to water in the storage tank, they must have adequate ventilation to operate properly. Otherwise, the space cools down over time, impacting the HPWH operating efficiency. This is not a problem with garage installations but needs to be considered for water heaters located in interior or exterior closets. For the 2025 Title 24 code the CEC is proposing that all HPWH installations meet mandatory ventilation requirements (California Energy Commission, 2023).

5. The contractor surveys revealed overall higher heat pump costs than what has been found in previous analyses. This could be due to incentive availability raising demand for heat pumps and thereby increasing the price. This price increase may be temporary and may come down once the market stabilizes. There are also new initiatives to obtain current costs including the TECH Clean California program21 that publishes heat pump data and costs; however, at the time of this analysis, the TECH data did not contain incremental costs because it only had the heat pump costs but not the gas base case costs.

6. Table 18 shows how CARE rates and escalation rate assumptions will impact cost-effectiveness. a. Applying CARE rates in the IOU territories has the overall impact to increase utility cost savings for an all-electric building compared to a code compliant mixed fuel building, improving On-Bill costeffectiveness. This is due to the CARE discount on electricity being higher than that on gas. The reverse occurs with efficiency measures where lower utility rates reduce savings and subsequently reduce cost-effectiveness.
b. If gas tariffs are assumed to increase substantially over time, in-line with the escalation assumption from the 2025 LSC development, cost-effectiveness substantially improves for the heat pump measures over the 30-year analysis period and many cases become cost-effective that were not found to be cost-effective under the CPUC / 2022 TDV escalation scenario. There is much uncertainty surrounding future tariff structures as well as escalation values. While it’s clear that gas rates will increase, how much and how quickly is not known. Future electricity tariff structures are expected to evolve over time, and the CPUC has an active proceeding to adopt an income-graduated fixed charge that benefits low-income customers and supports electrification measures for all customers.22 The CPUC will decide in mid-2024 and the new rates are expected to be in place later that year or in 2025. 21 TECH Public Reporting Home Page (techcleanca.com)
22 https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/electric-costs/demand-response-dr/demandflexibility-rulemaking

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Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 34 Recommendations and Discussion
California Energy Codes & Standards | A statewide utility program 2024-04-25 While the anticipated impact of this rate change is lower volumetric electricity rates, the rate design is not finalized. While lower volumetric electricity rates provide many benefits, it also will make building efficiency measures harder to justify as cost-effective due to lower utility bill cost savings.

7. Under NBT, utility cost savings for PV are substantially less than what they were under prior net energy metering rules (NEM 2.0); however, savings are sufficient to be On-Bill cost-effective in all climate zones except Climate Zones 1 through 3 and 5 through 6.
a. Combining a heat pump with PV allows the additional electricity required by the heat pump to be offset by the PV system while also increasing on-site utilization of PV generation rather than exporting the electricity back to the grid at a low rate.
b. While not evaluated in this study, coupling PV with battery systems can be very advantageous under NBT increasing utility cost savings because of improved on-site utilization of PV generation and fewer exports to the grid.

Recommendations:

1. There are various approaches for jurisdictions who are interested in reach codes for existing buildings. Some potential approaches are listed below along with key considerations. a. Prescriptive measures: Non-preempted measures that are found to be cost-effective may be prescriptively required in a reach code. One example of this type or ordinance is a cool roof requirement at time of roof replacement. Another example is requiring specific cost-effective measures for larger remodels, such as high-performance windows when new windows are installed or duct sealing and testing where ducts are in unconditioned space. b. Replacement equipment: This flavor of reach code sets certain requirements at time of equipment replacement. This study evaluated space heating and water heating equipment. Where a heat pump measure was found to be cost-effective based on either LSC or On-Bill, this may serve as the basis of a reach code given the following considerations.
i. Where reach codes reduce energy usage and are not just fuel switching, cost-effectiveness calculations are required and must be based on equipment that does not exceed the federal minimum efficiency requirements.
ii. Where reach codes are established using cost-effectiveness based on LSC, utility bill impacts and the owner’s first cost should also be reviewed and considered. iii. A gas path should also be prescriptively allowed to safely satisfy federal preemption requirements considering the CRA v. Berkeley case.23 Additional requirements may apply to the gas path, as described in Section 3.3, as long as the paths are reasonably energy or cost equivalent.
c. “Flexible Path”, minimum energy savings target: This flexible approach establishes a target for required energy savings based on a measure or a set of measures that were found to be cost-effective based on either LSC or On-Bill. A points menu compares various potential upgrades ranging from efficiency, PV, and fuel substitution measures, based on site or source energy savings. The applicant must select upgrades that individually or in combination meet the minimum energy savings target. The measures used to set the target should be non-preempted measures.

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California Energy Codes & Standards | A statewide utility program 2024-04-25 b. Requirement for HERS verified refrigerant charge verification for heat pumps in all climate zones (Table 150.1-A24).

5. Education and training can play a critical role in ensuring that heat pumps are installed, commissioned, and controlled properly to mitigate grid impacts and maximize occupant satisfaction. Below are select recommended strategies.
a. The Quality Residential HVAC Services Program25 is an incentive program to train California contractors in providing quality installation and maintenance while advancing energy-efficient technologies in the residential HVAC industry. Jurisdictions can market this to local contractors to increase the penetration of contractors skilled in heat pump design and installation. b. Educate residents and contractors of available incentives, tax credits, and financing opportunities. c. Educate contractors on code requirements. Energy Code Ace provides free tools, trainings, and resource to help Californians comply with the energy code. Contractors can access interactive compliance forms, fact sheets, and live and recorded trainings, among other things, on the website:
https://energycodeace.com/. Jurisdictions can reach out to Energy Code Ace directly to discuss offerings.

6. Health and safety
a. Combustion Appliance Safety and Indoor Air Quality: Implementation of some of the recommended measures will affect the pressure balance of the home which can subsequently impact the safe operation of existing combustion appliances as well as indoor air quality. Buildings with older gas appliances can present serious health and safety problems which may not be addressed in a remodel if the appliances are not being replaced. It is recommended that the building department require inspection and testing of all combustion appliances located within the pressure boundary of the building after completion of retrofit work that involves air sealing or insulation measures. b. Jurisdictions may consider requiring mechanical ventilation in homes where air sealing has been conducted. In older buildings, outdoor air is typically introduced through leaks in the building envelope.

After air sealing a building, it may be necessary to forcefully bring in fresh outdoor air using supply and/or exhaust fans to minimize potential issues associated with indoor air quality. 24 This requirement does not show up in the Express Terms for alterations in Section 150.2(b)1F, but the Statewide Reach Codes Team expects that it will be added to the next release of the proposed code language in the 45-day language as it aligns with the proposal made by the Codes and Standards Enhancement Team (Statewide CASE Team, 2023). 25 https://qualityhvac.frontierenergy.com/

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California Energy Codes & Standards | A statewide utility program 2024-04-25 5 References
California Energy Commission. (2017). Rooftop Solar PV System. Measure number: 2019-Res-PV-D Prepared by Energy and Environmental Economics, Inc. Retrieved from https://efiling.energy.ca.gov/getdocument.aspx?tn=221366 California Energy Commission. (2021b). Final Express Terms for the Proposed Revisions to the 2022 Energy Code Reference Appendices. Retrieved from https://efiling.energy.ca.gov/Lists/DocketLog.aspx?docketnumber=21- BSTD-01
California Energy Commission. (2022b). 2022 Reference Appendices for the 202 Building Energy Efficiency Standards.

CEC-400-2022-010-AP. Retrieved from https://www.energy.ca.gov/sites/default/files/2022-08/CEC-400- 2022-010-AP.pdf
California Energy Commission. (2022c, Feb). 2022 Single-Family Residential Alternative Calculation Method Reference Manual. CEC-400-2022-008-CMF-REV. Retrieved from https://www.energy.ca.gov/publications/2022/2022- single-family-residential-alternative-calculation-method-reference-manual California Energy Commission. (2023). 2025 Energy code Hourly Factors. Retrieved from https://www.energy.ca.gov/files/2025-energy-code-hourly-factors California Energy Commission. (2023). Draft 2025 Energy Code Express Terms. Retrieved from https://efiling.energy.ca.gov/GetDocument.aspx?tn=252915&DocumentContentId=88051 California Public Utilities Commission. (2021a). Utility Costs and Affordability of the Grid of the Future: An Evaluation of Electric Costs, Rates, and Equity Issues Pursuant to P.U. Code Section 913.1. Retrieved from https://www.cpuc.ca.gov/-/media/cpuc-website/divisions/office-of-governmental-affairsdivision/reports/2021/senate-bill-695-report-2021-and-en-banc-whitepaper_final_04302021.pdf California Public Utilities Commission. (2021b). Database for Energy-Efficient resources (DEER2021 Update). Retrieved April 13, 2021, from http://www.deeresources.com/index.php/deer-versions/deer2021 Department of Energy. (2022). Preliminary Analysis Technical Support Document: Energy Efficiency Program for Consumer Products and Commercial and Industrial Equipment. Retrieved from https://www.regulations.gov/document/EERE-2017-BT-STD-0019-0018 Department of Energy. (2023). Technical Support Document: Energy Efficiency Program for Consumer Products and Commercial and Industrial Equipment: Room Air Conditioners. Retrieved from https://www.regulations.gov/document/EERE-2014-BT-STD-0059-0053 E-CFR. (2020). https://www.ecfr.gov/cgibin/retrieveECFR?gp=&SID=8de751f141aaa1c1c9833b36156faf67&mc=true&n=pt10.3.431&r=PART&ty=HTM L#se10.3.431_197. Retrieved from Electronic Code of Federal Regulations: https://www.ecfr.gov/cgibin/retrieveECFR?gp=&SID=8de751f141aaa1c1c9833b36156faf67&mc=true&n=pt10.3.431&r=PART&ty=HTM L#se10.3.431_197
Statewide CASE Team. (2023). Residential HVAC Performance. Codes and Standards Enhancement (CASE) Initiative 2025 California Energy Code. Prepared by Frontier Energy. Retrieved from https://title24stakeholders.com/wp-content/uploads/2023/11/Revised_2025_T24_Final-CASE-Report-RESHVAC-Performance.pdf Statewide Reach Codes. (2023). Cost Effectiveness Explorer. Retrieved from Cost Effectiveness Explorer:
https://explorer.localenergycodes.com/
Statewide Reach Codes Team. (2021). 2019 Cost-Effectiveness Study: Existing Single Family Residential Buidling Upgrades. Retrieved from https://localenergycodes.com/content/resources

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California Energy Codes & Standards | A statewide utility program 2024-04-25 6 Appendices

6.1 Map of California Climate Zones
Climate zone geographical boundaries are depicted in Figure 16. The map in Figure 16 along with a zip-code search directory is available at: https://ww2.energy.ca.gov/maps/renewable/building_climate_zones.html Figure 16. Map of California climate zones.

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6.2 Utility Rate Schedules
The Reach Codes Team used the CA IOU and POU rate tariffs detailed below to determine the On-Bill savings for each package. The California Climate Credit was applied for both electricity and natural gas service for the IOUs using the 2023 credits shows below.26 The credits were applied to reduce the total calculated annual bill, including any fixed fees or minimum bill amounts.

Electricity rates reflect the most recently approved tariffs. Monthly gas rates were estimated based on recent gas rates (November 2023) and a curve to reflect how natural gas prices fluctuate with seasonal supply and demand. The seasonal curve was estimated from monthly residential tariffs between 2014 and 2023 (between 2017 and 2023 for CPAU). 12-month curves were created from monthly gas rates for each of the ten years (Seven years for CPAU).

These annual curves were then averaged to arrive at an average normalized annual curve. This was conducted separately for baseline and excess energy rates. Costs used in this analysis were then derived by establishing the most recent baseline and excess rate from the latest tariff as a reference point (November 2023), and then using the normalized curve to estimate the cost for the remaining months relative to the reference point rate. 26 https://www.cpuc.ca.gov/industries-and-topics/natural-gas/greenhouse-gas-cap-and-trade-program/californiaclimate-credit

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California Energy Codes & Standards | A statewide utility program 2024-04-25

6.2.1 Pacific Gas & Electric
The following pages provide details on the PG&E electricity and natural gas tariffs applied in this study. Table 20 describes the baseline territories that were assumed for each climate zone. A net surplus compensation rate of $0.07051/ kWh was applied to any net annual electricity generation based on a one-year average of the rates between December 2022 and November 2023.

Table 20. PG&E Baseline Territory by Climate Zone
Climate
Zone
Baseline
Territory
CZ01 V
CZ02 X
CZ03 T
CZ04 X
CZ05 T
CZ11 R
CZ12 S
CZ13 R
CZ16 Y
The PG&E monthly gas rate in $/therm was applied on a monthly basis according to the rates shown in Table 21.

These rates are based on applying a normalization curve to the November 2023 tariff based on ten years of historical gas data. Corresponding CARE rates reflect the 20 percent discount per the GL-1 tariff.

Table 21. PG&E Monthly Gas Rate ($/therm)
Month Total Charge
Baseline Excess
January $2.05 $2.43
February $2.08 $2.46
March $1.92 $2.31
April $1.80 $2.20
May $1.77 $2.18
June $1.78 $2.18
July $1.80 $2.20
August $1.85 $2.26
September $1.92 $2.33
October $1.99 $2.40
November $2.06 $2.46
December $2.05 $2.44

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California Energy Codes & Standards 29.108 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 41 Appendices
California Energy Codes & Standards 29.109 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 42 Appendices
California Energy Codes & Standards 29.110 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 43 Appendices
California Energy Codes & Standards 29.111 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 44 Appendices
California Energy Codes & Standards 29.112 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 45 Appendices
California Energy Codes & Standards 29.113 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 46 Appendices
California Energy Codes & Standards 29.114 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 47 Appendices
California Energy Codes & Standards | A statewide utility program 2024-04-25

6.2.2 Southern California Edison
The following pages provide details on the SCE electricity tariffs applied in this study. Table 22 describes the baseline territories that were assumed for each climate zone. A net surplus compensation rate of $ 0.06030/ kWh was applied to any net annual electricity generation based on a one-year average of the rates between December 2022 and November 2023
Table 22: SCE Baseline Territory by Climate Zone
Climate
Zone
Baseline
Territory
CZ06 6
CZ08 8
CZ09 9
CZ10 10
CZ14 14
CZ15 15

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California Energy Codes & Standards 29.116 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 49 Appendices
California Energy Codes & Standards 29.117 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 50 Appendices
California Energy Codes & Standards 29.118 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 51 Appendices
California Energy Codes & Standards | A statewide utility program 2024-04-25

6.2.3 Southern California Gas
Following are the SoCalGas natural gas tariffs applied in this study. Table 23 describes the baseline territories that were assumed for each climate zone.

Table 23. SoCalGas Baseline Territory by Climate Zone
Climate
Zone
Baseline
Territory
CZ05 2
CZ06 1
CZ08 1
CZ09 1
CZ10 1
CZ14 2
CZ15 1
The SoCalGas monthly gas rate in $/therm was applied on a monthly basis according to the rates shown in Table 24.

These rates are based on applying a normalization curve to the November 2023 tariff based on ten years of historical gas data. Long-term historical natural gas rate data was only available for SoCalGas’ procurement charges.27 The baseline and excess transmission charges were found to be consistent over the course of a year and applied for the entire year based on 2023 rates. CARE rates reflect the 20 percent discount per the GR tariff.

Table 24. SoCalGas Monthly Gas Rate ($/therm)
Month Procurement
Charge
Transportation Charge Total Charge
Baseline Excess Baseline Excess
January $0.72 $0.86 $1.31 $1.92 $2.36
February $0.50 $0.86 $1.31 $1.57 $2.02
March $0.44 $0.86 $1.31 $1.48 $1.93
April $0.39 $0.86 $1.31 $1.39 $1.84
May $0.41 $0.86 $1.31 $1.43 $1.87
June $0.46 $0.86 $1.31 $1.49 $1.93
July $0.47 $0.86 $1.31 $1.51 $1.96
August $0.51 $0.86 $1.31 $1.58 $2.03
September $0.46 $0.86 $1.31 $1.52 $1.96
October $0.45 $0.86 $1.31 $1.48 $1.92
November $0.48 $0.86 $1.31 $1.54 $1.99
December $0.57 $0.86 $1.31 $1.63 $2.08
27 The SoCalGas procurement and transmission charges were obtained from the following site:
https://www.socalgas.com/for-your-business/energy-market-services/gas-prices RES2023.xlsx (live.com)

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6.2.4 San Diego Gas & Electric
Following are the SDG&E electricity and natural gas tariffs applied in this study. Table 25 describes the baseline territories that were assumed for each climate zone. A net surplus compensation rate of $0.04542/ kWh was applied to any net annual electricity generation based on a one-year average of the rates between December 2022 and November 2023.

Table 25. SDG&E Baseline Territory by Climate Zone
Climate
Zone
Baseline
Territory
CZ07 Coastal
CZ10 Inland
CZ14 Mountain
The SDG&E monthly gas rate in $/therm was applied on a monthly basis according to the rates shown in Table

26. These rates are based on applying a normalization curve to the November 2023 tariff based on ten years of historical gas data. CARE rates reflect the 20 percent discount per the G-CARE tariff.

Table 26. SDG&E Monthly Gas Rate ($/therm)
Month Total Charge
Baseline Excess
January $2.34 $2.63
February $2.28 $2.57
March $2.21 $2.51
April $2.14 $2.45
May $2.18 $2.48
June $2.23 $2.55
July $2.26 $2.57
August $2.32 $2.62
September $2.26 $2.59
October $2.21 $2.55
November $2.24 $2.57
December $2.38 $2.70

29.121
Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 54 Appendices
California Energy Codes & Standards 29.122 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 55 Appendices
California Energy Codes & Standards 29.123 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 56 Appendices
California Energy Codes & Standards 29.124 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 57 Appendices
California Energy Codes & Standards 29.125 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 58 Appendices
California Energy Codes & Standards 29.126 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 59 Appendices
California Energy Codes & Standards 29.127 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 60 Appendices
California Energy Codes & Standards 29.128 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 61 Appendices
California Energy Codes & Standards 29.129 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 62 Appendices
California Energy Codes & Standards 29.130 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 63 Appendices
California Energy Codes & Standards | A statewide utility program 2024-04-25

6.2.5 City of Palo Alto Utilities
Following are the CPAU electricity and natural gas tariffs applied in this study. The CPAU monthly gas rate in $/therm was applied on a monthly basis according to the rates shown in Table 27. These rates are based on applying a normalization curve to the October 2023 tariff based on seven years of historical gas data. The monthly service charge applied was $14.01 per month per the November 2023 G-1 tariff.

Table 27. CPAU Monthly Gas Rate ($/therm)
Month G1 Volumetric
Total Baseline
G1 Volumetric
Total Excess
January $1.83532 $3.35639
February $1.38055 $2.59947
March $1.32506 $2.47695
April $1.29680 $2.44038
May $1.29511 $2.43804
June $1.32034 $2.45406
July $1.35688 $2.61519
August $1.40696 $2.67944
September $1.42130 $2.70301
October $1.42310 $2.48300
November $1.46286 $2.45547
December $1.62415 $2.62128

29.131
Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 64 Appendices
California Energy Codes & Standards 29.132 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 65 Appendices
California Energy Codes & Standards | A statewide utility program 2024-04-25

6.2.6 Sacramento Municipal Utilities District (Electric Only) Following are the SMUD electricity tariffs applied in this study. The rates effective January 2023 were used.

29.133
Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 66 Appendices
California Energy Codes & Standards 29.134 | A statewide utility program 2024-04-25 Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 67 Appendices
California Energy Codes & Standards | A statewide utility program 2024-04-25

6.2.7 Fuel Escalation Assumptions
The average annual escalation rates in Table 28 were used in this study. These are based on assumptions from the CPUC 2021 En Banc hearings on utility costs through 2030 (California Public Utilities Commission, 2021a). Escalation rates through the remainder of the 30-year evaluation period are based on the escalation rate assumptions within the 2022 TDV factors. No data was available to estimate electricity escalation rates for CPAU and SMUD, therefore electricity escalation rates for PG&E and statewide natural gas escalation rates were applied. Table 29 presents the average annual escalation rates used in the utility rate escalation sensitivity analysis shown in Section 3.2.4. Rates were applied for the same 30-year period and are based on the escalation rate assumptions within the 2025 LSC factors from 2027 through 2053.28 These rates were developed for electricity use statewide (not utility-specific) and assume steep increases in gas rates in the latter half of the analysis period. Data was not available for the years 2024, 2025, and 2026 and so the CPUC En Banc assumptions were applied for those years using the average rate across the three IOUs for statewide electricity escalation.

Table 28: Real Utility Rate Escalation Rate Assumptions, CPUC En Banc and 2022 TDV Basis
28https://www.energy.ca.gov/files/2025-energy-code-hourly-factors. Actual escalation factors were provided by consultants E3.

Statewide Natural
Gas Residential
Average Rate
(%/year, real)
Electric Residential Average Rate
(%/year, real)

PG&E SCE SDG&E
2024 4.6% 1.8% 1.6% 2.8%
2025 4.6% 1.8% 1.6% 2.8%
2026 4.6% 1.8% 1.6% 2.8%
2027 4.6% 1.8% 1.6% 2.8%
2028 4.6% 1.8% 1.6% 2.8%
2029 4.6% 1.8% 1.6% 2.8%
2030 4.6% 1.8% 1.6% 2.8%
2031 2.0% 0.6% 0.6% 0.6%
2032 2.4% 0.6% 0.6% 0.6%
2033 2.1% 0.6% 0.6% 0.6%
2034 1.9% 0.6% 0.6% 0.6%
2035 1.9% 0.6% 0.6% 0.6%
2036 1.8% 0.6% 0.6% 0.6%
2037 1.7% 0.6% 0.6% 0.6%
2038 1.6% 0.6% 0.6% 0.6%
2039 2.1% 0.6% 0.6% 0.6%
2040 1.6% 0.6% 0.6% 0.6%
2041 2.2% 0.6% 0.6% 0.6%
2042 2.2% 0.6% 0.6% 0.6%
2043 2.3% 0.6% 0.6% 0.6%
2044 2.4% 0.6% 0.6% 0.6%
2045 2.5% 0.6% 0.6% 0.6%
2046 1.5% 0.6% 0.6% 0.6%
2047 1.3% 0.6% 0.6% 0.6%
2048 1.6% 0.6% 0.6% 0.6%
2049 1.3% 0.6% 0.6% 0.6%
2050 1.5% 0.6% 0.6% 0.6%
2051 1.8% 0.6% 0.6% 0.6%
2052 1.8% 0.6% 0.6% 0.6%
2053 1.8% 0.6% 0.6% 0.6%

29.135
Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 68 Appendices
California Energy Codes & Standards | A statewide utility program 2024-04-25 Table 29: Real Utility Rate Escalation Rate Assumptions, 2025 LSC Basis Year
Statewide Natural
Gas Residential
Average Rate
(%/year, real)
Statewide
Electricity
Residential
Average Rate
(%/year, real)
2024 4.6% 2.1%
2025 4.6% 2.1%
2026 4.6% 2.1%
2027 4.2% 0.6%
2028 3.2% 1.9%
2029 3.6% 1.6%
2030 6.6% 1.3%
2031 6.7% 1.0%
2032 7.7% 1.2%
2033 8.2% 1.1%
2034 8.2% 1.1%
2035 8.2% 0.9%
2036 8.2% 1.1%
2037 8.2% 1.1%
2038 8.2% 1.0%
2039 8.2% 1.1%
2040 8.2% 1.1%
2041 8.2% 1.1%
2042 8.2% 1.1%
2043 8.2% 1.1%
2044 8.2% 1.1%
2045 8.2% 1.1%
2046 8.2% 1.1%
2047 3.1% 1.1%
2048 -0.5% 1.1%
2049 -0.6% 1.1%
2050 -0.5% 1.1%
2051 -0.6% 1.1%
2052 -0.6% 1.1%
2053 -0.6% 1.1%

29.136
Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 69 Appendices
California Energy Codes & Standards | A statewide utility program 2024-04-25 Get In Touch
The adoption of reach codes can differentiate jurisdictions as efficiency leaders and help accelerate the adoption of new equipment, technologies, code compliance, and energy savings strategies.

As part of the Statewide Codes & Standards Program, the Reach Codes Subprogram is a resource available to any local jurisdiction located throughout the state of California.

Our experts develop robust toolkits as well as provide specific technical assistance to local jurisdictions (cities and counties) considering adopting energy reach codes. These include Cost-effectiveness research and analysis, model ordinance language and other code development and implementation tools, and specific technical assistance throughout the code adoption process.

If you are interested in finding out more about local energy reach codes, the Reach Codes Team stands ready to assist jurisdictions at any stage of a reach code project.

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29.137
Cost-Effectiveness Analysis: Existing Single Family Building Upgrades 70 Appendices
California Energy Codes & Standards | A statewide utility program 2024-04-25

29.138
Overview of Planning Commissioner Comments and staff responses:

Planning
Commissioner
Comments
City Staff Response
Include a sunset
clause so that by
2030, this policy
would no longer be
effective.
 A reduced timeframe could impact CAP 2030 goals/targets  Since the reach code requires cost-effectiveness relative to the current version of the Energy Code, the reach code will need to be evaluated and updated every 3 years with the Energy Code cycles.
 It should be noted that the 2022 Energy Code and the 2025 Energy Code do not contain significant differences for additions and alterations, and it is very likely that no changes will be needed between this proposed reach code, and the option that would be brough back next year in reference to the 2025 Energy Code. The next time after that that the reach code will be required to be reviewed is in 2028, in preparation for the adoption of the 2028 Energy Code on Jan 1, 2029.

A voluntary policy
could be better than
a mandatory policy.
 While this is a mandatory policy, its designed to provide flexibility to allow choice in improvement that results in increased building quality at the time of major renovation, not just related to sustainability, but related to occupant comfort, health, and quality of living. Large renovation projects will happen with or without this reach code, so this is a way of ensuring applicants are thinking about sustainable and energy efficient renovations to be made at the time where it is most convenient and most costeffective.

Delay implementation
to Jan 1, 2026, to
align with new
Energy Code.
 This is an option, but most of the changes to the Energy Code are for new construction requirements, not related to additions and alterations, so the delay is unclear to have a benefit for applicants in the community.
 A delay would also the reduce the efficacy of the policy The policy could
increase cost of
home ownership
 An analysis of cost-effectiveness was completed as required by the state and is an attachment to the Agenda Report.
 A variety of low-cost compliance options are available along with the additional potential to qualify for rebates and other incentives.

29.139
Affordability –
Consider a cost
burden lower than
20%. A range of
percentages were
recommended
(mostly 5-10%)
 While voluntary projects often include cosmetic changes, this reach code requires that building quality, comfort, and health are prioritized alongside aesthetic improvements, with only a marginal increase of 5% to the project valuation (an even smaller fraction of construction costs).
 There are multiple cost-effective pathways offered, which result in overall savings.
 This reach code does not change the fact that the permits intended to be captured are the primary driver for increasing the home's property value through the voluntary addition or alteration projects.
 While the Cost Burden Threshold for project valuation is set at 20%, permit data analysis shows that compliance costs, based on current construction costs, generally range from an estimated 3% to a maximum of 11.5% for the expected typical cost of compliance of $6,600. Actual costs could be lower or higher, depending on the applicant’s chosen approach to compliance.

Project valuation, which is a formula to determine the building permit fee, is not the same as (and is much lower than) the actual construction cost (which can range from $500 to $1,000 per square foot). Thus, comparing the increased costs to project valuation rather than actual costs results in the need to use a much higher percentage threshold, since the denominator in the equation (in this case, project valuation) is much lower.

Increase square
footage threshold
from 350 and greater
to a larger number
 Staff analyzed a variety of thresholds. In reviewing permit data for median project valuations, minimum project valuations, and project scope to determine the threshold of 350 sf. For reference, a threshold of 500 sf would reduce the impact of the policy by around 15 permits per year. In reviewing project data, there was little to no difference in project valuation between 350 sf and those that were 500 sf so 350 sf is a better trigger for policy effectiveness.
 350 sf is also the threshold used for the City’s Green Building Program so there is alignment between these two policies that both support CAP 2030 building and energy goals.

Consider a
graduated point
requirement
based on project
valuation
 Square footage and project valuation were both options for trigger selection, however, square footage is a more reliable metric than project valuation. This is because it doesn't require adjustment over time. While project valuation may change, square footage is a more stable metric and shows a strong tie to projects of the correct scope.

29.140
 Another advantage of using a square footage metric is that cost is still taken into consideration in this policy with the cost-burden exception. This exception is meant to reduce burden due to extenuating situations for the existing building, resulting in higher than expected costs of compliance. By exempting projects in this way, it considers the proportional cost of compliance with the project valuation. This is preferable to an exception which has a cut-off below a certain project valuation, as this does not take into account the cost of compliance. The two factors are crucial for capturing well-intention opportunities for building improvements.

Consider Exempting
ADUs
 ADUs that qualify for state exemptions will be exempt, but many ADUs do not qualify for state exemption, so staff recommends only exempting qualifying ADUs to help ensure greater reach of the proposed policies.

Burden to City staff
due to additional
review time
 Chief Building Official John Gervasoni believes the added plan time review will be minimal. There will be some up-front training required, as there is with any change.

Concerns that
rebates and
incentives are not
always easy to obtain
 Currently, there are links on the website that direct applicants to resources. City Staff are currently working on developing a factsheet to improve the applicant experience.

Energy/Grid
concerns
 This reach code does not mandate electrification.
 An exception is included for electric readiness measures that trigger a service upgrade.

Address 120V water
heating technology
as an option for
electric readiness.
 Staff added language to the ordinance in response to this comment.

Additional Comments from Commissioner McKelvey

29.141
Suggestion Action Taken Staff Response
Reduce the Cost
Burden to 5%
Considered, no
modification
made
When permit data is used to compare the cost
burden in terms of construction costs rather than
permit valuation, the maximum cost of compliance
on a construction cost basis is about 11% using a
conservative estimate of $650 per square foot of
construction under current building conditions.

Depending on the type of project, permit valuation
uses $110 to $220, far below actual construction
cost. Comparing the increased costs to project
valuation rather than actual costs results in the
need to use a much higher percentage threshold,
since the denominator in the equation (in this case,
project valuation) is much lower.

Reduce language in
(2) “Granting of
Exemption” Section
Considered, no
modification
made
Although this suggestion simplifies the language, it
removes clarity about what should be expected to
be enforced. The intention of this exception is not
to remove all obligation, just the cost burdened
portion, where applicable.

Add language in (4)
“Appeal” Section
Modified
ordinance
Included “… with the Board of Building and Fire
Appeals” in the ordinance.

Pre-compliance
Exception
Clarification
Modified
ordinance
Included “… and appropriate credit shall be
included in the applicable compliance calculations.”
Historic Building
Exception
Modified
ordinance
Included the modification from “as determined by
the chief building official” to “as determined by the
Planning Director or designee.”
Points Value Change
in the Measure Menu
No modification
made
Points values cannot be modified by City Staff as
these are modeled values based on site energy
savings and tied to the cost effectiveness results.

Water Heating
Package
amendments
Modified
ordinance
Redundant language removed.

Air Sealing Measure
amendments to
remove option (b)
Considered, no
modification
made
Keeping (b) allows comparison of the applicant’s
building to a reference ACH50 value, even if the
applicant does not choose to comply via option (b),
which helps with education. Removing (b) reduces
compliance options.

29.142
Energy Efficient
Renovations Ordinance
1st Reading
City Council Meeting
November 19, 2024

29.143
1 Introduction + Background
2 Proposed Policy Requirements
3 Proposed Policy Exemptions
Agenda
4 Resources
5 Recommendation

29.144
Summer
2020
Prohibition of
Gas in New
Construction
Ordinance
Spring 2022
4 Community
Conversations
on Existing
Building
Decarbonization
2022
Grant to
decarbonize
existing
low income
homes
Fall
2022
Climate
Action
Plan
2030
adopted
Summer
2023
Prohibition
of Gas in
New
Construction
Ordinance
Suspended
Fall 2023
New
Construction Energy
Reach
Code
Adopted
Winter
2024
Energy
Efficient
Renovations Policy
Development
begins
Spring
2024
New
Construction Energy
Reach
Code goes
into effect
Spring to Fall
2024
Community +
Interested
Party
Engagement
Timeline of Building Decarbonization Efforts
Decarbonization includes lower carbon fuels, renewable energy, energy efficiency, electrification, carbon capture, and other ways to reduce carbon.

29.145
Local Statistics
• 87% of buildings are Single Family Homes
• 84% of Single Family Homes were built
before 1991
• 26% of Santa Cruz’ Community-wide
emissions are from building energy
Decarbonizing Santa Cruz’ Building Stock
CAP 2030: Measures BE-5 and BE-2:
• Increase resiliency through equitable
energy efficiency and local solar programs
• Electrify 31% of existing residential
buildings by 2030
• Electrify 53% of existing residential
buildings by 2035

29.146
California is pursuing ambitious efficiency measures…
The California Air Resources Board (CARB) zero-emission appliance standards phased implementation begins in 2027.

29.147
Non-Energy Reach Code Benefits

29.148
Proposed requirements for major residential addition and/or alteration projects to include energy efficiency measures.

What is a “major” addition or alteration as proposed?
• An addition of 350 or more square feet of floor area (aligns with Green Building Program threshold). • Any addition and alteration combination with an impacted area of 350 or greater square feet.

What would a project applicant have to do?
• Pick from a menu of energy efficiency measures and in some cases provide outlets for future zero emission appliances.

The proposed ordinance is projected to impact 110 permits a year with a median project valuation of $130k and project cost of $230k Proposed Policy-at-a-Glance

29.149
Energy Efficiency Measures + Packages
Requirements:

1. Install any number of the
measures from the table that
add up to a total score of 9 or
greater. Many combinations
possible

2. Complete all mandatory
requirements.

There are at least 5
cost effective combinations.

29.150
Compliance Examples

29.151
Proposed Exemptions

1. Repairs

2. Pre-Compliance

3. Historic Building The applicant may request an exemption to any requirements of this chapter which would impair the historic integrity of any building listed on a local, state, or federal register of historic structures

4. Hazard Mitigation  e.g., seismic retrofit

5. Temporary Structures

6. Cost Burden Costs associated with ordinance compliance exceeds 20% of project valuation

7. Only touching roof or windows or roof and windows

8. Manufactured Homes (Title 25 compliance only)

9. ADUs to which a statewide exemption applies*

29.152
Cost Impacts of the Proposed Policy
• The median project valuation for permits $130,000 captured by this policy. • The estimated typical cost of compliance $6,600 (not including rebates or incentives). • The increased cost for a typical project
complying with this policy (not including
rebates or incentives). 5%

29.153
Cost Impacts of the Proposed Policy
• The estimated median project
construction cost for permits captured by
this policy. $230,000
• The estimated typical cost of compliance
(not including rebates or incentives).
• 2.9% of the estimated project cost $6,600
• The maximum cost of compliance at a
20% cost burden threshold for project
valuation.
• 11.5% of the estimated project cost
$26,000

29.154
• Central Coast Community Energy provide direct incentives ($4,600 - $5,300+)
• New Regional Energy Network coming online with possible incentives in 2025
• Inflation Reduction Act tax credits available for most residential energy upgrades
• Promoting services to help community members navigate complicated projects
• Resubmitted grant proposal for low income decarbonization and resilience in frontline neighborhoods with tenant
protections/affordability
Resources

29.155

RECOMMENDATION
Motion to introduce for publication an
ordinance amending Municipal Code
Chapter 18.15 to adopt local amendments
to Title 24, Part 6 of the California Code of
Regulations (California Energy Code).

29.156
Thank you.

29.157
City Council

AGENDA REPORT
DATE: 11/10/2024
AGENDA OF: 11/19/2024
DEPARTMENT: City Manager
SUBJECT: Collective of Results and Evidence-Based (CORE) Recommended Awards (CM)
RECOMMENDATION: Motion to:
1) Approve the Recommended Awards from the Collective of Results and Evidence-based (CORE) Investments Request for Proposals (RFP) process; 2) Direct staff to allocate $189,576 of the remaining City CORE funding for elected officials set aside for emerging needs or priorities not funded through the competitive RFP process; 3) Direct staff to coordinate with the Human Services Department (HSD) to execute agreements for all final recommended awards and set aside fund;
4) Direct staff to coordinate with HSD to return by April 30, 2025, with an update on new and existing CORE contracts, a lessons learned framework, and an updated agreement between the City and County of Santa Cruz.

BACKGROUND: The CORE Investments program is a joint funding initiative between the City and County of Santa Cruz, designed to address health, education, and social disparities by supporting evidence-based programs. The program prioritizes innovative and community-driven initiatives focusing on improving outcomes for lower-income residents and others facing social inequities using a collective impact model.

On April 30, 2024, the Board of Supervisors and City Council approved the release of the FY25- 28 CORE Investments Request for Proposals (RFP). The RFP was designed to fund initiatives aligning with the City’s and County’s equity priorities, focusing on addressing health, education, and social well-being disparities.

As a result of the RFP process, 100 proposals were reviewed, and based on the evaluation of these proposals, HSD is recommending funding for 28 projects, totaling $3.44M. The RFP process followed the direction provided by the Board and Council on the proportional allocation of funds across CORE Conditions and funding Tiers, ensuring that the most impactful and highscoring proposals were prioritized.

30.1 Additionally, $668,828 of CORE funds were set aside for elected officials to allocate toward emerging needs or priorities that were not addressed through the competitive funding process. As a result of unspent funds in the awarded categories, the total set-aside for elected officials has increased to $1,018,423, which includes the flexibility of $172,021 for funding adjustments to ensure that all CORE funds are fully allocated.

This staff report provides an overview of the CORE RFP process, recommends funding awards, and seeks guidance on allocating the set-aside funds designated for emerging needs.

DISCUSSION: The CORE Investments program, supported by a combined $5.96M from the County and City, is focused on addressing critical community needs through evidence-based programs. These initiatives support health equity, education, and well-being for underserved populations in Santa Cruz County.

For FY25-28, the County allocated $4.8M, and the City allocated $1.08M to the CORE program.

A portion of these funds, $1.5M, has been earmarked for homelessness prevention and shelter services managed by the Housing for Health Partnership (H4H), and $668,828 is allocated for elected officials to meet emerging community needs that were not addressed in the competitive RFP process. The remaining $3.79M was made available through the RFP process, designed to fund programs in the following three key priority areas:

1. Lifelong Learning and Education

2. Thriving Families (including Children and Youth, Older Adults, and Dependent Adults)

3. Healthy Environments
The RFP process included three funding tiers based on the size of the projects and the level of funding requested. After a thorough review, HSD is recommending the following distribution of funds across the various proposals and tiers:

The RFP process aims to center equity and align funding with community priorities, supporting innovative programs that advance equity. Following the issuance of the RFP, HSD provided the Board with an update on the review process on September 10, 2024 and September 24, 2024 to the Council. The Board and Council directed HSD to allocate CORE awards based on the number of proposals in each funding category, ensuring that the highest-scoring proposals were funded. Any unallocated funds were to be added to the set-aside for elected officials.

30.2 On October 4, 2024, HSD notified applicants of the funding decisions, with 28 out of 100 proposals recommended for funding across three primary areas: Lifelong Learning and Education, Thriving Families (Children and Youth, Older and Dependent Adults), and Healthy Environments. Applicants were provided with their score, reviewer comments, the minimum score required to be eligible for funding, and the lowest scoring proposal that was funded in their program category. Appeals to the funding recommendations were due October 11, 2024, and the County had 10 days to respond to the appeals.

Recommended Awards
A total of $3,440,430 is recommended to allocate 28 proposals across three funding tiers and multiple priority areas. The following table summarizes the recommended awards:

The table below demonstrates the number and value of awards across the CORE Conditions and Tiers. For reference, the attachments are as follows:

1. Recommended and Not Recommended Proposals – The full list of recommended awardees and proposals not recommended for funding.

2. Analysis of Recommended Awards – An analysis of geographic and demographic distribution of the recommended awards and an analysis of how the recommended awards compare for the current CORE funding recipients.

3. Analysis of CORE Fund Leveraging – An analysis of how applicants and recommended awardees proposed to leverage CORE funding.

Tier 1 Tier 2 Tier 3 Total
Lifelong Learning & Education $500,000
1 Awards
$150,000
1 Award
$48,000
2 Awards
$698,000
4 Awards
Thriving Families: Children &
Youth
$488,265
2 Awards
$903,543
7 Awards
$50,000
2 Awards
$1,441,808
11 Awards
Thriving Families: Older &
Dependent Adults
$514,356
2 Awards
$446,575
5 Awards
$49,882
2 Awards
$1,010,813
9 Awards
Healthy Environments $264,809
3 Awards
$25,000
1 Award
$289,809
4 Awards
Total Cost $1,502,621 $1,514,927 $172,882 $3,440,430
Total Recommended Awards 5 14 9 28
This breakdown represents the distribution of CORE funds across the three priority areas and funding tiers, with the highest number of awards concentrated in the Thriving Families categories, reflecting the urgent need for programs that support children, youth, and older adults in the community.

The attachments provide a comprehensive and detailed analysis of those proposals recommended and not recommended. This includes insights into the geographic and demographic distribution of awards and the leveraging potential of CORE funds by applicants.

Proposal Review Process
The review process for CORE Investments was designed to be transparent and equitable.

30.3 Proposals were evaluated by diverse panels of community members, stakeholders, and professionals trained on the CORE funding criteria (Panelist Demographics). Panelists were selected based on their expertise in the relevant priorities and their representation of the community’s interests. After scoring, proposals were ranked within each priority area and funding tier.

The review process (Proposal Review Process) involved multiple stages, including scoring, panel discussions, and deliberations to ensure alignment with the funding criteria.

Appeal Process
HSD received 22 appeals from 19 organizations, which were reviewed by the County’s General Services Department (GSD). Out of these appeals, 16 were denied, 4 were partially granted without any changes to funding, and 2 resulted in scoring adjustments that made the proposals eligible for funding. The appeal process was conducted with complete transparency to ensure fairness and uphold the integrity of the funding distribution.

Set Aside for Elected Officials to Allocate
In addition to the CORE RFP awards, a total of $668,828 (15%) was designated for elected officials to allocate toward emerging community needs or priorities that were not addressed through the competitive funding process. The allocation of these set-aside funds allows for flexibility in addressing critical needs that may arise after the RFP process has concluded. As of November 2024, the total available set-aside funds amount to $1,018,423, which includes:

Set Aside Funds for Emerging
Needs/Priorities
County City Total
Set aside for elected officials determined
prior to RFP release
$544,328 $124,500 $668,828
Additional set aside funds following
recommended awards
$284,519 $65,076 $349,595
Total Available for Allocation 11/19/24 $828,847 $189,576 $1,018,423 Value 5% of funding adjustments County City Total
Built in flexibility for funding adjustments
to ensure all CORE funds are expended.

This funding would come from reducing
grants by up to 5%
$141,057 $30,964 $172,021
If the Board and Council align their set aside funding, the funding overall would stretch further, similar to the CORE awards; however, as the set aside is at the discretion of each separate elected body, we have shown the breakdown of funds between each.

Recognizing that all CORE funding is at the discretion of elected officials, the set-aside funds for elected officials are a new tool in this CORE cycle. To support the Council as they consider how to distribute the $189,576 of set aside funds, HSD and City staff felt it might be helpful to take the information regarding the not recommended proposals and organize it in three different ways for your review as you consider your options for allocating the funds. The options are listed below, and while no specific option is recommended, they are provided only with the intention

30.4 of supporting the examination of different funding scenarios and how those scenarios would land for additional programs within the available funding.

At the September 24, 2024 meeting, the Council expressed interest in using some of these funds for childcare services. Staff recommends that the Council carefully consider the options below and provide direction on how to proceed.

Options for allocating Set Aside funds:

The Board and City Council may allocate the set-aside funds in several ways, including:
 Option A: Fund the next highest-ranked proposals across all CORE Conditions and Tiers.
 Option B: Prioritize funding in a specific CORE Condition, such as Lifelong Learning or Thriving Families.
 Option C: Focus funding on smaller grants in lower-tier proposals, maximizing the number of programs supported.
 Option D: Apply the funds to the next ranked proposals that support childcare.

The Council could choose to prioritize applying the set aside money towards larger grants, meaning fewer additional awards, fund as many proposals as possible by funding small and/or medium sized grants, or fund childcare.

The attachment (Set Aside Options) provides examples of what would be funded through any of the above approaches.

Coordination with Santa Cruz County
The City and County continue to work together to administer the CORE Investments program, with HSD managing contracts and distributing funds. The City of Santa Cruz contributes partial funding to support contracts that benefit City residents. Staff will continue coordinating with the City, ensuring all agreements are aligned and executed efficiently.

As part of the next steps, staff will return in Spring 2025 with a report on the progress of the current CORE contracts, a lessons-learned framework, and proposed updates to the MOU that governs the ongoing coordination between the City and County for the next CORE funding cycle.

Homeless Prevention Funding
On April 30, 2024, the Board and City Council approved the allocation of $1.5M for homelessness prevention services, which includes funding for low-barrier navigation centers and shelter services. These funds are managed by the Housing for Health Partnership (H4H) and are intended to prevent homelessness through targeted support for those most at risk.

Organizations interested in applying for these funds must first be approved by vendors under the Housing for Health Partnership. Applications to become an approved vendor must be submitted by December 31, 2024. Information about the H4H vendor pool can be found at the H4H Partnership website:
https://housingforhealthpartnership.org/ForProviders/HousingforHealthVendorPool.aspx. Once approved, these organizations will be eligible to apply for the CORE South County prevention funds in February 2025.

30.5 Strategic Plan Overview and Applicability to CORE Investments The City of Santa Cruz Strategic Plan is a roadmap that outlines 7 key focus areas for ensuring the City’s long-term sustainability, economic health, and community well-being. Below outlines the CORE Investments Program and how it supports and advances these strategic goals.

1. Fiscal Sustainability and Transparency
 The CORE Investments Program aligns directly with the City’s fiscal goals by prioritizing evidence-based, community-driven initiatives that reflect the unique needs of Santa Cruz residents.
 The set-aside funds for emerging needs, totaling $189,576, ensure flexibility in meeting unforeseen fiscal and programmatic priorities, ensuring the City remains responsive and adaptable in its strategies.

2. Strong Business Communities and a Vibrant Downtown
 CORE Investments contributes to this goal by funding initiatives that strengthen community ties and increase engagement across Santa Cruz. Many of the projects funded through CORE target the economic empowerment of underserved populations, including youth, families, and individuals from diverse backgrounds. By fostering inclusive educational opportunities and promoting cultural and arts-based activities, CORE supports the long-term vitality of Santa Cruz’s business and social fabric.
 The funding priorities for programs such as youth development, cultural activities, and downtown beautification enhance the attractiveness of Santa Cruz as a destination for both residents and visitors. These activities contribute to a vibrant, safe, and economically resilient downtown area.

3. Housing
 CORE’s support for Thriving Families, particularly those focused on children, youth, and older adults, indirectly supports affordable housing goals. Many CORE-funded programs help reduce the risk of homelessness by addressing the root causes of housing insecurity, such as educational disparities, family violence, and health inequities.
 CORE’s alignment with the City’s housing objectives is also evident in its commitment to partnerships and the development of programs that can work in tandem with housing initiatives, affordable housing projects, and transitional housing services.

4. Homelessness Response
 A significant portion of CORE funding supports projects that contribute to homelessness prevention and housing stability. CORE aligns with the City’s Homelessness Response goals by funding programs that prevent eviction, provide outreach, and offer direct services to people at risk of homelessness.  Additionally, CORE’s flexibility in funding emerging needs allows the program to quickly adapt and respond to changing circumstances, such as capital investment needs for shelter services or new service delivery models.

5. Public Safety and Community Well-Being
 CORE-funded programs address public safety by investing in pro-social activities, youth engagement, and community-building efforts. Many of the proposals support the development of safe public spaces where residents can come together for educational, social, and recreational activities.

30.6  The program also aligns with public health priorities by funding projects that focus on mental health, substance use prevention, and community wellness, which are integral to broader efforts to enhance public safety and quality of life.

6. Natural and Built Infrastructure
 While not directly funding infrastructure projects, CORE supports the broader goals of sustainable development by funding initiatives that promote environmental wellbeing and the responsible use of community resources. Programs that enhance green spaces, public art, and cultural programming contribute to the City’s environmental and infrastructure.
 CORE’s commitment to equitable access to resources also aligns with the City’s goal of ensuring that its infrastructure investments serve the needs of all residents, including those in historically underserved areas.

7. Thriving Organization
 CORE programs offer City staff opportunities to expand their skill sets in community outreach, program management, and diversity, equity, and inclusion (DEI) by working with community-based organizations. This experience enhances staff capabilities and prepares them for new challenges, ultimately improving the effectiveness of City services.
 Additionally, CORE Programs foster cross-departmental collaboration with external organizations, helping staff build stronger relationships, improve teamwork, and cultivate a culture of mutual respect and cooperation, which supports collective problem-solving and idea generation.

Lessons Learned
The CORE program is an evolving initiative, and HSD intends to use the current funding cycle to refine the process. A lessons-learned review will be conducted in collaboration with stakeholders to improve the allocation and distribution of CORE funds in future cycles.

HSD will return in Spring 2025 with an evaluation framework that will include an assessment of the CORE funding process and recommendations for improvements.

Next Steps
Once the Board and City Council approve the recommended awards and set-aside allocations, City Staff will coordinate with HSD to execute the necessary agreements with awardees, oversee the distribution of funds, and finalize the set-aside allocation process.  Staff will return in April 2025 with a report on the progress of CORE-funded projects, including an updated agreement between the County and City and a lessons-learned framework.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: This action is exempt from the California Environmental Quality Act (CEQA) as it pertains to the allocation of existing funding for programs that will not result in new construction or significant environmental impacts.

HEALTH IN ALL POLICIES (HiAP): The CORE Investments program aligns with the Health in All Policies (HiAP) framework by promoting equity, sustainability, and public health in its funded initiatives:

30.7 Equity: The CORE Investments program is committed to promoting equity by prioritizing funding for organizations that serve underserved and marginalized populations. This includes low-income communities, people of color, seniors, and youth. By directing resources towards those most at risk of health disparities, CORE supports the fair distribution of opportunities and services that lead to better health outcomes for all residents.

Sustainability: The CORE Investments program is dedicated to promoting long-term solutions.

Many projects funded by CORE emphasize this, such as promoting environmental sustainability and building community resilience through programs focused on mental health, economic empowerment, and lifelong learning. The CORE model ensures that investments lead to lasting change rather than temporary fixes, fostering the development of sustainable systems for wellbeing.

Public Health: The program's emphasis on promoting health and well-being takes a comprehensive approach, directly tackling public health issues such as chronic diseases, mental health concerns, environmental justice, and access to education and housing. The diverse range of programs funded by CORE contributes to improved physical and mental health outcomes by providing equitable access to resources and opportunities that support overall well-being.

In summary, the CORE Investments program addresses immediate community needs and aims to build support systems that foster healthier, more resilient communities in alignment with HiAP principles.

FISCAL IMPACT: The recommended funding allocations for the CORE program total $3,440,430 and are fully funded through the existing General Fund allocation from the County and City. The remaining $189,576 in set-aside funds will be directed toward emerging community needs as determined by the Board and City Council. These actions ensure the continued effectiveness of the CORE Investments program in meeting the community's most pressing needs.

Prepared By:

Larry Imwalle
Homelessness Response
Manager
Submitted By:

Michelle Templeton
Assistant City Manager
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. RECOMMENDED AND NOT RECOMMENDED PROPOSALS.PDF

2. ANALYSIS OF RECOMMENDED AWARDS.PDF

3. ANALYSIS OF CORE FUND LEVERAGING.PDF

4. PANELIST DEMOGRAPHICS.PDF

5. PROPOSAL REVIEW PROCESS.PDF

6. SET ASIDE OPTIONS.PDF

30.8

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Santa Cruz City CouncilNovember 19, 2024

Santa Cruz City Council
November 19, 2024