HomeMy WebLinkAboutItem 7a. Study Session on Existing Building Electrification Retrofit Policy Options Item 7a
Department: Administration
Cost Center: 1005
For Agenda of: 12/5/2023
Placement: Study Session
Estimated Time: 75 minutes
FROM: Greg Hermann, Deputy City Manager
Prepared By: Chris Read, Sustainability Manager
SUBJECT: STUDY SESSION ON EXISTING BUILDING ENERGY EFFICIENCY
RETROFIT POLICY OPTIONS
RECOMMENDATION
Receive a presentation and conduct a study session on energy efficiency retrofit policy
options for existing buildings and provide strategic direction to staff for pursuing those
options.
REPORT-IN-BRIEF
The City’s Climate Action Plan includes a goal of reducing emissions from existing
buildings by 50% by 2030. Historic levels of resources are available to support community
members as they choose to upgrade their buildings with zero emission appliances and
equipment. However, these resources are likely insufficient to achieve the City’s goal.
Anticipating this fact, the 2023-25 Major City Goal work plan provides staff direction to:
“Conduct a study session, and pending Council direction, develop an equitable framework
for cost effective building electrification retrofit policies, with an initial focus on additions
and alterations, as called for by CAP Green Buildings Task 2.1.E.”
Staff conducted extensive research on the topic and identif ied 4 key findings:
1. Available incentives and rebates are likely not sufficient to achieve adopted City
goals.
2. The City’s building stock and its occupants are diverse and require diverse energy
retrofit solutions.
3. The large majority of natural gas consumed in existing buildings comes from water
heating and space heating.
4. There are a limited number of times when building owners make substantial
improvements to their buildings, and a City policy is likely necessary for each of
those events in order for the City to achieve its goals.
Related to key finding #4, the report includes three potential policies for Council’s
consideration including: 1) requirements for energy efficiency improvements concurrent
with major additions and alterations; 2) requirements for energy disclosure or
improvements at time of sale; and 3) the development of a building performance standard
for large buildings.
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Staff recommends returning to Council in early Spring 2024 with an additions and
alterations ordinance and will also spend the next year further assessing the feasibility of
a time-of-sale policy and a building performance standard. Assuming a concurrent and
rapid increase in voluntary emissions reductions, the proposed suite of policies puts the
City on a trajectory to achieving the Climate Action Plan’s goals related to energy use in
existing buildings.
POLICY CONTEXT
A suite of adopted City Council policies support the staff recommendation to evaluate
energy efficiency retrofit policy options for existing buildings, from the General Plan level,
to approving resolutions for the City’s Climate Action Plan for Community Recovery and
associated work programs, to the current Financial Plan Major City Goals. A select
summary of this policy framework is below:
Land Use Element of the General Plan:
o Policy 9.4 (Climate Action Plan) - The City shall maintain and implement its
Climate Action Plan to reduce community and municipal GHG emissions
consistent with State laws and objectives.
o Policy 9.7 (Sustainable Design) - The City shall promote and, where
appropriate, require sustainable building practices that consume less
energy, water and other resources, facilitate natural ventilation, use daylight
effectively, and are healthy, safe, comfortable, and durable.
Climate Adaptation and Safety Element of the General Plan:
o Policy HE-4.3 (Green and Healthy Buildings) - The City shall support fuel
switching retrofits (from fossil fuel to high-efficiency electric appliances),
energy efficiency retrofits, and distributed energy resources as low-carbon
solutions to create safe, cool, and healthy buildings and consider programs
and projects that support these retrofits as critical to maintaining community
safety and to supporting disaster preparedness.
Resolution 11159 (2020 Series) adopted the Climate Action Plan for Community
Recovery with the goal of community carbon neutrality by 2035 and a sub -goal of
50 percent reduction in emissions from existing buildings by 2030.
Resolution No. 11381 (2022 Series) reaffirmed these goals and created a work
program for fiscal years 2023-27, including Green Buildings Action 2.1.E, which
directs staff to, “Develop an equitable framework for requiring electrification
retrofits and develop cost effective building electrification policies for additions and
alterations.”
2023-25 Financial Plan Climate Action Major City Goal action 4.1.i directs staff to
conduct a study session, and pending Council direction, develop an equitable
framework for cost-effective building electrification retrofit policies, with an initial
focus on additions and alterations, as called for by CAP Green Buildings Task
2.1.E
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DISCUSSION
Background
On August 19, 2020, Council approved the City’s Climate Action Plan for Community
Recovery (“CAP”), and adopted Resolution 11159 (2020 Series), which includes the goal
of carbon neutrality by 2035 and building sector goals of zero emissions from new
buildings and a 50 percent reduction in emissions from existing buildings by 2030.
On December 6, 2022, the Climate Action Plan was updated, and the building sector
goals mentioned above were reaffirmed. In addition to a suite of solutions to support
voluntary retrofits, the updated Climate Action Plan includes work task “Green Buildings
4.1.A”, which directs staff to “Develop an equitable framework for requiring electrification
retrofits and develop cost-effective building electrification policies for additions and
alterations.” This action is included in the 2023-25 Financial Plan as Climate Action Major
City Goal Task 4.1.i.
Emissions reductions from existing buildings come from reducing energy use by adding
solar, replacing old appliances with high-efficiency heat pump hot-water heaters and
HVAC systems, and making building envelope improvements like installing new windows
and adding insulation. As the City’s electricity approaches 100% renewable by 2030
through Central Coast Community Energy (3CE), this primarily means reducing natural
gas consumption. Due to current regulatory limitations, the City is excluding stoves or
laundry dryers from this policy discussion.
As the City has initiated research on this topic, it has been guided by three ongoing
commitments. First, the City is committed to cost-effective strategies that stabilize energy
bills and save people money. Second, the City is committed to equity by making sure low-
income community members are not negatively impacted by energy retrofit policies while
being directly supported to improve their homes at the time that works for them via access
to rebates, incentives, and technical assistance. Finally, the City is committed to
developing a building energy retrofit policy that is aligned with other Major City Goals
including housing and economic development.
In support of developing an equitable and effective policy framework for building energy
retrofits, staff have been conducting research to answer the following questions:
1. Are existing incentives and rebates sufficient to achieve the City’s goals?
2. What do we know about buildings in the City?
3. How is energy used in buildings in the City?
4. When are major building upgrades typically made and what have other Cities done
to leverage these upgrade points for energy efficiency improvements?
This Council Agenda Report walks through these four questions and provides a key
finding for each.
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Question #1: Are existing incentives and rebates sufficient to achieve the City’s
goals?
As of 2023, historic levels of rebates and incentives for retrofits are being provided at the
local, regional, state, and federal levels. Nearly every building owner in the City has
access to financial incentives to improve their buildings, reduce greenhouse gas
emissions, and reduce their energy use. Many of these financial resources are focused
on helping low-income homeowners install electric appliances when the time is right for
them. The 2022 CAP update includes a suite of actions to support market development
and increase zero-emission appliance adoption rates, including:
Expansion of high visibility pilot projects (CAP Action Green Buildings 2.1.A) – the
City is currently supporting the Housing Authority of San Luis Obispo (HASLO) in
electrifying water heating and space heating appliances in one of its affor dable
housing developments and is supporting a broader look at helping affordable
housing developers strategically decarbonize their buildings.
Creation of an equity focused “Green and Healthy Buildings” service to educate
the community and connect low-income building owners with resources,
incentives, financing, and contractors (CAP Action Green Buildings 2.1.B) – In
October of 2023, the US Department of Energy awarded the City $400,000 to
develop a program that initially supports mobile home and manufact ured home
retrofits with the intent of expanding to serve other low-income building types in
the future. The award enables the City to pursue significant additional funding for
a future implementation phase of the program.
Establishing a “Green and Healthy Buildings” permit streamlining program. (CAP
Action Green Buildings 2.1.C) – In 2023, the Tri-County Regional Energy Network
(3C-REN) issued a survey asking if local governments would be interested in
permit streamlining support. The City has provided a response and staff will
continue collaborating with 3C-REN staff on permit streamlining program
development.
Staff are also advocating for a zero interest “on bill” forgivable loan program from Central
Coast Community Energy (CAP Action Green Buildings 2.1.D) and collaborating with City
and regional partners to support the workforce development required to implement the
Climate Action Plan (CAP Action Leadership 2.2.A). In addition to local action, a wide
range of regional, state, and federal programs are also available, including federal tax
incentives, statewide income-qualified direct-install program, statewide incentives and
rebates, and regional incentives through 3C-REN and 3CE.1
Using data provided by the California Air Resources Board, California Energy
Commission, and Lawrence Berkeley National Laboratory, among others, staff modeled
the rate of natural gas to electric conversions for water heating and space heating. The
retrofit rate estimate includes many variables, including assumptions about future City
programs, community access to incentives and rebates, workforce availability, and
1 For information about the full suite of programs available, visit https://incentives.switchison.org/ .
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continued supply chain improvement. Staff conducted various model runs, with emissions
reductions outcomes ranging from 15 percent (low uptake model run) to 27 percent (high
uptake model run) by 2030. Staff believes the high-uptake model to be the more likely
scenario, but even in this circumstance, the City would need to reduce overall existing
building emissions by an additional 23 percent to achieve the adopted goal.
Key Finding #1: Available incentives and rebates are likely not sufficient to achieve
adopted City goals.
Question #2: What do we know about buildings in the City?
The City contains approximately 24,000 parcels. Most of these parcels have buildings on
them and those buildings vary widely in age, size, use, and existing energy systems.
Due to the reporting requirements in state housing law, the City knows substantially more
about the residential building stock than the nonresidential building stock. As described
in Table 1 (recreated from the 2020 Housing Element of the General Plan), the city
contains approximately 21,403 residential units in buildings including single -family
detached, single family attached, small multi-family (2-4 units), large multi-family (5+
units), and mobile homes. Within each housing type, there is a wide variety of sizes,
property values, and material conditions. There is also a wide variability of occupants and
building owners. Although there are a small number of older all-electric buildings (and
new all-electric buildings constructed since 2020), the large majority of residential
buildings in the City are mixed fuel (meaning they use electricity and natural gas).
Table 1. Housing Units by Type, 2020
Unit Type Number of Units Percent of Total
Single-Family Detached 9,882 46%
Single-Family Attached 1,403 7%
Multi-Family (2-4 Units) 2,723 13%
Multi-Family (5+ Units( 5,912 27%
Mobile Homes, Other 1,482 7%
Total 21,403 100%
The picture is more complicated for non-residential and mixed-use buildings. Similar data
does not exist for this building stock; however, based on an analysis of Assessor’s Parcel
Data conducted by Lawrence Berkeley National Laboratory staff in conjunctio n with City
staff, there are approximately 1,500 parcels that contain at least one nonresidential
building. Of these, it is estimated that there are more than 150 nonresidential and large
multi-family buildings over 25,000 square feet. Like smaller residential buildings, these
buildings have types, sizes, values, ages, and occupancies that vary widely. Importantly,
the mechanical equipment for water heating and space conditioning, as well as the other
energy using systems and appliances vary widely across building types. For example, the
energy use in the City’s largest strip-mall retailer (with large cooling and heating loads)
will be very different than the energy use in a large restaurant (large water heating loads).
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Given this diversity, it is clear that any energy retrofit policy or program must be tuned to
the building type it is serving. A “one-size fits all” approach to building energy retrofits
would not be effective, and instead there is likely a need for multiple programs and policies
to serve different buildings stocks and community members.
Key Finding #2: The City’s building stock and its occupants are diverse and require
diverse energy retrofit solutions.
Question #3: How is energy used in buildings in the City?
As discussed above, most of the buildings in San Luis Obispo use some combination of
natural gas or electricity to power buildings systems (e.g., space heating and cooling,
water heating, etc.) and consumer appliances (e.g., ovens and stoves, clothing dryers,
etc.).
For residential buildings, a 2019 study by the California Energy Commission found that
over 90% of natural gas use in residential buildings was used to heat water and heat air.2
A study conducted by XeroHome3 recently modeled energy use in single family homes in
San Luis Obispo using publicly available information and came to a similar conclusion:
while energy use might vary from house to house, the large majority of residential natural
gas use is for heating water and air.
The picture is more complicated in nonresidential buildings. For most of these buildings,
water heating and space heating continue to make up the large majority of natural gas
use. Whether space or water heating uses more energy or generates more emissions is
dependent on the use and size of the building. As described above, special end uses also
play a larger role in nonresidential buildings. For example, high temperature water for
commercial dish washing and process loads can be energy and gas use intensive. While
the nonresidential building sector is more varied in its energy use, the sector has two
potential upsides: 1) a smaller number of buildings consume a substantially larger amount
of energy on a per-building basis, and 2) larger nonresidential buildings tend to have
standard maintenance cycles where energy efficiency improvements can be made.
There are many paths to achieving the goal of reducing emissions 50 percent by 2030.
For building owners choosing to reduce their own emissions, this could mean everything
from a new water heater to a new stove. In developing an energy retrofit requirement, the
City will focus on water and space heating along with energy efficiency improvements
and distributed energy resources such as solar and battery storage systems.
Key Finding #3: The large majority of natural gas consumed in existing buildings comes
from water heating and space heating.
2 https://www.energy.ca.gov/publications/2021/2019-california-residential-appliance-saturation-study-rass
3 The XeroHome platform also provides insights to local single-family residential occupants and is available
at: https://xerohome.com/app/#/
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Question #4: When are major building upgrades typically made and what have
other cities done what have other Cities done to leverage these upgrade points for
energy efficiency improvements??
In order to achieve Council’s existing building reduction goals while honoring the City’s
commitment to cost effectiveness, equity and other Major City Goals including housing
and economic development, staff sought to identify times when major building
improvements were already being made. Typical major improvements in a building’s life,
including electrical and plumbing system improvements and appliance replacements,
occur when a major addition or alteration is completed, when a building is sold, or when
a large building is undergoing routine maintenance. The remainder of this section
discusses each of these opportunities for improvement and shares additional details
about policies adopted by other cities.
Improvement Opportunity 1: Time of Permit for Additions and Alterations – An instance
when building owners make building energy upgrades is when they are constructing a
major addition or alteration. Major additions will typically include electrical and plumbing
components and are often high value improvements. The City is aware of an approach to
require certain cost-effective energy retrofit improvements, the costs of which are low
relative to the larger addition/alteration project.
An example of a local government that added an energy retrofit requirement to addit ions
and alterations is the County of Marin, which adopted a program where existing single
family residences undergoing additions or alterations are required to implement additional
energy efficiency measures beyond the State code. Additional energy saving s are
achieved through what they call the “Flexible Compliance Path”, a points -based system
allowing homeowners and contractors to select from a comprehensive menu of energy
efficiency and electrification measures that are appropriate for the scope of their project.
A similar program could be adopted by the City through local amendments to the
California Energy Code and could apply to single and multi-family residential projects.
An additions and alterations policy would be cost effective and would require relatively
low staff time to administer. However, there are only a relatively small number of additions
or alterations that happen each year in the City of San Luis Obispo. Staff estimate that
the policy would account for a 1-2% reduction in overall gas use through the end of the
decade (achieving 2-4% of the 50% reduction goal). While small, every percentage point
is important, and the policy would ensure that these projects aren’t locking themselves
into high carbon use through 2030 and beyond. Additio nally, the policy could be scaled
up if successful to apply to more types and sizes of projects or scaled back if deemed
ineffective.
Improvement Opportunity 2: Time of Sale – Real estate transactions are typically
accompanied by property investments, either by the seller seeking to increase the value
of the property, or the buyer updating the property to their preference. Time of Sale
examples include providing a “Home Energy Score” at the time a property is listed for
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sale, requiring that buildings be “electric ready” at time of sale, and requiring that certain
energy efficiency improvements be made at time of sale.4
The City has a history of “time of sale” requirements including the current sewer lateral
inspecting requirement, and long-standing water efficiency requirements. Policies that
coincide with time of sale can be complicated and would require extensive coordination
with real estate professionals to ensure success. Implementation would also have a
higher overhead, with additional staffing resources likely needed.
Staff estimates that approximately 200 single -family residential real estate transactions
occur in the City every year (excluding the sale of new homes), which would compound
to 1,400 homes by 2030 (approximately 10% of single-family homes). Staff estimate that
over time, these homes could account for a reduction in 2 to 5% of overall emissions
reductions by 2030, or 4% to 10% of progress towards the City’s goal.
Improvement Opportunity 3: Time Certain – Large buildings are typically managed like
capital assets, with maintenance and appliance/system replacement occurring at regular
and planned intervals.5 A policy option called a “Building Performance Standard” requires
that large building owners track their energy use and mecha nical equipment and when
they are ready to replace equipment, do so using a low emissions alternative.
An example of a local government that has a Time Certain requirement is the City of
Chula Vista, which requires that large buildings disclose energy performance on an
annual basis. After five to ten years of disclosure, depending on building size, certain
buildings will be required to achieve a certain building performance score.6
Building performance standards are typically used by bigger cities that have very large
buildings. This is primarily because the staff overhead to administer a program is high
relative to the staff size of smaller cities and because the standard energy benchmarking
tools have typically supported large buildings. The Departme nt of Energy and the national
energy laboratories have been working to develop approaches that work for smaller cities
with smaller buildings and smaller staff numbers. The City is currently working with these
entities to better understand the potential of a Building Performance Standard in San Luis
Obispo.
In the Fall of 2023, staff from the Lawrence Berkeley National Laboratory provided a rough
estimate of the impact a Building Performance Standard could have in San Luis Obispo.
Based on this initial analysis, subject to revision, a Building Performance Standard in
these buildings could result in a reduction of 10 to 15 percent of total existing building
emissions, or 20 to 30 percent of the City’s 2030 goal.
4 In the Bay Area, BayREN provides a Home Energy Score service that building owners listing their property
can use to disclose energy use and connect prospective buyers with resources for building improvements.
BayREN has received funding to provide this service on a statewide basis starting in 2025. More information
is available at: https://www.bayren.org/home-learning-center/home-energy-score-hes .
5 For the purpose of this report, “large building” refers to a building over 25,000 square feet and include s
nonresidential and/or multi-family residential uses.
6 https://www.chulavistaca.gov/departments/clean/benchmarking
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Key Finding #4: There are a limited number of events that building owners make major
improvements to their buildings and a City policy is likely necessary for each of those
events in order for the City to achieve its goals.
Proposed Equitable Framework for Cost Effective Zero Emissions Building Retrofit
Policies
As described above, 2023-25 Financial Plan Climate Action Major City Goal Action 4.1.i
directs staff to conduct a study session, and pending Council direction, develop an
equitable framework for cost-effective building electrification retrofit policies, with an initial
focus on additions and alterations. Staff evaluated each of the policy options discussed
above against a standard set of evaluative criteria (Table 2). Based on the completed
research and analysis, staff recommends the following policy framework:
1. Return to Council in early 2024 with an ordinance for cost -effective residential
major additions and alterations retrofit requirements.7 Should Council direct staff
to pursue this option, substantial additional technical work and outreach would
occur to ensure the policy is reasonable and effective. During this phase, should
new information arise that would render an additions and alterations policy
infeasible, staff would notify Council of this information and propose an alternative.
Staff’s technical and outreach work would focus on major outstanding policy
considerations, including:
a. Applicability - Should the policy be applicable to single-family and multi-
family residential major additions and alterations?
b. Size - Should the policy requirement be triggered by a project’s square
footage size (e.g., projects that add or alter more than 250 square feet)
and/or a percentage of existing building area (e.g., projects that add or alter
more than 25 percent of existing building area)?
c. Exemptions - What reasonable exemptions should be included to ensure
the required improvements are a small part of the overall project costs?
2. Work closely with realtors and other stakeholders to research the feasibility of a
point-of-sale requirement for single-family homes and a building performance
standard for large buildings and, if viable, return to Council in late 2024 with a
program, recommendation for next steps, and/or an explanation of why the
program/s is/are currently infeasible.
A core assumption in the Climate Action Plan is that implementation will need to scale
exponentially over the next decade. The policy framework presented in this report is
aligned with this assumption and has important characteristics for success. First, t he
framework starts small, with multiple opportunities to scale up or step back as lessons
are learned from implementation. Second, the framework covers each building sector,
including single family, multi-family, and non-residential buildings. Third, the framework
takes action on what is feasible now while providing time to further explore the feasibility
of point of sale and building performance standard policy options over the next year.
7 “Major alterations” describe projects that have structural, plumbing, and/or electrical components.
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The City’s ambitious goal to reduce emissions from existing build ings in half by the end
of the decade will be challenging to achieve. The City and regional partners will continue
to look for ways to rapidly increase uptake of zero emissions appliances. If the City can
increase voluntary retrofits and can find ways to cost effectively increase policy
performance over time, the framework as proposed lays the foundation and puts the City
on a trajectory towards achieving its 2030 goals while also supporting the City’s other
Major City Goals.
Table 2. Policy Option Evaluation
Event Time of Permit Point of Sale Time Certain
Policy Option Additions and
Alterations
Home Energy
Score / Electric
Ready
Benchmarking /
Building Performance
Requirements
Uses Existing
Process? Yes No No
Local Government
Case Studies? Yes Yes Yes
Administrative
Overhead Low Medium / High Medium / High
Near-Term Impact Low / Medium Medium Low
Potential to Scale Medium High High
Cost Effective Yes Yes Yes
Summary
A near-term
solution to begin
reducing building
emissions while
increasing
building retrofit
capacity
A mid-term
solution with early
options to support
retrofits, but more
research is
required
A mid-term solution
with the potential for
cost effective savings
in the nonresidential
sector, but more
research is required
Recommendation
Return with
ordinance in
early 2024
Return with
recommendation in
late 2024
Return with
recommendation in
late 2024
Indicates favorable conditions.
Indicates moderately favorable or uncertain conditions.
Indicates unfavorable conditions.
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Previous Council or Advisory Body Action
August 2020 – Council adopted Resolution 11159 (2020 Series) which approved
the Climate Action Plan for Community Recovery with the goal of community
carbon neutrality by 2035 and a sub-goal of 50 percent reduction in emissions from
existing buildings by 2030.
December 2022 – Council adopted Resolution No. 11381 (2022 Series) reaffirming
these goals and created a work program for fiscal years 2023-27, including Green
Buildings Action 2.1.E, which directs staff to, “Develop an equitable framework for
requiring electrification retrofits and develop cost effective building electrification
policies for additions and alterations.”
June 2023 – Council adopted the 2023-25 Financial Plan Climate Action Major City
Goal 4.1.i, which directs staff to conduct a study session, and pending Council
direction, develop an equitable framework for cost effective building electrification
retrofit policies, with an initial focus on additions and alterations, as called for by
CAP Green Buildings Task 2.1.E.
Public Engagement
Staff have conducted the following public engagement efforts to answer the questions
proposed at the beginning of this Council Agenda Report:
Green and Healthy Homes Roundtable – Staff hosted eight meetings with the
roundtable (six in 2022 and two in 2023), which consists of public health staff,
community members, affordable housing providers, an affordable housing tenant,
building design professionals, environmental and racial justice organizations,
regional agency staff, and an HVAC contractor, among others. The group met to
identify the challenges of building retrofits, develop solutions to those challenges,
and provide initial feedback on how a wide range of policy options might work in
San Luis Obispo.
Chamber of Commerce – Staff presented to the Legislative Action Committee on
October 12 to provide background and describe the potential policy options
described in this Council Agenda Report.
Climate Coalition – Staff presented to the Leadership Team on November 2 to
provide background and describe the potential policy options include in this
Council Agenda Report.
San Luis Obispo Climate Justice Alliance – Staff presented to the Climate Justice
Alliance to provide background and describe the potential policy options included
in this Council Agenda Report.
Communitywide survey – Staff conducted a community wide survey to assess
general retrofit program priorities and sensitivities. Among the 182 survey
respondents, the top three priorities for a potential existing building policy were: 1)
cost effectiveness, 2) that the policy be supported with financial incentives and
technical assistance, and 3) providing clear expectations f or builders and owners.
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San Luis Coastal Association of Realtors Local Government Relations Committee
– staff met with members of the San Luis Coastal Association of Realtors to
discuss practical considerations associated with a possible time of sale policy.
Should Council direct staff to continue researching a time of sale policy, staff would
work closely with this group as a key stakeholder.
Program administrator and technical expert interviews – Staff met for remote
meetings with staff from a number of cities, programs administrators, and national
research entities including the City of Chula Vista, City of Berkeley, County of
Marin, City of San Francisco, 3C-REN, 3CE, BayREN, Department of Energy,
California Statewide Codes and Standards Team, and the Lawrence Berkeley
National Laboratory.
This engagement conducted to date has allowed for staff to narrow down the options for
Council’s consideration at this study session. Should Council provide strategic direction
to move forward with one or more policy approach, staff would conduct substanti al
collaborative outreach to ensure the proposal it brings back to Council is well vetted.
SCHEDULE AND NEXT STEPS
Should Council provide strategic direction to continue development of one or more retrofit
policies, staff would conduct additional extensive outreach and technical review. Staff
recommends bringing back an additions and alterations policy for Council’s further review
and consideration of adoption in March of 2024 for implementation to begin at a
reasonable date identified through the policy development process. Concurrently, staff
would spend the majority of 2024 continuing to vet the feasibility of a time of sale and
building performance policy.
CONCURRENCE
Community Development Department concurs with 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. 15378. Projects carried out as part of an adopted energy efficiency retrofit policy will
require subsequent environmental review or finding of exemption.
FISCAL IMPACT
Budgeted: Yes Budget Year: 2023-24
Funding Identified: No
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Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ N/A $ $ $
State
Federal
Fees
Other:
Total $ $ $ $
The additions and alterations policy described in the Council Agenda Report can be
completed using no-cost technical support from Central Coast Community Energy and
3C-REN. Staff time to develop the policies, including associated community outreach, is
accounted for in the 2023-25 Climate Action Major City Goal work program. Staff are
currently evaluating funding sources to support the long-term development and
implementation of time of sale and building performance standard policies.
Implementation costs for each of these would be developed and presented for Council’s
consideration at time of policy adoption.
QUESTIONS FOR COUNCIL
1. Does Council want staff to continue developing an “additions and alterations
policy”?
1.a. If so, in the report, staff includes outstanding policy considerations. Does
Council have any early feedback regarding these considerations?
1.b. Are there key stakeholders staff should engage with?
2. Does Council want staff to continue researching potential “Time of Sale” and
“Energy Performance Standards” policies?
2.a. If so, what are factors do you want staff to design for and are there key
stakeholders you would want staff to engage with?
2.b. If so, is there a policy preference that staff should focus on during the public
engagement and research phase of this policy work?
3. Are there other policies or programs that Council would like to staff to further
explore?
ALTERNATIVES
Council could direct staff not to pursue existing building retrofit policies and
instead pursue emissions reductions through alternative approaches. Given the
City’s ambitious climate goals and the limited ability to pursue reductions in alternative
ways, staff does not recommend this approach.
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City Council Study Session – December 5, 2023
1
Receive a presentation and conduct a study
session on energy efficiency retrofit policy options
for existing buildings and provide strategic
direction to staff for pursuing those options.
2
1.Background (policy context, public engagement,
and research findings)
2.Proposed Energy Retrofit Framework
3.Schedule, Next Steps, and Questions for Council
3
4 4
5
•Communitywide carbon neutrality
by 2035
•Cut emissions from existing
buildings in half by 2030
6
•Municipal operations
carbon neutrality by
2030
•Created as a
response to
community outreach
•Implementation in
progress and
ongoing
7
•Community Outreach
•Communitywide survey
•Green and Healthy Homes Roundtable
•Community Organizations
•Chamber of Commerce
•San Luis Obispo Climate Coalition
•San Luis Obispo Climate Justice Alliance
•San Luis Coastal Association of Realtors
•Technical Experts and Program
Administrators
•Cities and counties
•Regional incentive and rebate providers
•Department of Energy and National
Research Laboratories
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•Cost-effectiveness – Focus on strategies that stabilize energy bills and save
people money.
•Equity focused – Ensure low-income community members are not negatively
impacted by energy retrofit policies; continue to develop programs that provide
access to rebates, incentives, and technical assistance.
•Aligned with other Major City Goals – Building policies should support other
goals such as housing and economic development.
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1.Are existing incentives and rebates sufficient to
achieve the City’s goals?
2.What do we know about buildings in the City?
3.How is energy used in buildings in the City?
4.When are major building upgrades typically made
and what have other Cities done to leverage these
upgrade points for energy efficiency improvements
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•Historic amounts of financial resources are available for energy efficiency
retrofits.
•The City’s work program is focused on helping community members
access these resources to improve their buildings .
•Staff modeling suggests that these resources will account for an up to 27
percent reduction in existing building emissions, leaving an additional 23
percent reduction required to achieve the 2030 goal.
Key Finding #1: Available incentives and rebates are likely not
sufficient to achieve adopted City goals.
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•Approximately 10,500 single family buildings and 8,600 multi-family units.
•1,500 parcels have at least one non-residential building; ~150 are
over 25,000 square feet.
•These buildings have varying types, sizes, values, ages, and occupancies
that create variation in use of mechanical equipment and appliances.
Key Finding #2: The City’s building stock and its occupants are diverse
and require diverse energy retrofit solutions.
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•Water and space heating makes up the large majority of natural gas use in
residential buildings.
•The same is true in non-residential buildings, with more variability due to
specific end uses.
•Non-residential buildings consume a substantially larger amount of energy
on a per-building basis.
Key Finding #3: The large majority of natural gas consumed in existing
buildings comes from water heating and space heating.
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Major Additions and Alterations
Time of Sale
Time Certain
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•Policy idea: require energy efficiency retrofits on
major addition and alteration projects.
•Occurs via local amendments to the California
Energy Code.
•Requirements are cost effective and use permit
review processes.
•If applied to residential projects, staff estimates it
would account for a 1-2% reduction in buildings
related emissions use by 2030.
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•Policy idea –require energy disclosure and/or energy
efficiency improvements at time of sale.
•Allows buyers to make more informed decisions while
potentially including important upgrades (e.g., electrical
panel upgrades, outlets near gas appliance, etc.).
•Policies can be complicated,and success would
depend on extensive coordination with real estate
professionals.
•These homes could account for a reduction in 2-5% of
buildings related emissions.
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•Policy idea: require that large building
owners track and disclose their energy
use and/or use low emissions alternatives
when they are ready to replace
equipment.
•Cost effective improvements in large
buildings could lead to large reductions in
emissions.
•Programs are highly technical and would
likely require additional staffing/overhead
resources.
•Could result in a 10% to 15% reduction in
buildings related emissions.
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There are a limited number of events that building owners
make large improvements to their buildings and a City policy
is likely necessary for each of those events in order for the
City to achieve its goals.
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1.Return to Council in early 2024 with an ordinance for cost-
effective Additions And alterations retrofit requirements.
2.Work closely with realtors and other stakeholders to research the
feasibility of a Time-of-Sale requirement for single-family homes
and a Building Performance Standard for large buildings […].
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1.Applicability - the policy should be applicable to single-family and multi-
family residential major additions and alterations.
2.Size - the policy requirement should be triggered by a project’s square
footage size and/or a percentage of existing building area.
3.Exemptions - reasonable exemptions should be included to ensure the
required improvements are a small part of the overall project costs.
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1.Starts small,with multiple opportunities to scale up or step back as lessons
are learned from implementation.
2.Covers each building sector,including single family,multi-family,and non-
residential buildings.
3.Takes action on what is feasible now while providing time to further
explore the feasibility of Time of Sale and Building Performance Standard
policy options over the next year.
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Step Date
Conduct Additions and Alterations technical work
and community outreach December – March 2024
If adopted, begin enforcement of Additions and
Alterations requirements June 2024
Continue to research and evaluate mid-term policy
options (Time of Sale and Building Performance
Standards) and return to Council with findings.
January – December 2024
1.Does Council want staff to continue developing an “Additions and Alterations
policy”?
1.a. If so, in the report, staff includes outstanding policy considerations (applicability, size, and exemptions).
Does Council have any early feedback regarding these considerations?
1.b. Are there key stakeholders staff should engage with?
2.Does Council want staff to continue researching potential “Time of Sale” and
“Energy Performance Standards” policies?
2.a. If so, what factors do you want staff to design for and are there key stakeholders you would want staff to
engage with?
2.b. If so, is there a policy preference that staff should focus on during the public engagement and research
phase of this policy work?
3.Are there other policies or programs that Council would staff to further
explore?
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Receive a presentation and conduct a study
session on energy efficiency retrofit policy options
for existing buildings and provide strategic
direction to staff for pursuing those options.
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Event Time of Permit
Policy Option Additions and Alterations
Uses Existing Process? Yes
Local Government Case Studies? Yes
Administrative Overhead Low
Near-Term Impact Low / Medium
Potential to Scale Medium
Cost Effective Yes
Summary
A near-term solution to begin reducing building
emissions while increasing building retrofit
capacity
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Event Time of Sale
Policy Option Home Energy Score / Electric Ready
Uses Existing Process? No
Local Government Case Studies? Yes
Administrative Overhead Medium / High
Near-Term Impact Medium
Potential to Scale High
Cost Effective Yes
Summary A mid-term solution with early options to support
retrofits, but more research is required
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Event Time Certain
Policy Option Benchmarking / Building Performance Standards
Uses Existing Process? No
Local Government Case Studies? Yes
Administrative Overhead Medium / High
Near-Term Impact Low
Potential to Scale High
Cost Effective Yes
Summary
A mid-term solution with the potential for cost
effective savings in the nonresidential sector, but
more research is required