HomeMy WebLinkAboutItem 7a. Study Session - Clean Energy Choice Program for New Buildings - 2022 Strategic Direction Item 7a
Department: Community Development
Cost Center: 4006
For Agenda of: 2/1/2022
Placement: Study Session
Estimated Time: 60 minutes
FROM: Michael Codron, Community Development Director
Prepared By: Chris Read, Sustainability Manager; Bob Hill, Sustainability & Natural
Resources Official; Teresa McClish, Housing Policy & Programs Manager
SUBJECT: STUDY SESSION: CLEAN ENERGY CHOICE PROGRAM FOR NEW
BUILDINGS - 2022 STRATEGIC DIRECTION
RECOMMENDATION
Receive a presentation on the first phase of the Clean Energy Choice Program and
provide strategic direction to staff ahead of the 2022 program update.
REPORT-IN-BRIEF
In 2020, Council adopted the Clean Energy Choice Program for New Buildings. The
program encourages all-electric new buildings by placing additional eff iciency and
building performance requirements on mixed fuel buildings (those that include natural
gas) in support of Council’s adopted greenhouse gas emissions reduction goals. The
program is tied to the California Energy Code and must be updated when the statewide
code is updated every three years. The 2020 Climate Action Plan and 2021 -23 Financial
Plan anticipated this need and directed staff to update the Clean Energy Choice Program
in 2022.
In support of this update, staff conducted a review of the first year of program performance
and found that when project applicants had the choice, less than half chose to build all -
electric. This rate is not sufficient to accomplish City-wide objectives for greenhouse gas
reductions. Substantial progress in this area is necessary in the immediate future to
accomplish program goals for emissions reductions from the built environment if the City
is to accomplish adopted City Council policies and goals.
The report provides two approaches for Council feedback to inform staff’s approach to
the 2022 program update. Approach #1 is to remove the natural gas compliance option
for new buildings. Approach #2 is to continue with the current “electric-preferred” program
while working to identify other opportunities to reduce greenhouse gas emissions. Council
could also provide strategic direction on a combined approach that adopts the “electric
preferred” option with subsequent phased in removal of the natural gas compliance
pathway at a later date.
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Based on contents of this Council Agenda Report, staff recommends Approach #1. In any
case, staff will continue to conduct research and work with stakeholders to identify
reasonable exemptions and to ensure a cost effective, equitable, and effective program.
DISCUSSION
The discussion section of this report provides historical background for the Clean Energy
Choice Program for New Buildings, including an overview of program performance during
the past year, an update on statewide building climate policy, and options available to the
City for the 2022 Energy Code and Clean Energy Choice Program update.
Background
Climate Action Plan for Community Recovery
On August 19, 2020, Council approved the City’s Climate Action Plan for Community
Recovery, and adopted Resolution 11159 (2020 Series), which includes the goal of
carbon neutrality by 2035 and a building sector goal of zero operational greenhouse gas
(GHG) emissions from new buildings.
The Climate Action Plan for Community Recovery forecasts annual community emissions
to be approximately 397,710 metric tons of carbon dioxide equivalent (MTCO2e) in 2035.
The plan provides a trajectory to reducing these emissions towards net zero by 2035, with
approximately seven percent of total reductions coming from new and existing building
decarbonization (26,750 MTCO2e). Of that, a projected 6,250 MTCO2e in reductions are
expected to come from all-electric new buildings permitted between 2020 and 2035.
Although the emissions reductions from new buildings is small relative to existing
buildings, all-electric new buildings provide a least-cost approach to avoiding the addition
of new emissions sources while the community works to achieve its climate goals.1 All-
electric new buildings are cost effective, highly efficient, provide cleaner indoor air quality,
and provide substantially lower operational emissions than buildings that use natural gas
appliances.2
1 It is important to note that in the Climate Action Plan, a total of 111,030 MTCO2e remain unaccounted for,
with reductions for these emissions needing to emerge in future planning updates.
2 See previous findings regarding cost effectiveness, building efficiency, and operational emissions in the
September 3, 2019 Council Agenda Report.
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Climate Action Plan Commitment to Equity
The Climate Action Plan for Community Recovery includes a commitment to implement
actions through an equity lens.3 The relationship between energy and equity is a key
focus area for the City and its sustainability work moving forward. The following are
examples of how staff is integrating equity considerations into the update:
1. Meeting with local affordable housing providers and developers to learn from their
experience building and managing all-electric projects.
2. Closely evaluating the pending cost-effectiveness studies (see below) to
understand the projected utility bill cost differences between all-electric and mixed
fuel buildings built under the 2022 California Energy Code that would be occupied
by low- and moderate- income households.
3. Facilitate enrollment in the California Alternate Rates for Energy (CARE) and the
Family Electric Rate Assistance (FERA) programs, both of which provide reduced
electricity rates for low-income households.4
4. Continuing to advocate for and facilitate access to Central Coast Community
Energy’s all-electric affordable housing unit incentive program (see below).
5. Understanding how all-electric buildings (which typically have lower construction
and offsite infrastructure costs and require less energy utility coordination) can
support the City’s ambitious housing production goals.
The City’s Current Approach to All-Electric New Buildings
The City has discussed all electric buildings as far back as the public process for the Avila
Ranch and San Luis Ranch Development Agreements. Since then, the topic has been
presented to the City Council and community on numerous occasions. The topic has also
gained statewide relevance with over 50 other local governments in Californ ia adopting
similar regulations to encourage or require all-electric new buildings.5
As a primary implementing action, Council unanimously approved the Clean Energy
Choice Program for New Buildings (Program) on June 16, 2020. The Program includes
(among other things):6
3 See Administrative Action 1.1 of the Climate Action Plan:
https://www.slocity.org/home/showpublisheddocument/27891/637339848339500000 . The action directs
staff to integrate multiple equity considerations into implementation action project plans.
4 More information about CARE and FERA is available here:
https://www.pge.com/en_US/residential/save-energy-money/help-paying-your-bill/longer-term-
assistance/care/care.page?cid=em_PSPS_PSPSMonthlyNL_20200306_Care_email_na_na
5 The Sierra Club maintains a list of adopted policies here.
6 Note that although the Climate Action Plan was adopted after the Clean Energy Choice Program for New
Buildings (adopted June 16, 2020), the two items had been seen is integral to each other’s success since
as early as Fall of 2018.
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Resolution 11133 (2020 Series) stating that, “it is the Policy of the City that new
buildings should be all-electric.”
Ordinance 1684 (2020 Series) which requires that mixed-fuel buildings be
substantially higher performing than all-electric buildings and requires solar
installations on nonresidential buildings.
Incentives including funding for technical assistance to builders to help them
successfully process permits for all-electric buildings and advocacy for financial
incentives.7
Ordinance 1685 (2020 Series) allowing limited term regulatory flexibility in certain
cases where mechanical equipment may be allowed in setbacks.8
At that time, the City Council also considered a Carbon Offset Program to further
incentivize all-electric development. The Offset Program would have required any
developer choosing to build a mixed-fuel building instead of all-electric to pay an in-lieu
fee. The in-lieu fees would then be used by the City to support electrification of existing
residential buildings in the City. The Carbon Offset Program was a unique, market-based
solution to accomplish the objective of reducing emissions from buildings. However, local
offset programs have not been adopted elsewhere and the Carbon Offset Program as
previously conceived would be staff time intensive to administer.
The June 16, 2020, Council action also included direction for “Staff to return to Council in
June 2021 with a summary of program performance and the Carbon Offset Program for
deliberation and action.” Due to scheduling conflicts, this action was completed as a
memo to Council in December 2021, which is included as Attachment A and summarized
below.
Coordination with Building Code Updates
The local amendments to the California Energy Code made via Ordinance 1864 apply to
the 2019 version of the triennial statewide code and will be enforceable and valid through
December 31, 2022. The approach taken under the Clean Energy Choice Program for
New Buildings is referred to as “electric-preferred,” meaning that the more stringent
regulations for mixed-fuel buildings are intended to encourage all-electric buildings as the
preferred option.
7 Staff successfully supported the creation of a program at Central Coast Community Energy to provide
direct incentives to developers of multi-family and affordable housing units to choose all-electric buildings.
Of the $1.2 million set aside for the program in Fiscal Year 2020-21, $844,000 in incentives supporting 502
units across 8 projects in the City of San Luis Obispo were awarded and reserved.
8 At the time of report publication, there are no known instances of a project seeking to use the flex ibility
provisions provided by Ordinance.
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The City must update and adopt standards if they are to be enforceable as part of the
2022 statewide code (which will be valid January 1, 2023 through December 31, 2025).
The need to update the Clean Energy Choice Program was known in advance and is
included in the 2021-23 Climate Action Major City Goal and explicitly contemplated in
Climate Action Plan Green Buildings Action 1.1 (Adopt and implement the Clean Energy
Choice Program for New Buildings and review opportunities for improvement in the 2022
code cycle). This report and presentation to Council officially kicks off the update process,
which will continue through September 2022 as described below.
Clean Energy Choice Program for New Buildings – Program Performance
Program Participation
The Clean Energy Choice Program for New Buildings went into effect on September 1,
2020. In December 2021, staff provided a progress memo to Council summarizing one
year of program performance (Attachment A).
The City began implementing the program on September 1, 2020. Between then and
August 31, 2021, the City received 255 building permit applications for new buildings for
single family residential, multi-family residential, commercial, and mixed-use projects. In
total, the submitted permit applications include 333 residential units, and approximately
7,050 square feet of nonresidential space.
Over the one-year study period, the program has led to a substantial number of new all -
electric residential units (204 out of 333 units, 61 percent of total).9 It is important to note,
though, that 153 all-electric units submitted as part of the San Luis Ranch project were
subject to a Development Agreement requiring all electric new building. Another
consideration is that 68 mixed-fuel units built in the Righetti Ranch subdivision were
exempt from the program because of the effective date of the ordinance.
For an apples-to-apples comparison, staff has removed San Luis Ranch and the Righetti
Ranch/Orcutt Area Specific Plan permit applications from the analysis to reflect only those
permits that were subject to the program and where the developer had the option to
choose between fuel types.
Of these remaining 112 units, 51 are all-electric and 61 are mixed-fuel (46 percent and
54 percent, respectively). Table 1 provides a summary of the residential permit data.
9 The program is tracked through the City’s Energov permit system.
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Table 1: Mixed-fuel and All-Electric Units in Building Permits
Submitted 9/1/2020-9/2/2021
Location
All-
Electric Mixed Fuel Total
% all-
electric
Righetti Ranch/Orcutt
Area (Exempt) Multi-Family 0 68 68 0%
San Luis Ranch (All-
Electric Required)
Single Family 51 0 51 100%
Multi-Family 102 0 102 100%
Location
All-
Electric Mixed Fuel Total
% all-
electric
Other - Subject to
Clean Energy Choice
Program
Single Family 14 10 24 58%
Accessory
Dwelling Unit 8 14 22 36%
Multi-Family 29 37 66 44%
Total 51 61 112 46%
Over the one-year study period, the City also received permit applications for two
commercial projects and two mixed-use projects with commercial components. Of these
permit applications, three projects totaling 3,950 square feet are mixed-fuel. The one
project that is going all electric has an estimated 3,100 square feet of commercial space.
It is important to note that these findings have limitations including: 1) the data only
provides one year of permits, and 2) the data does not have deta ils about which
appliances were natural gas and electric in the mixed -fuel cases.
Incentives and Technical Support
As mentioned above, the program was also supported with technical assistance and
direct financial incentives. These incentives may have imp roved program performance.
The resources were well utilized and have facilitated successful permit review. Notable
findings include:
In addition to technical support, City staff successfully supported the creation of a
program at Central Coast Community Energy to provide direct incentives to
developers of multi-family and affordable housing units to choose all-electric
buildings. Of the $1.2 million set aside for the program in Fiscal Year 2020 -21,
$844,000 in incentives supporting 502 units across 8 projec ts were awarded and
reserved. This program continues and is now exclusively focused on affordable
housing.
The City’s Energy Reach Code Virtual Help Desk launched on September 1, 2020,
in parallel with the Clean Energy Choice Program effective date. Since the launch
of the help desk, 89 visitors used the help desk as a compliance resource.
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Based on an analysis of program results to date, when provided a choice, developers are
selecting a mixed-fuel option about half of the time. Even though the results are
preliminary, this rate is not sufficient to accomplish City -wide objectives for greenhouse
gas reductions. Substantial progress in this area is necessary in the immediate future to
accomplish program goals for emissions reductions from the built environmen t if the City
is to accomplish adopted City Council policies and goals.
Statewide Updates for Climate Action and Low Carbon Buildings
2022 California Energy Code
As mentioned above, one of the variables influencing the City’s update to the Clean
Energy Choice Program is how the California Energy Commission updates the statewide
energy code. In December of 2021, the California Energy Commission unanimously
adopted the 2022 California Energy Code.10 The 2022 Code reflects a desire by the
California Energy Commission to improve indoor air quality in buildings, reduce
emissions, and move towards all-electric new buildings. According to the California
Energy Commission, the 2022 Energy Code focuses on four key areas in newly
constructed buildings:11
Encouraging electric heat pump technology for space and water heating, which
consumes less energy and produces fewer emissions than gas -powered units.
Establishing electric-ready requirements for single-family homes to position
owners to use cleaner electric heating, cooking and electric vehicle (EV) charging
options whenever they choose to adopt those technologies.
Expanding solar photovoltaic (PV) system and battery storage standards to make
clean energy available onsite and complement the state’s progress toward a 1 00
percent clean electricity grid.
Strengthening ventilation standards to improve indoor air quality.
The California Energy Code is updated every three years. Since the City’s current
approach to all-electric new buildings builds on amendments to the California Energy
Code, the City’s approach will need to be updated prior to implementation of the new
energy code in January 2023.
10 The 2022 California Energy Code is available here: https://www.energy.ca.gov/programs-and-
topics/programs/building-energy-efficiency-standards/2022-building-energy-efficiency
11 https://www.energy.ca.gov/news/2021-08/energy-commission-adopts-updated-building-standards-
improve-efficiency-reduce-
0#:~:text=The%202022%20Energy%20Code%20focuses,emissions%20than%20gas%2Dpowered%20u
nits.
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Cost Effectiveness Studies
In support of local energy policy development, The California Energy Codes and
Standards Team, composed of staff at the Investor-Owned Utilities operating in California
(PG&E and SoCal Gas, respectively, in San Luis Obispo’s service territory), is currently
working on updating the statewide cost effectiveness studies to reflect the changes to the
2022 California Energy Code.12 The City used the 2019 Cost Effectiveness Studies to
make findings related to cost effectiveness of the current program and will use the 2022
update in the same way.13 Given the changes to the 2022 California Energy Code, staff
expects the cost effectiveness studies to be more favorable for all-electric buildings than
the cost parity generally reported in the 2019 studies.14 Staff expects to receive initial
findings of the report by March of 2022 and the full report to be published by late spring.
More Local Governments Leading the Way
The City of San Luis Obispo was one of the first to pursue an all-electric new buildings
policy. This leadership has inspired countless others to move forward. Since the City
adopted its “electric preferred” approach, more direct and effective approaches that
eliminate natural gas as a compliance option have become the preferred approach.
To-date, 54 California local governments have adopted building electrification ordinances
to either encourage or require all-electric new buildings. Based on review of the
approaches, approximately 45 of those approaches outright prohibit natural gas in new
buildings in one or more building sectors.15
Two examples of this updated approach to the policy include the City of Santa Barbara,
and the City of Santa Cruz:16
1. City of Santa Barbara - In July of 2021, Santa Barbara City Council adopted an
Ordinance that prohibits the installation of natural gas infrastructure in newly
constructed buildings as part of its efforts to achieve carbon neutrality by 2035.
The ordinance applies to all building permits submitted after January 1, 2022 and
12 For more information about the California Energy Codes and Standards Team, see:
https://localenergycodes.com/
13 The statewide study includes information for every climate zone and utility; the City is in Climate Zone 5
and received utility services from Pacific Gas & Electric, and SoCal Gas.
14 For more information about the 2019 Cost Effectiveness Studies and how they informed the City’s policy,
see June 16, 2020 Clean Energy Choice Program Council Agenda Report:
http://opengov.slocity.org/WebLink/DocView.aspx?id=122344&dbid=0&repo=CityClerk&searchid=dec3cc
80-f51d-4826-bc4d-acf9f39433e5
15 The Sierra Club maintains a comprehensive list of California building electrification policies, here:
https://www.sierraclub.org/articles/2021/07/californias-cities-lead-way-gas-free-future
16 Notably, the approach taken by Santa Barbara and Santa Cruz are amendments to the municipal code
(not local amendments to the California Energy Code) that preclude mixed-fuel buildings as a legal
compliance pathway. Since those cities still allow an all -electric compliance path consistent with State law,
they are able to adopt the policy once and will not have to update it every time the triennial California Energy
Code is adopted.
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only applies to newly constructed buildings. Accessory Dwelling Units (ADUs) that
are completely new buildings must be all-electric. Exemptions are allowed for
restaurants, clean rooms, laboratories, and projects where electrification is not
feasible.
2. City of Santa Cruz – After declaring a climate action emergency in early July of
2020, the City of Santa Cruz adopted new municipal code to prohibit the installation
of natural gas infrastructure in new buildings. Existing buildings undergoing
alterations, additions, or tenant improvements are exempt. Other limited
exemptions include: restaurants, facilities employing industrial process heat, ADUs
≤ 750SF, contrary to public interest, and demonstration of infeasibility.
Central Coast Community Energy
Since summer of 2020, Central Coast Community Energy has made a number of policy
changes and improvements that support building electrification including expanded
program budget and staff and a new procurement policy that seeks to achieve 100
percent renewable resources balanced on a monthly basis by 2030.17 This commitment
will ensure that all-electric new buildings continue to reduce their operational emi ssions
impact to near zero by 2030. The additional programming and staffing commitments are
supportive of all-electric new buildings and include ongoing direct incentives for all-electric
new affordable housing units.
2022 Program Update Options
Staff’s intent with this Study Session is to present the information described above and
receive strategic direction ahead of the 2022 update process. Given the updated
information, staff have identified two approaches for the update and several additional
items for consideration.
Please note that in all cases, staff will ensure proposals coming before Council are cost
effective, equitable, and aligned with the other current Major City Goals including housing,
diversity, equity, and inclusion, and fiscal health and responsibility. In instances where,
through further research and due diligence, staff finds an approach is misaligned with
current Major City Goals or is no longer cost effective, the approach will be amended
accordingly. Any amendments of this nature will be highlighted when staff returns to
Council for policy adoption. Based on the contents of this Council Agenda Report and as
reflected in the summary of key evaluative criteria provided by Table 2, staff recommends
Approach #1.
17 For more information, see https://3cenergy.org/understanding-clean-energy/.
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Approach #1 – Remove the natural gas compliance pathway
This approach would remove natural gas as a compliance option for new buildings in
one or more sectors. This approach provides several benefits, including:
Avoids emissions from new mixed-fuel buildings,
Provides a simpler and more straightforward approach for designers, developers,
and staff,
Avoids the need to potentially retrofit “new” buildings in the future,
Honors the commitments to all-electric buildings made by San Luis Ranch, Avila
Ranch, and other early adopters, and
Aligns with adopted Council goals.
Should Council direct staff to pursue this option, staff would spend the public outreach
period clarifying if the approach should be achieved through local amendments to the
2022 California Energy Code or should be adopted by ordinance in the City’s municipal
code on a permanent basis, identifying exemptions where all-electric options aren’t
currently viable, and advocating for incentives and technical assistance to support local
projects.
Approach: #2 – Continue with the Electric Preferred Path
This approach would retain the current method, allowing all -electric buildings that are
minimally compliant with the State code and requiring additional efficiency and/or
energy/carbon performance standards for mixed-fuel buildings. The primary benefit of this
approach is that it is consistent with the City’s current approach and retains choice.
Should Council provide strategic direction to pursue this approach, staff would spend the
public outreach period fine tuning exemptions, reviewing the cost effectiveness studies to
identify optimal additional efficiency and building performance requirements for each
building sector, and advocating for incentives and technical assistance to support local
projects.
To stay on track to achieve Council’s adopted goals, the emissions from new mixed-fuel
buildings would need to be offset or reduced elsewhere. Possible options for additional
emissions reductions would be to increase the City’s existing building retrofit goals or to
further develop the previously mentioned Carbon Offset Program.
It should be noted that retrofits are complicated and expensive and the City’s current
approach to existing buildings is already highly ambitious. The City’s previously
contemplated “Carbon Offset Program” could provide a path to allow natural gas (retain
choice) while also achieving Council’s emissions reduction goals (by funding additional
building retrofit projects). However, this approach would necessarily involve
establishment of substantial administrative and bureaucratic processes to support
success.
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In addition, building emissions reductions through the program would have to be made
above and beyond the current existing building emissions reductions goals. Finally, the
cost of administering a carbon offset program and the effectiveness of such a program is
currently unknown. Should Council direct staff to pursue this path, staff would also spend
the public outreach period researching program cost and feasibility.
Combining Approaches
An alternative approach, should Council wish to consider it, is to develop a program that
implements Approach #2 (Continue with the Electric Preferred Path) as part of the 2022
update and phases in Approach #1 (Remove the natural gas compliance pathway) over
time. Under this combined approach, staff would develop and propose an update in 2022,
that would put an “electric-preferred” policy in place starting January 1, 2023 and would
include a phased in removal of the natural gas compliance pathway at a later date (e.g.,
January 1, 2024). The combined approach would provide additional time for land owners,
developers, and builders to prepare for all-electric requirements. This approach has
several downsides, including 1) allowing for the growth of new onsite natural gas
emissions for another year, 2) requiring that staff concurrently develop two code updates,
and 3) introducing two separate energy codes in the 2022 Building Code cycle for
applicants and staff to keep track of (e.g., there would be one energy code for permit
applications submitted in 2023 and another energy code for permit applications submitted
in 2024 and 2025).
Table 2: Program Update Options by Key Evaluative Criteria
Consistent
with Adopted
Goals and
Policy
Consistent with
Major City
Goals
Requires
Substantial
Additional
Staff Time
Creates
Certainty for
the
Development
Community
Approach #1 – Remove
the natural gas
compliance pathway
Yes Yes No Yes
Approach #2 – Continue
with the “Electric
Preferred” pathway
Maybe18 Yes Yes Maybe19
18 This box is marked “maybe” because the feasibility of implementation of a carbon offset program and the
feasibility of achieving enhanced retrofit goals are unknown, as described above.
19 This box is marked “maybe” because, depending on how Approach #2 is implemented, the process could
be more administratively burdensome, complex, or time consuming.
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Previous Council or Advisory Body Action
The topic of all-electric new buildings has been considered by Council on numerous
occasions including:
October 3, 2017 and August 21, 2018 – Avila Ranch and San Luis Ranch
Development Agreements consider all-electric new units.
September 18, 2018 – Carbon neutrality and direction to research possibility of
requiring carbon neutral buildings as part of the City’s building codes
February 2019, unanimous direction to develop an approach to carbon neutral new
development.
June 4, 2019 – The Climate Action MCG is adopted with a reach code as an item
in the work program.
September 3, 2019 – The City adopted the Clean Energy Choice Program for New
Buildings.
June 16, 2020 – The City rescinded portions of the September 3 action and
readopted the Clean Energy Choice Program.
July 7, 2020 – Council conducted the second reading of Clean Energy Choice
Program ordinances.
August 18, 2020 – The City adopted the Climate Action Plan for Community
Recovery, which included building sector goals and explicitly identifies the need to
update the Clean Energy Choice Program in 2022.
May 18, 2021 – Staff provided a Climate Action Plan update to Council, which
included an update on building electrification progress.
June 1, 2021- Council adopted the 2021-23 Financial Plan with the Climate Action
MCG that called for the Clean Energy Choice Program update.
Policy Context
As mentioned above, the information presented in this report is grounded in standing
policy, including:
Resolution 11159 (2020 Series), which includes the goal of carbon neutrality by
2035 and a building sector goal of zero operational greenhouse gas (GHG)
emissions from new buildings.
Resolution 11133 (2020 Series) stating that, “it is the Policy of the City that new
buildings should be all-electric.”
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Approach to Existing Buildings
This report focuses on the update to the City’s energy policy for new buildings. However,
existing buildings are the major source of greenhouse gas emissions from the built
environment. For the purpose of sharing progress and to clearly delineate the existing
and new buildings programs, this Council Agenda Report provides a brief status update
on the current approach to existing buildings.
The City is concurrently working on developing a building retrofit program to achieve the
Council adopted goal of a 50 percent reduction in existing building emissions by 2030.
The City’s approach is to (1) research the community building stock to un derstand priority
building types and to understand cost effective retrofit, (2) complete pilot retrofits to
confirm research and learn more about how retrofits could work in the City, and (3)
research and present policy approaches to supporting equitable retrofit options at scale.
Notable work in progress includes:
Modelling the emissions profile of all single-family homes using the XeroHome
model.20
Modelling the emissions profile of all other buildings using the BlocPower model.21
Initiating a pilot program to retrofit affordable housing units. Current proposed
retrofits include replacing natural gas water and space conditioning equipment with
electric heat pump appliances. As a result of this innovative work, the City and its
partner BlocPower have been awarded a $200,000 grant to establish a community
retrofit working group and to directly invest in additional pilot projects.
In addition to this work in progress, the City has also been invited along with RACE
Matters SLO to participate in the Rocky Mountain Institute’s Equitable Building
Decarbonization California learning cohort. Staff will co-learn with RACE Matters SLO
staff and eight other California jurisdictions and their equity partners about equitable
building electrification retrofits throughout 2022.
With this “existing buildings” work effort happening on a parallel path, staff does not
currently recommend that the Clean Energy Choice Program for New Buildings expand
its applicability to include substantial renovations and remodels.
20 See the Santa Monica XeroHome portal for an example of what community members will have access
to: https://my.xerohome.com/. The XeroHome platform also allows the City staff to understand the cost
effectiveness of certain decarbonization measures in different subsets of buildings based on local
conditions.
21 See the Oakland BlocMaps portal for an example of what community members will have access to:
http://blocmaps.blocpower.io/oakland. BlocPower is the City’s primary partner in understanding local
building emissions and developing a path to equitably addressing them.
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Public Engagement
In December 2021, staff sent the 2020 -21 Clean Energy Choice Program Performance
Memo to City Council. In December of 2021, City Staff also provided a note about the
update at the Developers’ Roundtable meeting. Following that action, City Staff reached
out via email to all builders and developers known to be practicing in the City, as well as
to key community based organizations and business groups such as the Chamber of
Commerce and SLO Climate Coalition.
In early January 2022, staff met with several builders and developers to identify how the
current program was going for them and to discuss areas of improvement. Staff re ceived
feedback about possible exemptions and suggestions for process improvements. Of the
builders that responded to the invitation, the general feedback was that all -electric new
buildings have not been disruptive to the standard design, permitting, utility coordination,
or construction processes.
Staff has drafted a 2022 public engagement calendar and will begin implementing it
following Council’s direction on approach at the February 1, 2022, strategic direction
meeting. The current engagement plan includes a virtual workshop tentatively scheduled
for March 30, 2022, that is intended for all stakeholder groups, including the business
community, environmental advocates, technical building electrification experts, and
community members.
Additional stakeholder meetings for specific audiences, such as technical experts, may
be held on an as-needed basis in April of 2020. Content from these virtual workshops will
be shared on social media and available for viewing on the City’s website. Following this
engagement, community members will be invited to offer their input on the draft code
amendments via the City’s Open City Hall platform for the entire month of May. After the
Open City Hall feedback period ends, staff will review comments and integrate them into
a revised draft of code amendments that will be presented to City Council in September
of 2022.
CONCURRENCE
City Administration and Community Development concur on the contents of this report.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act does not apply to the recommended action in
this report, because the action does not constitute a “Project” under CEQA Guidelines
Sec. 15238. Environmental impacts will be considered as part of the public process when
the policy is brought to Council for adoption.
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FISCAL IMPACT
Budgeted: Yes Budget Year: 2021-22
Funding Identified: Yes
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $59,000 $0 $0 $0
State -- -- -- --
Federal -- -- -- --
Fees -- -- -- --
Other: -- -- -- --
Total $59,000 $0 $0 $0
The Clean Energy Choice Program update will be completed by staff. The project is
included in the 2021-23 Climate Action Major City Goal and Office of Sustainability and
Community Development Department work programs with appropriate budget
allocations. The “total budget available” figure of $59,000 in the Fiscal Analysis table
refers to the expected value of already budgeted staff time based on current fully
burdened hourly rates. Should Council provide strategic direction to pursue Approach #2,
additional funding for program development would likely need to be identified and
requested at a future Council meeting.
Several external resources exist to support the effort including: California Public Utility
Commission’s Statewide Codes and Standards team, which will provide technical
assistance and cost effectiveness studies. The City is also currently also working with the
Tri-County Regional Energy Network (3C-REN) and Central Coast Community Energy
(3CE) to establish additional technical support for purpose of adopting electrification and
efficiency reach codes in the 2022 code cycle. Both organizations have had budg ets
approved for this effort and will be initiating their support programs in early 2022.
KEY QUESTIONS FOR COUNCIL
1. What observations and feedback does Council have about the two approaches
presented in this report?
2. Does Council prefer one of the approaches?
3. If Council has a mixed preference, is there information or considerations you’d like
staff to consider as it updates the program? Are there any specific timelines or
engagement efforts that staff should concentrate on?
4. Are there other items Council would like staff to consider including (e.g., specific
exemptions, resilience components, additional efficiency or performance
requirements, additional incentives, additional technical assistance, etc.)?
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Item 7a
NEXT STEPS
Following receipt of strategic direction from Council, work is expected to proceed on the
following schedule:
Task Timeframe
Initiate public engagement program February 2022
Statewide Codes and Standards Team
releases cost effectiveness studies
March 2022
Staff develops proposed policy and code
amendments based on technical information
and responses from the public engagement
program.
March – May 2022
Seek feedback via Open City Hall on draft
code amendments and programming needs
May 2022
Staff amends update based on community
feedback
June 2022
Staff presents Program update to Council
for adoption.
September 2022
If Council’s preferred approach is local
amendments to the California Energy Code,
submit to the California Energy Code for
approval.
October-December 2022
Begin program update implementation. January 2023
ALTERNATIVES
Council could direct staff to not pursue an update to the Clean Energy Choice
Program, which would cause the program to expire on December 31, 2022. Under
this alternative, the City would allow the Clean Energy Choice Program to expire at the
end of 2022 and would adopt the statewide code for implementation beginning in 2023.
Staff does not recommend this alternative as it is inconsistent with adopted Council policy
and the City's climate action goals.
ATTACHMENTS
A – 2021 Council Memo - Clean Energy Choice Program for New Buildings Update
Page 492 of 495
City of San Luis Obispo, Council Memorandum
DATE: December 13, 2021
TO: City Council
FROM: Michael Codron, Community Development Department Director
VIA: Chris Read, Sustainability Manager
Teresa McClish, Housing Policy and Programs Manager
SUBJECT: Clean Energy Choice Program for New Buildings Status Update
Purpose
This memo provides a status update on the Clean Energy Choice Program for New Buildings,
summarizing permit data after one year of implementation. The memo is intended to provide
context for the City Council and community as we move into the process of preparing our local
amendments to the California Building Code (CBC). The next code cycle is starting, and local
amendments need to be adopted in 2022 to coincide with CBC updates that will go into effect on
January 1, 2023. This memo is for informational purposes with no action required by Council.
Background
On August 19, 2020, Council approved the City’s Climate Action Plan for Community Recovery,
and adopted Resolution 11159 (2020 Series), which includes the goal of carbon neutrality by 2035.
An important part of this strategy is to accomplish zero operational greenhouse gas (GHG)
emissions from new buildings.1 This goal can be achieved through all-electric new buildings.
Contemporary all-electric new buildings are cost effective, highly efficient, and provide
substantially lower operational emissions that buildings that use fossil/natural gas for building
systems such as heating and cooling.2
The City has aggressively pursued increased energy efficiency in the built environment and the
Development Agreements for both Avila Ranch and San Luis Ranch include a provision that
requires them to comply with city-wide energy policy. Both projects are under construction and
will be all-electric. These developments consist of at least 1,300 homes, plus commercial
buildings, office buildings and a hotel. Since then, the topic has been presented to the City Council
and community on numerous occasions. The topic has also gained statewide relevance with 50
other local governments in California adopting similar regulations to support or require all-electric
new buildings.3
1 The Resolution also includes the goal of reducing emissions from existing builds 50 percent by 2030. The City is
currently working on achieving this goal through the development of a building retrofit program. Currently, the
program is in the pilot phase with initial electrification retrofits expected to occur in 2022.
2 See previous findings regarding cost effectiveness, building efficiency, and operational emissions in the September
3, 2019 Council Agenda Report.
3 The Sierra Club maintains a list of adopted policies here.
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Clean Energy Choice Program for New Buildings Status Update Page 2
As the primary implementing action for the City’s emissions goals for new buildings, Council
unanimously approved the Clean Energy Choice Program for New Buildings which includes
(among other things):4
Resolution 11133 (2020 Series) stating that, “it is the Policy of the City that new buildings
should be all-electric.”
Ordinance 1684 (2020 Series) which requires that mixed-fuel buildings be substantially
higher performing than all-electric buildings and requires solar installations on
nonresidential buildings.
Incentives including funding for technical assistance to builders to help them successfully
process permits for all-electric buildings and direction to advocate for financial
incentives.5,6
Ordinance 1685(2020 Series) allowing for temporary regulatory flexibility to allow certain
types of mechanical equipment in setbacks upon Community Development Director
Approval.7
Findings
The City began implementing the program on September 1, 2020. Between then and August 31,
2021, the City received 255 building permit applications for new buildings for single family
residential, multi-family residential, commercial, and mixed-use projects. In total, the submitted
permit applications include 333 residential units, and approximately 7,050 square feet of
nonresidential space.
Over the one year study period, the program has led to a substantial number of new all-electric
residential units (204 out of 333 units, 61 percent of total).8 It is important to note, though, that
153 all-electric units submitted as part of the San Luis Ranch project were subject to a
Development Agreement requiring all electric new buildings, and the 68 mixed-fuel units
submitted as part of the Righetti Ranch/Orcutt Area Specific Plan were exempt from the program
because of the effective date of the ordinance.
It is important to remove San Luis Ranch and the Righetti Ranch/Orcutt Area Specific Plan permit
applications from the analysis to reflect only those permits that are subject to the program and
where the developer had the option to choose between fuel types. Of these remaining 112 units,
51 are all-electric and 61 are mixed-fuel (46 percent and 54 percent, respectively). Table 1 provides
a summery of the residential permit data.
4 Note that although the Climate Action Plan was adopted after the Clean Energy Choice Program for New
Buildings (adopted June 16, 2020), the two items had been seen is integral to each other’s success since as early as
Fall of 2018.
5 The City’s Energy Reach Code Virtual Help Desk launched on September 1, 2020, in parallel with the Clean
Energy Choice Program effective date. Since the launch of the help desk, 89 visitors used the help desk as a
compliance resource.
6 Staff successfully supported the creation of a program at Central Coast Community Energy to provide direct
incentives to developers of multi-family and affordable housing units to choose all-electric buildings. Of the $1.2
million set aside for the program in Fiscal Year 2020-21, $844,000 in incentives supporting 502 units across 8
projects in the City of San Luis Obispo were awarded and reserved.
7 No projects utilized this regulatory flexibility.
8 The program is tracked through the City’s Energov permit system.
Page 494 of 495
Clean Energy Choice Program for New Buildings Status Update Page 3
Table 1: of Mixed-fuel and All-Electric Units in Building Permits Submitted 9/1/2020-9/2/2021
Location
All-
Electric
Mixed
Fuel Total
% all-
electric
Righetti Ranch/Orcutt Area (Exempt) Multi-Family 0 68 68 0%
San Luis Ranch (All-Electric
Required)
Single Family 51 0 51 100%
Multi-Family 102 0 102 100%
Location
All-
Electric
Mixed
Fuel Total
% all-
electric
Other - Subject to Clean Energy
Choice Program
Single Family 14 10 24 58%
Accessory
Dwelling Unit 8 14 22 36%
Multi-Family 29 37 66 44%
Total 51 61 112 46%
Over the one-year study period, the City also received permit applications for two commercial
projects and two mixed-use projects with commercial components. Of these permit applications,
3 projects totaling 3,950 square feet are mixed-fuel. The one project that is going all electric has
an estimated 3,100 square feet of commercial space.
It is important to note that these findings have limitations including: 1) the data only provides one
year of permits, and 2) the data does not have detail about what appliances were natural gas and
electric in the mixed-fuel cases.
Analysis
Based on an analysis of program results to date, when provided a choice, developers are selecting
a mixed-fuel option about half of the time. Even though the results are preliminary, this rate is not
sufficient to accomplish City-wide objectives for greenhouse gas reductions. As a result, staff will
be identifying potential changes to the program for the City Council to consider during a Study
Session scheduled for February 1, 2022. At the Study Session, the Council will have the ability to
direct staff to work on program changes to increase the percentage of new buildings that are all-
electric buildings. Substantial progress in this area is necessary to accomplish program goals for
emissions reductions from the built environment.
Next Steps
Staff will return to Council at the February 1, 2022 City Council meeting to provide additional
update information and to seek strategic direction as it updates the program to reflect changes in
the 2022 California Building and Energy codes.
Please feel free to be in touch with Sustainability Manager Chris Read at cread@slocity.org to
schedule additional Clean Energy Choice Program for New Buildings briefing time.
Page 495 of 495
Program Update
Approach #1
Approach #1
Approach #1
Approach #2
Approach #2