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California’s Building Decarbonization Opportunity: Knowing Where We Are and Delivering What We Need

Transcendent Energy for the Building Decarbonization CoalitionALEJANDRA MEJIA CUNNINGHAM • MICHELLE VIGEN RALSTON • KATIE WU

ACKNOWLEDGEMENTS

This report was prepared for the

Building Decarbonization Coalition

(www.buildingdecarb.org). The

authors wish to thank the members

of the Coalition for their valuable

review of the draft report.

Building Decarbonization Coalition 3

Decarbonization is the process of reducing economy-wide car-

bon or other greenhouse gases. There are many ways to de-

carbonize economies, and experts call out three high priority

strategies as the “pillars of decarbonization:” (1) highly effi-

cient energy use in buildings, transportation, and industry; (2)

development of zero- and low-carbon fuels; and (3) switching

all end uses to zero- and low-carbon fuels (Figure 1).1 This pa-

per discusses the costs and benefits of transitioning California’s

buildings to near-zero carbon fuels; the paper also discusses the

California Public Utilities Commission’s (CPUC) options for de-

veloping a regulatory framework to catalyze and sustain mar-

kets to decarbonize California’s entire building stock. Through

this paper, the Building Decarbonization Coalition (BDC) in-

tends to continue the conversation around decarbonization and

spur action to reduce greenhouse gas emissions in buildings at

least cost. Ultimately, it is the CPUC, in collaboration with stake-

holders, that will determine the scope of any regulatory actions

taken under its authority and obligation to meet California’s

ambitious energy and environmental goals.

California’s Building Decarbonization Opportunity: Knowing Where We Are and Delivering What We Need

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

The Costs and Benefits of Building Electrification and How to Understand Them . . . . . . . . . . . . . . . . . . . . . . . . . . .4

WHAT WE KNOW TODAY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

THE APPROPRIATE APPROVAL THRESHOLD FOR BUILDING DECARBONIZATION INVESTMENTS . . . . . . . . . . . . . . .7

A New Regulatory Framework for Building Decarbonization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

GUIDING PRINCIPLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Guiding Principle One: Focus on Key Results . . . . . . . . . . . . .8

Guiding Principle Two: Deliver Customer Value by Customer Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Guiding Principle Three: Support Flexible Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Guiding Principle Four: Keep Clean Energy Affordable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

NEXT STEPS: PUTTING THE GUIDING PRINCIPLES TO WORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Minimize Regulatory and Administrative Requirements that Act as Barriers to Affordability, Innovation, and Forward-Looking Collaboration . . . . . . . . . . 9

Ensure Early Coordination Among Internal Proceedings and State-Level Regulatory Cycles . . . . . . . . . . 10

Prioritize Ongoing Evaluation to Inform Progress Towards Results: Least Cost Long-Term GHG Emission Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Continuously Improve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Highly Efficient Energy Use in

Buildings, Transportation,

and Industry

Zero-carbon Electricity

and Low-carbon

Fuel Supplies

2045 CARBON- NEUTRAL

ECONOMY End Use Fuel

Switching to Low- and Zero-carbon

Supplies

Figure 1. Three Pillars of Decarbonization

4 Building Decarbonization Coalition

INTRODUCTION

In California, emissions from transportation continue to rise,2

and it is possible that emissions from other sectors, particularly

residential and commercial buildings, will need to decrease by

more than 80% of 1990 levels to help meet economy-wide car-

bon neutrality by 2045.3 Nationwide, residential and commercial

buildings account for approximately 11% of U.S. greenhouse

gas (GHG) emissions, or just over 500 million metric tons (MMt)

of carbon dioxide equivalent (CO2e).4 California’s emissions fol-

low this proportion—in 2016, about 9% of direct (i.e., on-site)

GHG emissions came from the residential (6%) and commercial

(3%) sectors.5 When off-site electricity generation, associated

methane, and refrigerants were also considered, buildings ac-

counted for over 25% of statewide emissions in 2016.6

In buildings, fossil fuels are used for space and water heating,

cooking, and clothes drying, with space and water heating rep-

resenting the largest energy end uses.7,8 In the future, resourc-

es such as renewable gas and solar thermal may become af-

fordable building decarbonization options; however, electricity

is the cleanest space and water heating fuel that is currently

available in California.9 Therefore, today, electrification is a pri-

mary low-cost strategy for significantly reducing fossil fuel use

in these end uses. Given current technology costs and avail-

ability, to achieve GHG reduction targets, experts estimate that

50% of new space conditioning and water heating must be

electrified by 2030, and 100% must be electrified by 2050,10,11

equal to a 27 MMt CO2e emissions reduction by 2050.12 Specific

adoption rates for induction cooktops and clothes dryers have

not yet been widely discussed in the literature; however, experts

estimate that at least 90% electrification of all end uses is nec-

essary in both the residential and commercial sectors to meet

2050 emissions reductions targets.13,14 Note that these technol-

ogy adoption rates were developed to meet certain emissions

reduction goals and are not assessments of technological or

economic feasibility. The preferred combination of decarbon-

ization strategies requires further research and discussion and is

expected to vary by market segment (e.g., new versus retrofit;

small office versus large commercial; public vs. private; single-

vs. multi-family).

Electric appliances for residential and commercial end uses, such

as heat pump space and water heaters and induction cooktops,

have been available for many years; however, they represent

only a small percentage of the current market in California.15,16

For California to achieve its climate goals by 2045, stakehold-

ers must collaborate to ramp up the market share of efficient

zero-emissions appliances via a combination of programmatic

and market development initiatives, including training, educa-

tion, data-sharing, standards development, incentives, capaci-

ty-building, and technical research and support.

POLICY LEVER: California aims to have a carbon

neutral economy by 2045, and key to achieving

that goal is the implementation of Senate Bill (SB)

1477 for low-emissions buildings and clean heating

in new and existing residential buildings. The bill

requires the CPUC, in consultation with the California

Energy Commission, to develop and oversee the

Technology and Equipment for Clean Heating (TECH)

Initiative, a market development initiative, and the

Building Initiative for Low-Emissions Development

(BUILD) Program, a new construction incentive

program. Currently, $50 million per year of funding

is guaranteed between 2019 and 2023, with 30%

of the BUILD funds reserved for new low-income

housing. These funding levels are starting points—the

CPUC could decide to allocate additional funds and

resources to support low-emissions buildings and

clean heating beyond the requirements of SB 1477.

Changes in behaviors and market structures are critical to im-

proving the adoption and penetration rates of the efficient

zero- and low-emissions technologies that support building de-

carbonization and reduced GHG emissions. This focus on long-

term beneficial changes in market structures and GHG emis-

sions, rather than on incremental energy resource acquisition,

poses significant challenges for applying existing demand-side

cost-effectiveness principles. Those principles were developed

to compare demand-side resources to supply-side investments

within a single-fuel construct.17,18 As such, existing demand-side

resource cost-effectiveness tests may not be informative tools

for understanding whether certain investments in building de-

carbonization are worth the risk. That, however, should not de-

ter or delay regulators and stakeholders from accelerating build-

ing decarbonization. Any delay is likely to increase total costs of

climate mitigation on the order of billions of dollars.19

THE COSTS AND BENEFITS OF BUILDING ELECTRIFICATION AND HOW TO UNDERSTAND THEM

California has many methods and tests to understand the

cost-effectiveness of demand-side program activities from

different stakeholder perspectives. Across CPUC demand-side


proceedings, different cost-effectiveness tests are used for dif-

ferent purposes. For example, energy efficiency funding autho-

rization requires a pre-determination of a cost-effective utility

portfolio using the Total Resource Cost (TRC) and Program Ad-

ministrator Cost (PAC) tests; however, distributed generation

projects, such as rooftop solar, are analyzed using TRC, PAC,

Participant Cost, and Societal Cost tests only after a project is

completed to improve cost efficiencies in future projects.20,21

The continued development of technology-neutral cost-effec-

tiveness methods and protocols is within the scope of the Inte-

grated Distributed Energy Resources proceeding.22

Costs and benefits for building decarbonization are similar to

those in existing demand-side programs. Table 1 summarizes

the costs and benefits that customers are most likely to be fa-

miliar with. Those are the costs and benefits that are likely to

have relatively greater influence on customers’ willingness to

adopt low- and zero-emissions technologies in the short-term.

To catalyze the building decarbonization market, decision-mak-

ers, stakeholders, and project proponents should mitigate these

costs and promote these benefits to immediately lower barriers

to adoption.

Over the medium-term, to ramp up adoption rates, stakehold-

ers should address the more extensive list of costs and benefits

included in Appendix 1. Note that Appendix 1 is not intended

to be a comprehensive list of long-term costs and benefits relat-

ed to building decarbonization. Additional research is needed

before some anticipated benefits can be properly valued. For

instance, utilities could send heat pump water heaters demand

response signals to heat water when solar output is high, and

support smoothing out supply and demand imbalances on the

grid; however, additional research is required before energy

managers understand the technical potential, reliability, and

monetary value of this grid service.23,24

As the building decarbonization market continues to develop,

regulators and stakeholders will need to understand short- and

long-term risks (e.g., to customers, utilities, policy goals, society,

climate) related to investing or not investing in certain tech-

nologies and intervention strategies. Some risks (e.g., impact

to air quality, impact to policy goals) will be inherently difficult

to quantify; however, it will still be imperative to understand,

manage, and reduce said risks. As the market develops, stake-

holders should periodically review the list of costs and benefits

related to building decarbonization, determine how they have

changed, and either add or remove costs and benefits, where

appropriate, as technology evolves.

INPUT MARKET AFFECTED CURRENCY

COSTS PAID BY

Equipment—space conditioner, water heater, cooktop, dryer

new & retrofit money customer

Installation (e.g., contractor labor and permitting)

new & retrofit money customer

Building-level Electrical Upgrades retrofit money customer

Transaction—Contractor new & retrofit time, effort, lost wages

contractor

Transaction—Customer retrofit time & effort customer

BENEFITS RECEIVED BY

Environmental (e.g., improved air quality) new & retrofit GHG emissions society

Infrastructure—avoided new natural gas pipelines

new money development company, maybe also customer

Comfort new & retrofit quality of life customer

UNCERTAIN IMPACT

Energy bills retrofit; to some extent, new

money customer

Table 1: High Impact Costs and Benefits of Building Decarbonization


The existing literature acknowledges that cost and benefit

projections for electrification vary and depend on a range of

assumptions, inherently creating uncertainty in the results.25,26

Given the range of data and assumptions and the long-term

nature of building decarbonization, rather than compare stat-

ic point values, decision-makers and stakeholders would be

better informed by understanding cost and benefit categories

and ranges of qualitative and quantitative values, the impacted

stakeholder groups, and anticipated trends for how costs and

benefits will change over time. Decision-makers and stakehold-

ers should also incorporate scenario and uncertainty analyses

to assess costs and benefits under varying technology advance-

ment and adoption rates, to help shed light on when and how

to intervene in the market.

Researching and assessing ranges of cost and benefit values can

also make it easier to consider costs and benefits that are more

difficult to quantify. For example, improved air quality is a signif-

icant driver for implementing emissions reduction policies, but

monetary valuation of the environment and improved health is

complex. It may be better to conduct scenario analyses around

ranges of values, rather than use point values or exclude these

costs and benefits.27 Similarly, the range of values for the social

cost of GHGs, arguably the primary driver for emissions reduc-

tion policies, is massive and even the “best available data” are

considered to underestimate the damage costs associated with

climate change.28 Studies on the value of decarbonized build-

ings can provide insight on issues such as customers’ willingness

to pay for, and the monetary value of, low- and zero-emissions

development.

WHAT WE KNOW TODAY

Although highly efficient electric heating technologies have

been available for many years, their market penetration in Cal-

ifornia is relatively low.29 The primary barriers to demand for

these technologies are upfront costs (e.g., equipment, installa-

tion, transaction), operating costs (e.g., potential bill increases),

and lack of familiarity with, and risk aversion to, new technolo-

gies.30,31 These barriers are common to other demand-side pro-

grams, such as energy efficiency and demand response, and

other geographic regions of the US, including the Northeast.

A barrier unique to building electrification, however, is the po-

tential for bill increases given relative prices of electricity ver-

sus natural gas. Knowing this, stakeholders can build a long-

term programmatic vision to strategically drive down costs in

the short-term and enhance consumer experience with low- to

zero-emissions end uses in the medium-term, while simultane-

ously minimizing the risk of wasted opportunities and adverse

customer impacts.

Existing literature provides substantive information on the types

of costs and benefits associated with building electrification and

who faces them; however, values vary depending on a range

of circumstances. For example, customers may require build-

ing-level electrical upgrades when retrofitting appliances from

natural gas to electric end uses; however, the scope of upgrades

depend on the building’s age, location, and incumbent system,

and costs may range between several hundred and several

thousand dollars.32

For most new single- and multi-family home construction, elec-

trification has been found to reduce costs over the lifetime of

the appliances when compared with fossil fuels, especially when

considering the avoided cost of new gas mains, services, and

meters not needed in all-electric neighborhoods.33,34 In non-res-

idential buildings, heat pump technology has higher potential in

smaller buildings, such as small offices, given the limited avail-

ability of cost-competitive high capacity heat pump space con-

ditioning and water heating systems.35,36 Ongoing monitoring

and evaluation will be critical elements to manage risks and

understand necessary costs to building electrification.37

NEW AFFORDABLE HOUSING IS A VALUABLE OPPORTUNITY FOR EARLY COORDINATION AND EQUITY: Electrification is already a cost-reduction strategy in

new construction, and new affordable housing is

one promising way for decarbonization to benefit

underserved communities. Engaging with housing

agencies at the early project financing stages can lead

to significant economic, equity, and GHG results at

scale in the short- to mid-term.

For disadvantaged and underserved communities, including

low-income and hard-to-reach (e.g., tribal, elderly, rural) com-

munities, new building decarbonization initiatives can reap

valuable information on the effectiveness of program delivery

methods and customer satisfaction with new technologies.

For instance, pilots in the San Joaquin Valley may be test cas-

es for designing and implementing integrated, whole-building

approaches where natural gas service is not available. Addi-

tionally, California’s robust affordable housing policies and

programs provide an entry point to collaboratively fund and

install electrified technologies in new single- and multi-family

buildings. These opportunities are available in the short-term to

understand challenges and opportunities, as well as gain expe-

rience with, innovative project designs and cross-industry and

cross-agency collaboration for building decarbonization.


As with any new energy resource initiative, the CPUC and other

state agencies need to ensure that disadvantaged communi-

ties are not disproportionately or unreasonably impacted by in-

creased energy bills or inaccessibility of program offerings. One

important issue that the CPUC, utilities, and stakeholders will

have to consider is how to maintain and manage gas infrastruc-

ture as fuel switching in end uses increases and demand on ex-

isting gas infrastructure decreases. Due to the low penetration

of building electrification technologies today, stakeholders have

time to develop and ensure a strategic and equitable transition

away from fossil fuel infrastructure. As an immediate starting

point, the CPUC and stakeholders should confer with the Dis-

advantaged Communities Advisory Group to discuss how the

Equity Framework38 under development should influence and

shape building decarbonization initiatives.

Appendix 1 contains a starting point of issues and trends relat-

ed to the costs and benefits of building decarbonization, the

affected market (i.e., new vs. retrofit), and the impacted stake-

holder group(s). Stakeholders should discuss this list, modify as

appropriate, and prioritize project and program tracking metrics

and research needs to address those costs and benefits with

relatively greater influence on market penetration of low-emis-

sions technologies.

THE APPROPRIATE APPROVAL THRESHOLD FOR BUILDING DECARBONIZATION INVESTMENTS

Traditional cost-effectiveness tests applied to demand-side re-

sources are not informative tools for building decarbonization

for two reasons. First, resource valuation tests measure avoided

costs related to fuels and energy system infrastructure, and de-

carbonization aims first and foremost to reduce GHG emissions

at least cost. Second, building decarbonization, like other mar-

ket development initiatives, is expected to be cost-effective over

the long-term rather than in the short-term. While decarbon-

ization activities may bundle well with demand-side offerings,

the initiative requires substantive market development activities

that may not reap quantifiable benefits for several years.

Building decarbonization should pursue a “least-cost long-term

emissions reduction” framework as the threshold for project/

program approval. Project proponents should demonstrate

their proposals contribute to market development and poli-

cy objectives and deliver emissions reductions at or under an

agreed-upon cost threshold, such as refined carbon abatement

cost curves.39 Proponents should also ensure that programs are

not locking in carbon-emitting equipment that could limit GHG

reductions needed by 2045. This is similar to the framework

used for transportation electrification40 and in the CPUC’s (sin-

gle-fuel) Integrated Resource Plan (IRP) proceeding, and, over

time, may align with the CPUC’s efforts to develop a common

resource valuation framework.41 For projects that are on the

threshold, regulators should leverage research on expected cost

and benefit trends over the life of the assets and the potential

for projects to contribute to market development goals to as-

sess the reasonability of proponents’ proposals. As appropriate,

cost-effectiveness test analyses and other qualitative and quan-

titative metrics may still be performed for ongoing monitoring

and evaluation purposes to increase cost efficiencies over time.42

LEAST-COST LONG-TERM EMISSIONS

REDUCTIONS are delivered by a strategy, intervention, or program that has demonstrated costs below a CPUC-adopted threshold and that does not lock in fossil fuel infrastructure that would limit future carbon reductions.

The least-cost emissions reduction framework allows stake-

holders more flexibility to design innovative initiatives based on

emission reductions, rather than designing programs to pass

certain resource valuation tests. Additionally, the least-cost

emissions framework is better aligned with the industry’s trend

towards competitive solicitations and all-source procurement

activities. Setting up building decarbonization initiatives within

a least-cost emissions framework will facilitate coordination and

inclusion of building decarbonization technologies with IRP and

Integrated Distributed Energy Resources (IDER) bids.

A NEW REGULATORY FRAMEWORK FOR BUILDING DECARBONIZATION

Organizations across the country have proposed streamlined

guiding principles to guide strategic decarbonization. For exam-

ple, the Regulatory Assistance Project suggests that “beneficial

electrification” is in the public interest when it meets at least

one of the following conditions without negatively affecting the

other two:

1 . Saves consumers money over the long run

2 . Enables better grid management

3 . Reduces negative environmental impacts43

The CPUC will need to set quantitative decarbonization goals,

first in response to legislative requirements, then later to con-

tinue meeting the state’s economy-wide commitments. Once

those goals are set, the CPUC will also need to create a frame-


work that can deliver results at an unprecedented speed and

scale; the magnitude of the task at hand and the urgency with

which California must decarbonize its building stock demand a

novel approach to support the necessary investments and make

room for groundbreaking innovation. This section proposes

four guiding principles that would orient that framework in the

right direction. The final section of this paper discusses concrete

actions the CPUC and stakeholders can take to start implement-

ing the proposed guiding principles.

GUIDING PRINCIPLES

Guiding Principle One: Focus on Key Results

The ultimate goal of building decarbonization is to reduce long-

term GHG emission from California’s buildings at the lowest

possible cost. This suggests that two key values should guide

the state’s decarbonization framework: (1) projected long-term

GHG reductions per dollar as a relative threshold to guide in-

vestment;44 and (2) total GHG reductions as a measurement of

success. Together, these simple, clear metrics, denoting cost ef-

ficiency and resulting emission reductions, can drive all decar-

bonization investments, from application-driven R&D, engage-

ment with manufacturers, and market development, to code

development and deep retrofits for the state’s oldest buildings.

While other metrics (such as attribution) are emphasized in oth-

er California programs, the goals of building decarbonization

are wholesale outcomes, and metrics should credit all consumer

action, investment, and accelerated adoption of strategies and

approaches.45

Programs should be evaluated according to how many tons of

carbon they reduce at an approved cost in a period of time,

without locking in fossil fuel infrastructure or equipment that

would impede further carbon reductions. This can be measured

at the project level using a fence-line approach like the one

proposed for Southern California Edison’s (SCE) Clean Ener-

gy Optimization Pilot (CEOP).46 It can also be measured at a

service-territory level in terms of total long-term GHG-reduc-

tions. Ensuring that GHG reductions meet a low-cost threshold

should be done at the regulatory approval point. GHG reduc-

tion modeling for the California Energy Commission has already

produced abatement cost curves that indicate a small number

of least-cost GHG emission pathways.47 The cost of those pre-

ferred strategies can be refined and translated into “GHG re-

duction per dollar invested” ranges. This would allow flexibility

to propose innovative strategies while ensuring that decarbon-

ization funds are invested in low-cost GHG reductions.

Guiding Principle Two: Deliver Customer Value by Customer Segment

Building decarbonization is inherently customer-dependent: it

will only succeed if customers are able and willing to participate

in the transition to cleaner fuels. Positive sales, installation, and

operation experiences are crucial to successful customer en-

gagement. Early on in the market development process, main-

taining this customer focus should result in effective engage-

ment with manufacturers and installers to help them produce

equipment, business models, warranties, and maintenance ser-

vices that best suits the needs of California’s homes. Educating

distributors about the benefits of decarbonization equipment

will also be key to delivering positive customer experiences at

scale, since customers rely on distributors and installers as trust-

ed sources of information on home equipment. As the mar-

ket develops, direct decarbonization and electrification retro-

fits should be targeted to customer segments where they can

provide the most benefits, including health/indoor air quality,

comfort, and bill reductions and where transaction costs can

be minimized, including through policy incentives and well-de-

signed energy rates.

Emphasizing the importance of customers’ experiences and out-

comes should also shift the policy focus from “what would have

happened in the absence of intervention” to “how can we turn

even more Californians into satisfied owners, and more contrac-

tors into advocates of clean electric heating technologies.” The

latter is a more productive future-oriented perspective.

Guiding Principle Three: Support Flexible Implementation

A “test and learn” vision encourages research-supported exper-

imentation, quick learning from results and failures, and contin-

uous improvement. The intent of a “test and learn” approach

is to roll out interventions, monitor impact, scale further where

appropriate, and modify or cancel also where appropriate. Flex-

ible implementation rules would encourage the quick modifica-

tion or cancelation of underperforming strategies to minimize

sunk costs, while recognizing that market transformation ef-

forts will take several years to meet long-term goals. It would

also encourage creative approaches for expanding the reach of

electrification efforts (i.e., program spillover). Most importantly,

embracing flexible implementation means that long-term ef-

forts will continue to advance, incorporating insights from on-

going evaluation, but not suspending or limiting progress due

to a single past program’s failure or missed opportunity. This

would avoid the “start/stop” program cycles that have stifled

innovation and progress in energy efficiency in the past.


Guiding Principle Four: Keep Clean Energy Affordable

Increased reliance on clean electricity is a key element of Cali-

fornia’s decarbonized future.48 However, for clean electricity to

become the state’s buildings’ main energy source, policy makers

must ensure its affordability for all. For the CPUC, this means

managing organizational-level coordination to minimize new

system costs and prioritize transmission and distribution system

upgrades that enable maximum deployment of clean, afford-

able distributed energy resources (DERs) and demand-side man-

agement. This should include valuing the storage capabilities of

electrification technologies so that California’s electric cars and

water heaters can act as grid-balancing batteries, augmenting

system hosting capacity and resiliency. Policy-driven factors that

increase electric rates should also be weighed carefully against

the adverse effects they might have on the state’s carbon reduc-

tion goals. Policy makers must prioritize empowering tradition-

ally underserved customers to access decarbonization incentives

and resources that reduce energy costs, so the communities

that need these resources most can benefit from these policies.

NEXT STEPS: PUTTING THE GUIDING PRINCIPLES TO WORK

The above guiding principles can set the vision for California’s

building decarbonization efforts. That vision should be reflect-

ed throughout all aspects of implementation, starting with the

regulatory rules and expectations that will direct market inter-

ventions. This section discusses concrete actions the CPUC and

stakeholders can take to apply the guiding principles to Califor-

nia’s initial building decarbonization efforts.

Minimize Regulatory and Administrative Requirements that Act as Barriers to Affordability, Innovation, and Forward-Looking Collaboration

MANAGE COSTS AND SPEED UP INNOVATION BY MINIMIZING ADMINISTRATIVE AND REGULATORY BURDENS As much as possible, decarbonization funds should be invest-

ed directly on intervention strategies. The CPUC could control

the cost of support activities by imposing a percentage cap on

administrative expenditures (e.g., 7% of budget), or requiring

continuous reductions in administrative costs (e.g., 0.5% per-

cent reduction each year until a certain goal is met). However,

this would risk impeding the marketing, outreach, education,

and other industry engagement activities that will be essential

to getting decarbonization to scale.

Another way to control the cost of decarbonization is to min-

imize the administrative and regulatory burden related to pro-

posing, launching, and managing building decarbonization

programs. This does not mean sacrificing oversight over decar-

bonization efforts—it means focusing oversight on key aspects

and allowing for flexibility in others. By limiting unnecessary re-

porting requirements and burdensome approval processes, the

CPUC can implement a streamlined program approval frame-

work while ensuring that funds are spent effectively according

to a “test and learn” vision. This will make it easier for innova-

tors to propose and test new decarbonization strategies. Reduc-

ing the regulatory reporting requirements will also support the

guiding principle of flexibility: the fewer regulatory costs related

to testing an intervention strategy, the less economic, political,

and personal capital will be invested in it, which should make

it easier for organizations to change course if the strategy does

not perform as expected.

Limiting reporting requirements will not preclude the availability

of data needed to track progress. Instead, the CPUC can prior-

itize metrics and oversight that will encourage least cost emis-

sions reductions in buildings without dampening innovation

with too many reporting requirements. By setting ambitious

decarbonization goals and reducing administrative burdens, the

CPUC can allow energy providers to optimize their spending

and stay focused on results.

DO NOT DEPEND ON SHAREHOLDER INCENTIVES TO MOTIVATE UTILITY ACTION Shareholder incentives were originally proposed for energy ef-

ficiency portfolios because the traditional utility business model

does not motivate energy companies to encourage reductions

in energy consumption. However, California’s experiment with

shareholder incentives has led to decades of expensive litiga-

tion, perverse incentives, and significant ill will among energy

efficiency stakeholders. Collectively, the state has spent millions

of dollars ensuring that no ratepayer money would be unfairly

disbursed to utility shareholders, putting in place complex and

expensive processes to determine exact incentive amounts, and

re-litigating results years later.49 Even with a new shareholder

incentive mechanism, it is not clear that shareholder incentives

alone have motivated increased energy efficiency gains.50

A regulatory mechanism that focuses on accelerating invest-

ment in decarbonization while managing costs, rather than

on debating exactly what shareholder incentives to pay out,

would be a more productive use of ratepayer dollars. This

would reduce the expenses associated with shareholder pay-

out evaluations, allowing those funds to be invested in actual

decarbonization activities, and it could help focus the stake-


holder dialogue on proactive collaboration to reach goals. Elimi-

nating the possibility of contentious shareholder payouts should

allow stakeholders to focus all resources on learning fast from

initial experiences and improving future approaches, not on

building evidence to argue for higher or lower incentive pay-

outs.

Ensure Early Coordination Among Internal Proceedings and State-Level Regulatory Cycles

ORIENT AND ORGANIZE ENERGY EFFICIENCY EFFORTS TO OPTIMIZE THE DUAL VALUE STREAMS OF EFFICIENCY AND ELECTRIFICATION Energy efficiency plays a significant role in California’s de-

mand-side management efforts—reducing demand across the

system, driving economic savings for customers, and locking

in environmental, health, and social benefits due to reduced

carbon emissions and pollution. These benefits of energy ef-

ficiency will have an enhanced role to play in support of an

aggressive push for building decarbonization, even as some of

the locational and time-dependent aspects of how the resource

is valued may change.

Many core energy efficiency benefits will be essential to suc-

cessful building decarbonization. Conventional energy efficien-

cy is critical for reducing air leakage and energy waste in build-

ings, and for reducing distribution system expansion costs by

lowering peak demand. These benefits will increase in value and

importance as California’s buildings rely more on clean electric-

ity. Well-weatherized, efficient, electric homes can provide elec-

tric grid flexibility while also reducing unnecessary energy and

infrastructure costs at peak demand times. By reducing energy

waste, energy efficiency will help control electrification custom-

er bills during this transition and ensure that electrification ben-

efits the grid by managing system costs and putting downward

pressure on rates for all customers.

Evolving some aspects of energy efficiency, including specific

program rules and how the resource is valued, will allow for

maximum synergies with the state’s decarbonization work. The

value of energy efficiency will increasingly depend on location,

time of day, and seasonality. It will be important to appropriate-

ly value those attributes so that energy efficiency providers can

aggregate and deliver the highest value savings. It will be equal-

ly important to properly account for all value streams from en-

ergy efficiency in a building decarbonization scenario, including

reduction of system and circuit peak, ramp, and GHG emissions.

Delivering efficiency at the specific times and locations that will

be most helpful for decarbonization may be more challenging.

Undervaluing the resource would limit how much energy effi-

ciency can be procured to support the state’s building decar-

bonization goals.51 This could also make electrification more

expensive and lead to higher-than-necessary customer costs.

INTEGRATE CONSIDERATION OF DECARBONIZATION APPROACHES AND PROGRESS INTO GRID AND

RESOURCE PLANNING AND OTHER PROCEEDINGSDecarbonization can be implemented in ways that minimize the

cost of new infrastructure to serve new load. Electric “prosum-

ers” can use advanced controls on their electrification equip-

ment to augment the distribution grid’s flexibility and resiliency.

For example, adding controlled electric load during the day can

help use the state’s plentiful supplies of solar power, and, com-

bined with shifting of controllable electric load away from eve-

ning peaks, can reduce the number of fossil fuel plants that must

be kept running to prepare for the evening ramp. Energy pro-

viders can also deploy behind-the-meter electrification equip-

ment in low load pockets or areas affected by power backflow

to defer investments in transmission or distribution equipment.

One good example of this locational targeting is Pacific Gas &

Electric’s proposed Behind the Meter (BTM) thermal storage pi-

lot program.52 Decarbonization and potential infrastructure cost

savings, however, will only be achieved if behind-the-meter in-

vestments are appropriately considered and valued as grid opti-

mization strategies in system planning forums.

CPUC staff and stakeholders will need to accurately convey in-

frastructure cost increase and savings potential from decarbon-

ization in the many regulatory proceedings that dictate capital

investments in the energy system. These proceedings should

include Resource Adequacy, Integrated Distributed Energy Re-

sources, the Integrated Resource Plan, and the Distribution Re-

sources Plan. In the longer term, decarbonization efforts could

also be informed by any proceedings that are initiated to ad-

dress the future of underutilized gas infrastructure; these future

proceedings could lead to further locational targeting of decar-

bonization efforts so as to minimize costs from underutilized

assets. Preparation for all of the above regulatory proceedings

should include building case studies and analyses to support

the use of demand-side electrification and decarbonization re-

sources as grid assets. Only then will building decarbonization

be able to fully contribute to energy affordability in the state.

Prioritize Ongoing Evaluation to Inform Progress Towards Results: Least-Cost Long-Term GHG Emission Reductions

The ultimate goal of California’s building decarbonization ef-

forts should be to maximize the GHG reductions from build-

ings in the state at the lowest cost possible. In some cases, me-

ter-supported GHG reductions can be tracked as a performance


metric. Other market transformation metrics can also serve

as indicators of progress towards decarbonization goals. This

would include metrics such as year-over-year reductions in first

costs of near-zero-emission technologies, or percentage of new

heating equipment sales that consists of near-zero-emission

technologies. Retrospective metrics such as replaced equipment

lifetime can help shed light on market turnover, but are less

useful in measuring progress toward the two key goals.

To keep decarbonization focused on scaling least-cost long-term

GHG reductions, CPUC staff, stakeholders, and energy provid-

ers must prioritize evaluation needs to align with advancing

decarbonization goals. This prioritization should apply to deter-

mining what issues are investigated, what type of information

is gathered, and how this research will support the improved

evolution of programs.

HOW DO WE TRANSLATE CHANGES IN ELECTRICITY USE TO GHG REDUCTIONS? In California, legislative

mandates for renewable electricity make it so changes

in electricity consumption will lead to increasingly

larger GHG reductions over time. Turning electric

load on or off today will likely immediately impact

the amount of gas generation on the system, since

gas plants are still used to “follow load” and balance

the system second by second. However, if the

electric load was removed or added permanently, the

change would have long-term impacts on the electric

system, more likely affecting long-term dispatch or

procurement decisions, which would be subject to

increasing renewable power requirements. Therefore,

the best way to accurately calculate the GHG impacts

of building decarbonization is to use methodologies

that capture the “long-run build” effects.

For example, stakeholders might agree that investigating work-

force willingness to install efficient electric water heating equip-

ment is a research priority. This evaluation may include both a

state of play and a more longitudinal approach, ideally, but it

should incorporate ways to capture the evolving needs of the

workforce to meet the demand of decarbonization efforts. Sim-

ilarly, stakeholders could also agree that tracking the level of

participation of traditionally underserved customer segments

in decarbonization incentive and workforce programs and the

impact of decarbonization on energy bills for low-income and

disadvantaged community members can help ensure that de-

carbonization programs are not harming the state’s most vul-

nerable populations. In these ways, evaluation can inform fu-

ture iterations of program development. Further, as a particular

initiative matures, and workforce development needs might

become less critical than affordability or access, research and

evaluation needs should also change, again to support progress

in future programs.

Continuously Improve

California’s ambitious decarbonization goals will require contin-

uous improvement, not just to improve upon underperforming

strategies, but also to build upon successes and increase impact

and scope. This will require removing regulatory and adminis-

trative barriers to innovation, as well as focusing data gathering

and reporting requirements on information that can be used to

improve programs.

Decarbonization interventions should focus on influencing cost,

adoption, and investment factors. Programs should track mar-

ket development indicators, spillover, and the role of the pro-

gram in activating consumer investment and accelerating this

progress. Since the goal is to continually improve impact, indica-

tors of impact should be tracked for both program participants

and non-participants. Research questions useful for continuous

improvement include what motivated consumers to make an

investment in a new technology, adopt a new way of operating,

or pay a premium (even with an incentive) to switch to a clean-

er fuel. These questions can expose how program participants

were motivated to act and how that impact could be improved

next time. Focusing on what motivates customers to act, rather

than on what would have happened in the absence of program

intervention, would result in information that can be used to

enhance the impact of ongoing decarbonization efforts.

Tracking trends in market conditions, including changes to

adoption barriers; technology costs; product performance; and

customer, GHG, and grid benefits, will help keep decarbon-

ization strategies focused and effective. These leading indica-

tors can be used to monitor the progress of market transfor-

mation programs, which can often take several years to meet

their long-term objectives. Market data should be used to up-

date program models, assumptions about barriers, incentive

structures, technical assistance, and support services as the

market evolves towards broader acceptance of decarbonization

technologies. These continuous improvement strategies will en-

sure that decarbonization investments, tactics, and innovations

remain forward-looking and customer-centric.


CONCLUSION

California’s ambitious GHG reduction goals demand that the

building sector be rapidly decarbonized. To catalyze and ramp

up decarbonization activities, all stakeholders will need to work

together. The CPUC needs to structure a regulatory framework

that supports aggressive interventions, encourages innovation,

and delivers consistent results. Project proponents must design

market development initiatives and program offerings tailored

to customers’ needs and capacities to adopt new low- and ze-

ro-emissions technologies, and also broad enough to come to

scale quickly when successful. Lastly, all stakeholders will be ac-

countable for ensuring that decarbonization is accessible to all

customers and that customers are not disproportionately bur-

dened by their fuel choices. Although SB 1477 requirements

offer a starting point for testing approaches and targeting hard-

to-reach customer segments, to reach the scale necessary to

achieve economy-wide carbon neutrality by 2045, more must

be done before 2020.

After laying out the need for building decarbonization in Cal-

ifornia and the barriers that must be overcome to successfully

meet the building sector’s share of the state’s GHG goals, this

paper recommends guiding principles for a successful building

decarbonization regulatory framework: (1) focusing on least

cost long-term GHG reductions, (2) delivering customer value

by customer segment, (3) implementing a flexible test and learn

framework, and (4) keeping clean energy affordable. The guid-

ing principles are embedded into the recommended actions for

the CPUC, including minimizing administrative costs and regu-

latory requirements, coordinating among internal proceedings,

prioritizing ongoing evaluation, and continuously improving.

While many implementation details remain to be determined,

the elements presented in this paper intend to set those detail

in the right direction.


INPUT MARKET CURRENCY PAID/RECEIVED BY NOTES/TRENDS

COSTS

Equipment—space conditioner, water heater, cooktop, dryer

New & retrofit Money Customer Higher in retrofit than new; expected to decline over time

Installation New & retrofit Money Customer Includes contractor labor and permitting; expected to be less for newer buildings and may not have an incremental cost in new construction

Building-level Electrical Upgrades

Retrofit Money Customer Varies by building age, location, incumbent system(s)

Infrastructure—electrical distribution

New & retrofit Money Electric ratepayers Costs likely not incurred from any one project but a collection of projects or programs; impact may be small to individual ratepayers

Infrastructure— existing natural gas infrastructure

Retrofit Money Customer & gas ratepayers

Customers may pay a fee to disconnect natural gas service; rate impacts to remaining utility customer pool

Transaction— customer

Retrofit Time & effort Customer Time and effort spent to find or pick equipment and contractor, wait for installation, operate/manage/maintain equipment, participate in a demand response or load shifting program

Transaction— contractor

New & retrofit Time, effort, lost wages

Contractor Time and effort spent to learn about new equipment, train in installation, sell new equipment to customers, find and purchase new equipment; could be measured in monetary terms as opportunity cost of training

BENEFITS RECEIVED BY

Environmental New & retrofit GHG emissions Society Emissions savings from electric appliances, magnitude depends on baseline fuel and electric grid resource mix

Infrastructure— avoided new natural gas pipelines

New Money Development company

Development company may pass cost savings (or a proportion) on to customer but CPUC does not have authority to require savings to pass on

Infrastructure— ramping services/ grid management

New & retrofit Energy Utility and customer (assuming incentives for grid services)

Additional research is needed given uncertainty around technical capacity and effects of proprietary software and controls on equipment

Comfort New & retrofit Quality of life Customer Demand for air conditioning may drive adoption of heat pump systems, as seen in the Northeast; desire for comfort may also impact the way that customers use their equipment (e.g., not maximizing efficiency)

Workforce development

New & retrofit Labor Society Opportunity to develop a workforce for a clean heating future: high wage, high benefit contractor jobs to transform cost-driven jobs to quality-driven jobs

Health improvement (e.g. improved indoor air quality)

New & retrofit Quality of life, money Society, homes near power plants

May have greater benefits in communities disproportionately impacted by natural gas power plants; quantification options presented with CPUC Societal Cost Test proposal

Appendix 1T R E N D S I N B U I L D I N G E L E C T R I F I C AT I O N C O S T & B E N E F I T C AT E G O R I E S


INPUT MARKET CURRENCY PAID/RECEIVED BY NOTES/TRENDS

UNCERTAIN IMPACT

Energy bills Mostly retrofit, also new

Money Customer Operating costs for heat pump space conditioners and water heaters may increase given the relative cost of electricity vs natural gas but this is uncertain and potentially only a short-term issue; increased electricity use may increase total costs or push customers into higher tiered rates. Customers that are slower to adopt decarbonized technologies or that choose to remain on a fossil fuel system may face increased costs related to maintaining fossil fuel infrastructure.

Safety New and retrofit Quality of life Customers and their neighbors

All-electric homes would not face safety risks related to on-site fuel combustion; however, as gas demand lowers, maintaining adequate pressure within existing gas lines may become more complicated and introduce additional risks

Energy security New and retrofit Quality of life Society There may be risks from reducing the diversity of energy resources and increased dependence on aging electrical infrastructure.

Appendix 1, cont.T R E N D S I N B U I L D I N G E L E C T R I F I C AT I O N C O S T & B E N E F I T C AT E G O R I E S


Endnotes1. Williams, J.H., B. Haley, F. Kahrl, J. Moore, A.D. Jones, M.S. Torn, H. McJeon, November 2014, Pathways to deep decarbonization

in the United States, prepared for the Deep Decarbonization Pathways Project of the Sustainable Development Solutions Network, Available online at: http://unsdsn.org/wp-content/uploads/2014/09/US-Deep-Decarbonization-Report.pdf.

2. California Air Resources Board, July 2018, California Greenhouse Gas Emissions from 2000 to 2016 - Trends of Emissions and Other Indicators, Available at: https://www.arb.ca.gov/cc/inventory/pubs/reports/2000_2016/ghg_inventory_trends_00-16.pdf.

3. Sheikh, Imran, 2017, Decarbonizing residential space and water heating: The case for electrification, ECEEE 2017 Summer Study, Reference number 1-327-17 Sheikh.

4. Steinberg, D., Bielen, D., Eichman, J., Eurek, K., Logan, J., Mai, T., McMillan, C., Parker, A., Vimmerstedt, L., and Wilson, E. (Collectively, National Renewable Energy Laboratory, NREL), Electrification and Decarbonization: Exploring U.S. Energy Use and Greenhouse Gas Emissions in Scenarios with Widespread Electrification and Power Sector Decarbonization, July 2017, Available at: https://www.nrel.gov/docs/fy17osti/68214.pdf.

5. California Air Resources Board, 2018, California Greenhouse Gas Emissions Inventory - 2018 Edition, Available online at: https://www.arb.ca.gov/cc/inventory/data/data.htm. Cal

6. Brook, Martha, June 2018, Building Decarbonization 2018 Update Integrated Energy Policy Report, Presentation at the June 14, 2018 IEPR Workshop on Achieving Zero Emission Buildings, Docket # 18-IEPR-09, Available at: https://efiling.energy.ca.gov/GetDocument.aspx?tn=223817.

7. Deason, J., Wei, M., Leventis, G., Smith, S., Schwartz, L., March 2018, Electrification of buildings and industry in the United States: Drivers, barriers, prospects, and policy approaches, Prepared for the Office of Energy Policy and Systems Analysis U.S. Department of Energy, Available online at: http://ipu.msu.edu/wp-content/uploads/2018/04/LBNL-Electrification-of-Buildings-2018.pdf

8. Brook, Martha, June 2018, Building Decarbonization 2018 Update Integrated Energy Policy Report, Presentation at the June 14, 2018 IEPR Workshop on Achieving Zero Emission Buildings, Docket # 18-IEPR-09, Available at: https://efiling.energy.ca.gov/GetDocument.aspx?tn=223817.

9. Current heat pump equipment efficiencies make up for the electric energy lost in transmission and distribution. Therefore, in California, heat pump space and water heating equipment emit fewer GHG emissions than any other available technology. See A Path Forward for the Three Prong Test: Recommended Updates to the CPUC’s Test for Fuel Substitution, Transcendent Energy, filed by the Natural Resources Defense Council in R.13-11-005, July 27, 2018.

10. Deason, J., Wei, M., Leventis, G., Smith, S., Schwartz, L., March 2018, Electrification of buildings and industry in the United States: Drivers, barriers, prospects, and policy approaches, Prepared for the Office of Energy Policy and Systems Analysis U.S. Department of Energy, Available at: http://ipu.msu.edu/wp-content/uploads/2018/04/LBNL-Electrification-of-Buildings-2018.pdf

11. Steinberg, D., Bielen, D., Eichman, J., Eurek, K., Logan, J., Mai, T., McMillan, C., Parker, A., Vimmerstedt, L., and Wilson, E., July 2017, Electrification and Decarbonization: Exploring U.S. Energy Use and Greenhouse Gas Emissions in Scenarios with Widespread Electrification and Power Sector Decarbonization, Available at: https://www.nrel.gov/docs/fy17osti/68214.pdf.

12. E3, June 2018, Appendix A of Deep Decarbonization in a High Renewables Future, Prepared for the California Energy Commission, Available at: https://www.ethree.com/wp-content/uploads/2018/06/Deep_Decarbonization_in_a_High_Renewables_Future_CEC-500-2018-012-1.pdf.

13. Williams, J.H., B. Haley, F. Kahrl, J. Moore, A.D. Jones, M.S. Torn, H. McJeon, November 2014, Pathways to deep decarbonization in the United States, prepared for the Deep Decarbonization Pathways Project of the Sustainable Development Solutions Network, Available online at: http://unsdsn.org/wp-content/uploads/2014/09/US-Deep-Decarbonization-Report.pdf.

14. E3, June 2018, Deep Decarbonization in a High Renewables Future, Prepared for the California Energy Commission, Available at: https://www.ethree.com/wp-content/uploads/2018/06/Deep_Decarbonization_in_a_High_Renewables_Future_CEC-500-2018-012-1.pdf.

15. Figure 8 of Deep Decarbonization in a High Renewables Future

16. Steinberg, D., Bielen, D., Eichman, J., Eurek, K., Logan, J., Mai, T., McMillan, C., Parker, A., Vimmerstedt, L., and Wilson, E. (Collectively, National Renewable Energy Laboratory, NREL), Electrification and Decarbonization: Exploring U.S. Energy Use and Greenhouse Gas Emissions in Scenarios with Widespread Electrification and Power Sector Decarbonization, July 2017, Available online at: https://www.nrel.gov/docs/fy17osti/68214.pdf.

17. Eto, Joseph, December 1998, Guidelines for Assessing the Value and Cost-effectiveness of Regional Market Transformation Initiatives, Prepared for the Northeast Energy Efficiency Partnerships (NEEP), Available at: http://eta-publications.lbl.gov/sites/default/files/neep-reg-mrkt-transform.pdf


18. The National Efficiency Screening Project, May 2017, National Standard Practice Manual for Assessing Cost-effectiveness of Energy Efficiency Resources, Available at: https://nationalefficiencyscreening.org/wp-content/uploads/2017/05/NSPM_May-2017_final.pdf.

19. Sheikh, Imran, November 2017, Lowest cost reduction of space and water heating emissions in California, report for Sierra Club.

20. CPUC Staff, IDSM Cost-effectiveness Mapping Project Report and Staff Proposal, Available at: www.cpuc.ca.gov/WorkArea/DownloadAsset.aspx?id=10742.

21. CPUC Staff, Cost-effectiveness Mapping Project Cost and Benefits Matrix, Available at: http://www.cpuc.ca.gov/General.aspx?id=10745.

22. R.14-10-003. CPUC, 2018, Administrative Law Judge’s Ruling Seeking Responses To Questions And Comment On Staff Amended Proposal On Societal Cost Test, Issued in Rulemaking 14-10-003, Available at: http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M212/K023/212023660.PDF

23. Pacific Northwest National Lab, July 2013, Demand Response Performance of GE Hybrid Heat Pump Water Heater, Available at: https://www.pnnl.gov/main/publications/external/technical_reports/pnnl-22642.pdf.

24. Ecotope, Inc., June 2018, Heat Pump WAter Heater Electric Load Shifting: A Modeling Study, Available at: https://ecotope-publications-database.ecotope.com/2018_001_HPWHLoadShiftingModelingStudy.pdf.

25. Jadun, Paige, Colin McMillan, Daniel Steinberg, Matteo Muratori, Laura Vimmerstedt, and Trieu Mai, December 2017, Electrification Futures Study: End-Use Electric Technology Cost and Performance Projections through 2050. Golden, CO: National Renewable Energy Laboratory. NREL/TP-6A20-70485., Available at: https://www.nrel.gov/docs/fy18osti/70485.pdf

26. Energy and Environmental Economics (E3), June 2018, Deep Decarbonization in a High Renewables Future, Prepared for the California Energy Commission, June 2018, Available at: https://www.ethree.com/wp-content/uploads/2018/06/Deep_Decarbonization_in_a_High_Renewables_Future_CEC-500-2018-012-1.pdf.

27. Skumatz, L., 2009, Lessons Learned and Next Steps in Energy Efficiency Measurement and Attribution: Energy Savings, Net to Gross, Non-Energy Benefits, and Persistence of Energy Efficiency Behavior (at page 74), prepare for the California Institute for Energy and Environment Behavior and Energy Program, Available at: https://uc-ciee.org/downloads/EEM_A.pdf.

28. CPUC Staff, 2018, Distributed Energy Resource Cost-Effectiveness Evaluation: Further Recommendations on the Societal Cost Test, An Energy Division Staff Proposal Addendum #2, Issued via Ruling in Rulemaking 14-10-003, Available at: http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M212/K023/212023660.PDF

29. E3, June 2018, Deep Decarbonization in a High Renewables Future, Prepared for the California Energy Commission, June 2018, Available at: https://www.ethree.com/wp-content/uploads/2018/06/Deep_Decarbonization_in_a_High_Renewables_Future_CEC-500-2018-012-1.pdf.

30. Deason, J., Wei, M., Leventis, G., Smith, S., Schwartz, L., Electrification of buildings and industry in the United States: Drivers, barriers, prospects, and policy approaches, Prepared for the Office of Energy Policy and Systems Analysis U.S. Department of Energy, March 2018, Available online at: http://ipu.msu.edu/wp-content/uploads/2018/04/LBNL-Electrification-of-Buildings-2018.pdf

31. Northeast Energy Efficiency Partnership (NEEP), January 2017, Northeast/Mid-Atlantic Air-Source Heat Pump Market Strategies Report 2016 Update, Available at: https://neep.org/sites/default/files/NEEP_ASHP_2016MTStrategy_Report_FINAL.pdf

32. Farahmand, Farhad, Barriers for Space and Water Heating Electrification and Distributed Solar, 2018 ACEEE Summer Study on Energy Efficiency in Buildings.

33. Billimoria, Sherri, Mike Henchen, Leia Guccione, and Leah Louis-Prescott, 2018, The Economics of Electrifying Buildings: How Electric Space and Water Heating Supports Decarbonization of Residential Buildings. Rocky Mountain Institute, Available at: http://www.rmi.org/ insights/reports/economics-electrifying-buildings/

34. TRC, November 2016, Palo Alto Electrification Final Report, Prepared for the City of Palo Alto, Available at:https://www.cityofpaloalto.org/civicax/filebank/documents/55069.

35. TRC, September 2018, City of Palo Alto 2019 Title 24 Energy Code Reach Code Cost Effectiveness Analysis DRAFT, Prepared for the City of Palo Alto, Available at: https://cityofpaloalto.org/civicax/filebank/documents/66742.

36. Farahmand, Farhad, 2018, Barriers for Space and Water Heating Electrification and Distributed Solar, 2018 ACEEE Summer Study on Energy Efficiency in Buildings.

37. Prahl, R. and Keating, K., October 2014, Building a Policy Framework to Support Energy Efficiency Market Transformation in California Public Review Draft, Available at: https://www.energydataweb.com/cpucFiles/pdaDocs/1187/MT_Policy_White_Paper_Public_Review_draft_Oct_2014.doc

Endnotes, cont.


38. Disadvantage Communities Advisory Group, September 2018, Disadvantage Communities Advisory Group Equity Framework, Available at https://efiling.energy.ca.gov/getdocument.aspx?tn=224742.

39. Building decarbonization is a new concept. An established market that would be ready to respond to competitive solicitations for decarbonization services does not yet exists. However, the CPUC should consider transitioning decarbonization to a competitive procurement framework in the mid-term.

40. SB350 requires that transportation electrification programs seek to minimize overall costs and maximize overall benefits.

41. The IRP framework cannot be used for building decarbonization at this time because it does not analyze cost and GHG reduction trade-off across multiple fuel options (electricity and gas).

42. The CPUC routinely uses a variety of cost-effectiveness tests to measure the values of demand-side interventions. Those tests could be used to assess some aspects of decarbonization, but new tests may be needed for the societal values not captured by current CPUC tools.

43. Regulatory Assistance Project, Beneficial Electrification: Ensuring Electrification in the Public Interest, June 2018, pg. 9.

44. See “Approval Threshold” discussion earlier for more detail.

45. A good example of this is the Northwest Energy Efficiency Alliance’s (NEEA) approach to energy efficiency market transformation, which focuses on gross market outcomes instead of attribution to specific interventions.

46. A fence-line approach aggregates GHG reductions, measured based on metered energy data, on an institutional campus (including campus vehicles) up to previously demarcated boundaries, or virtual fence-lines. Sothern California Edison, Testimony in Support of its Application for Approval of its Clean Energy Optimization Pilot, filed with the CPUC May 15, 2015, pg. 27.

47. Energy and Environmental Economics (E3), Deep Decarbonization in a High Renewables Future, Prepared for the California Energy Commission, June 2018, Figure 27.

48. Ibid.

49. CPUC Decision 15-09-026, Order Granting Rehearing of Decisions 10-12-049, 09-12-045, and 08-12-059 and Consolidating Rehearings, Modifying Rulemaking 09-01-019 and Denying Rehearing of Rulemaking, and Denying Request for Official Notice, issued September 22, 2015, pg. 3-8.

50. CPUC, Commission Staff Performance Statement Report: PY 2016 Ex Post and PY 2017 Ex Ante Savings, October 26, 2018, Table 4-3.

51. The most recent E3 Pathways report showed that energy efficiency has negative societal costs and remains a key element for meeting California’s GHG reduction goals. One way to approach a new valuation of energy efficiency could be to calculate what the societal cost of meeting the GHG goals would be in the absence of energy efficiency.

52. Pacific Gas & Electric, 2018 Energy Storage Procurement and Investment Plan, 2018 Assembly Bill 2868 Energy Storage Investments and Programs Prepared Testimony, March 1, 2018, Volume Three, Chapter 7.

Endnotes, cont.

california’s building decarbonization opportunity: knowing ... · given current technology costs...

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