California’s shift toward ending natural gas use in new buildings is reaching a decision point. 

This week, the California Energy Commission held its latest workshop on updating the state’s Title 24 Building Energy Efficiency Standards, which will set the energy baselines builders must adhere to in new construction from 2023 onward. 

Amid the complexities of this process, a key point of contention has emerged: whether the CEC should retain baseline methodologies that make room for natural gas in new buildings or switch to baselines that strongly encourage all-electric buildings. 

Environmental and clean energy groups say the latter choice is critical to decarbonize buildings that account for the state’s second-largest source of carbon emissions after transportation. California’s mandate of 100 percent carbon-free energy by 2045 implies the elimination of natural gas over the coming decades, but the state hasn’t yet created plans for ending its use in buildings. 

This week's CEC workshop presented proposals that could boost electrification in high-rise residential and nonresidential buildings including offices, schools, stores and warehouses. But according to an October workshop presentation, the CEC appears set to retain two different baselines for low-rise residential buildings and single-family homes — one geared toward the use of natural gas appliances and one for all-electric construction. 

While Title 24’s energy efficiency baselines don’t prohibit certain appliances, they do set stringent standards that builders must comply with. Under the state's three-year building code cycles, changes being made this time around could lock in building plans through much of the rest of this decade. Final draft versions of the standards are expected in February, and the CEC is expected to approve them in July.

"There may be an opportunity to change things down the road," said Denise Grab, a manager on Rocky Mountain Institute’s Carbon-Free Buildings team. But the next few weeks may offer the last opportunity for advocates of all-electric buildings to make their case, before the CEC's draft proposals harden into instructions to staff to begin the year-long process of embedding the changes into the modeling software used by builders to determine compliance with the baselines. 

Why decisions now could drive investment through this decade

"A single all-electric baseline would prioritize all-electric construction and make it much more difficult for gas in construction to happen,"  Grab said. But waiting for the state's three-year building code cycle in 2025 to make those changes could drive "a huge unnecessary cost to consumers and to the public." 

California added more new natural-gas customers than any other state over the past decade. If that growth pattern is unchecked, the state could see an additional $1 billion in natural-gas infrastructure spending over the next five years, according to RMI research. That could end up being a stranded investment as the state is forced to stop using natural gas in decades to come, critics say. 

This underlying risk of stranded assets has led to all-electric building codes winning the support not only of all-electric investor-owned utility Southern California Edison, but also Pacific Gas & Electric, the first dual-fuel utility in the country to express support of all-electric construction codes. 

The all-electric Sacramento Municipal Utility District has joined in support, as has the California Community Choice Association, representing the 23 community-choice aggregators serving about a quarter of the state’s electric customers. 

Getting rid of natural-gas-fired appliances will also be an important step in curbing their larger-than-previously-understood levels of emissions of nitrogen dioxide, carbon monoxide and particulates harmful to human health, advocates say. 

The California Air Resources Board issued a November resolution calling for electrifying all appliances and singling out efforts to improve the health of low-income and disadvantaged communities already suffering from high levels of air pollution and resulting health problems like asthma and heart disease. 

Pushback from natural gas utilities and construction industry

But the move to all-electric has some significant opponents — namely, the state’s largest natural gas utility, Southern California Gas, which argues that moving too quickly will burden customers with higher bills. 

SoCal Gas has funded pro-gas advocacy groups to oppose local governments from enacting all-electric building ordinances. More than 40 California cities and counties have banned or limited natural gas in new buildings since Berkeley became the first in the nation to do so last year, with San JoseSan Francisco and Oakland passing or updating ordinances in the past month. 

At the same time, SoCal Gas has enlisted more than 100 cities to sign a resolution supporting “balanced energy solutions” that include natural gas. It’s also won support from state lawmakers and has sued the CEC for failing to include natural gas in its efficiency efforts. 

SoCal Gas is under investigation by the California Public Utilities Commission’s Public Advocates Office for improperly using ratepayer funds meant for energy efficiency outreach to pay for its pro-gas and anti-electrification advocacy. The Sierra Club, represented by EarthJustice, has asked the CPUC to issue a $255 million fine against the utility for this activity. 

Builder and property owner groups have also opposed an all-electric baseline, saying it could increase costs and run against consumers’ desire for gas appliances. 

Research indicates that all-electric buildings reduce utility bills, largely by replacing gas-fired heating with heat pumps, and reduce health risks from gas-fired ranges by replacing them with induction stovetops. They can also be cheaper to build, primarily because they replace two sets of energy delivery infrastructure with one.

But California building industry groups wrote a letter to the CEC in August disputing those claims. The letter cited data from members indicating that construction and utility costs for all-electric homes are equal to or slightly higher than mixed-fuel construction and that energy costs could be higher for all-electric homes in some parts of the state. 

The groups also suggested that the CEC previously agreed to forgo an all-electric baseline in the current Title 24 code cycle, in exchange for builders agreeing to support the solar mandate for new homes put in place this year under the last code cycle. 

Boosting the market dynamics for building electrification

But advocates of all-electric buildings say that California must act now to give builders, appliance makers and other key industries the guidance they need to start to adapt to all-electric construction. 

The CEC has proposed compliance credits for all-electric building, which could encourage more builders to adopt it, Pierre Delforge, senior scientist with the Natural Resources Defense Council, said in an interview. 

But that alone may not be enough, he said. An all-electric baseline “will create market capacity and make it easier to shift the existing markets, [and] because contractors will be more familiar with the technology, the costs will come down the cost curve.” 

“Leading with health and cost are the most important, the most likely to get the attention of consumers. But we can’t get mass adoption until we have a thriving market, with contractors who know the equipment and know it well.” 

That’s the point made in a Dec. 1 letter to the CEC and Gov. Gavin Newsom from shareholder activist group Ceres, representing the Business for Innovative Climate and Energy Policy group of nearly 70 companies ranging from IT giants like Adobe, Microsoft and Salesforce to retail giants like McDonald's, Nike and Starbucks.

“Commercial and residential developers have been slow to change their building practices on the basis of suspected higher costs,” the group wrote. “Establishment of a 2022 all-electric building code will provide critical policy certainty that businesses need to plan and invest in the future.”