California regulators are starting to fill a hole in the state’s climate policy.

For decades, California has led the world in efforts to reduce the energy consumption of appliances and buildings. But in recent years, California policymakers have started to favor a new guiding metric: carbon.

In January 2018, then-Governor Jerry Brown signed an executive order calling for at least 5 million zero-emission vehicles to be on California roads by 2030. In September of the same year, Brown signed SB 100, which called for 100 percent zero-carbon electricity in California by 2045.

Last month, the California Public Utilities Commission (CPUC) affirmed the carbon shift by launching a proceeding devoted to decarbonizing buildings.

“Modeling tells us that 100 percent renewable electricity alone isn’t enough to help us meet our 2030 greenhouse gas reduction goals; we also need to electrify our homes and buildings to reduce the use of fossil fuels in California. Twenty-five percent of total emissions in California are from homes and buildings, and we must make headway on reducing these emissions to meet the state’s overall aggressive climate goals,” said CPUC President Michael Picker in a statement.

The new proceeding has four goals: implement SB 1477, a bill signed by Gov. Brown last September that requires the CPUC to oversee two new low-carbon heating programs; investigate potential pilot programs to build all-electric, zero-carbon buildings in areas damaged by wildfires; coordinate with the California Energy Commission on updates to the state’s building (Title 24) and appliance (Title 20) energy efficiency standards; and establish a building decarbonization policy framework.

The two new programs authorized under SB 1477 are path-breaking. The legislation itself has been called “the first legislatively mandated building decarbonization bill in the country.”

But the real breakthrough is the money — $200 million over four years — authorized under the bill to be invested in programs to advance low-carbon space and water heating technologies in both new and existing buildings. Funding for the programs is slated to come from natural-gas utility carbon allowance proceeds from California’s cap-and-trade program.

Thirty percent of the funding for the Building Initiative for Low Emissions Development (BUILD) program, which focuses on new construction, is reserved for low-income housing.

“An important historical moment”

In an email, Rachel Golden, a senior campaign representative with the Sierra Club, told Greentech Media the CPUC’s new rulemaking “is an important historical moment, similar to when California began investing in statewide incentives to drive market development for rooftop solar and EVs.”

“Those early and sustained investments in rooftop solar and EVs transformed the market,” she said. “The provision of $200 million (or $50 million/year) from SB 1477 is important seed funding to jump-start a transition in California to zero-emission electric buildings.”

She cautioned that much work is left to be done. As GTM reported last year, even in California, legacy policy and regulatory barriers are holding back the transition to all-electric, zero-emission buildings.

“SB 1477 is just the beginning,” said Golden, “as higher levels of funding plus complementary policies like rate reform will be needed in the near term.”

Adding building decarbonization to California’s long-term energy planning

On a parallel track, the California Energy Commission is poised to adopt an updated version of the state’s biennial Integrated Energy Policy Report. The opening chapter of the 2018 report, which comes before commissioners for approval on February 20, is devoted to “decarbonizing buildings.”

“There is a growing consensus that building electrification is the most viable and predictable path to zero-emission buildings,” the authors conclude.

Building decarbonization advocates welcomed the new emphasis on zero-emission buildings in the state’s long-term energy planning.

“The 2018 Integrated Energy Policy Report represents a significant shift in state energy policy from historically favoring methane gas for heat and hot water in buildings, to utilizing clean and renewable electricity to keep our buildings warm and provide hot showers,” wrote Pierre Delforge, a senior scientist with the Natural Resources Defense Council, in an email.

“This shift is enabled by California’s rapid progress toward 100 percent emissions-free electricity, and by the recent development of super-high efficiency heat pump technology as cleaner alternatives to gas-fired furnaces and water heaters," he added.

“We are thrilled to see the CEC leading on building decarbonization,” said the Sierra Club’s Golden. “The commission recognizes California needs to prioritize building decarbonization, and specifically smart electrification of gas and propane appliances, if California is to meet its climate targets. We can no longer just focus on energy efficiency; we must design smart policies to replace polluting gas appliances with high-efficiency electric appliances that can be responsive to the grid’s needs and powered by clean energy.”

“The year is [starting] off with a bang as both our energy agencies released the beginning of comprehensive frameworks for eliminating emissions from buildings,” Panama Bartholomy, director of the Building Decarbonization Coalition, told GTM. The coalition comprises utilities, equipment manufacturers, environmental organizations and local governments.

Next steps toward zero-emission buildings

In the run-up to the recent actions at California’s energy agencies, Bartholomy’s group published guidance for the state’s policymakers. At the end of January, the coalition released a series of reports on the opportunities and challenges coming with a shift to zero-emission buildings.

This week, the coalition published a policy roadmap outlining how California can reduce greenhouse gas emissions in buildings by 40 percent by 2030. The roadmap calls for California to adopt a “Zero Emission Building Code” for the residential sector by 2025 and the commercial sector by 2028.

California regulators signaled what is likely to come next with pilot projects approved by the CPUC last December that authorized Pacific Gas & Electric Company, Southern California Edison, and third parties to spend nearly $51 million to replace propane- or wood-burning appliances with all-electric models in more than 1,600 low-income San Joaquin Valley households.

“The commission's decision there jumps over costly gas pipeline extensions and goes straight to the clean alternative: electrification, efficiency and clean energy,” said the Sierra Club’s Golden.

As for the two low-carbon heating incentive programs authorized under SB 1477, the CPUC will decide by Q4 of this year on the rules to guide program implementation.

“2018 was the year building decarbonization started to get talked about with a bunch of reports and meetings,” said Bartholomy. “2019 looks like the year we start making it happen.”