Report on CA Zero Net Energy State Buildings Misses Point

It is time for California to implement its zero-net energy policy in a way that better aligns with the climate goals of the state, the nation (minus the current federal administration and its fossil fuel industry vested interests) and the world.

There is more to California’s Zero Net Energy state buildings policy than the state’s Legislative Analyst Office (LAO) considered in its recent report. The LAO, which is the California Legislature’s nonpartisan fiscal and policy advisor, just released an evaluation of the state’s pursuit of Zero Net Energy (ZNE) state buildings and it misses the mark in two important ways.

The state buildings ZNE policy originates from a 2012 executive order by Governor Jerry Brown that directed state agencies to transition half of the square footage across the 8,000 buildings owned by the state to a zero-net energy status by 2025, meaning that they need to generate enough solar energy onsite annually to offset their energy consumption over the same period. Since the adoption of the executive order, nine ZNE state buildings have been completed and another 22 are planned.

The LAO report claims that “a mandate for state buildings to be ZNE is not a necessary or cost‑effective way for the state to achieve its (greenhouse gas) GHG reduction goals,” and that “a ZNE mandate will not necessarily reduce emissions more than would otherwise occur… because the state has already adopted a cap-and‑trade program that limits total emissions from large emitters, such as electricity generators.”

What the LAO report misses

The LAO analysis misses 2 key points:

First, cap-and-trade is a complement, not a substitute, for sector-specific emissions reductions policies. California achieves the bulk of its emissions reductions through specific programs such as renewable electricity mandates, efficiency building codes and appliance standards, low-carbon fuel standards, zero-emissions vehicles and many others.

The cap-and-trade program serves as a motivator, and as a backstop for these other programs. It is effectively an insurance policy on meeting the cap; it was never intended to be the primary policy instrument to reduce emissions.

Instead, the zero-net energy policy seeks to transform the building sector to minimize energy waste and offset a large share of energy bills through onsite electricity generation.

The first solar arrays installed in California were pretty expensive but thanks to these initial investments, millions of Californians now benefit from very cost-effective rooftop solar systems, and from an electricity grid that is increasingly comprised of electricity from renewable resources.

The same opportunity is available to make building efficiency upgrades cheaper and utility bills lower, but to realize these benefits we need policies capable of doing the heavy lifting. With more than 20 percent of all emissions in the state, buildings are a critical piece of the solution to mitigate climate change and reduce pollution in California.

That is the purpose of California’s ZNE state buildings policy: catalyze the market transformation to highly-efficient buildings that produce enough energy on site to offset their annual consumption. Requiring that every project be strictly cost-effective from the start would hinder this market learning mechanism, and slow innovation to bring down costs. Unleashing innovation will ultimately result in lower costs for all Californians, and for the state government over its entire stock of 8,000 buildings.

California’s state buildings—like any property owner’s buildings—are sitting on potential savings of 50 percent on average through measures that offer a rate of return of 15 percent per year or better. The ZNE mandate will ensure the state takes advantage of these immense cost savings instead of getting locked into ever-increasing energy bills at the expense of California’s taxpayers.

Second, the LAO report misses a real issue with the state’s implementation of the governor’s ZNE Executive Order. The implementation rules use an outdated definition of zero-net energy that encourages the use of higher-carbon fossil gas instead of cleaner electricity for heat, resulting in supposedly ZNE buildings that still produce far more emissions from burning gas than they avoid through onsite solar generation.

This is because the California Department of General Services (DGS) is using a definition of ZNE based on national average grid electricity mix, which includes a large share of coal power and a modest amount of renewable energy. This interpretation requires less onsite solar to offset fossil gas use than it takes to offset the same amount of electricity use, encouraging the use of gas. But the reality is that California’s electricity mix is substantially cleaner than the national average. California is on track to reach 50 percent renewable electricity perhaps as early as 2020, 10 years earlier than expected. The remainder of its power comes from a mix of hydropower, nuclear (at least until its last nuclear plant closes in 2025), and cleaner than average gas power plants.

What should be next

DGS should revise its ZNE implementation policy to accurately reflect California’s increasingly clean electricity grid. This would encourage the development of state ZNE buildings that use clean, high-efficiency, and lower-cost electric heating technology.

That’s right: Modern electric heating systems, using ultra-high efficiency heat pump technology, can result in lower operating costs than gas-based furnace and water heaters, helping achieve California’s ZNE goals at a lower cost. They also produce much less smog-causing NOx (nitrogen oxides) pollutants, and are inherently safer thanks to the absence of gas combustion.

Water and space heating are the top two energy uses in buildings, ahead of air conditioning, plug loads (appliances and equipment plugged into outlets) and lighting. Together they are responsible for more than 40 percent of building energy use, and roughly 10 percent of the state’s climate-warming GHG emissions.

Another option to neutralize emissions from burning gas in buildings is to use low-carbon fuels, such as biogas produced from sustainable sources, and synthetic gas produced from renewable energy, but that is currently much more expensive than electrification, with no prospects of achieving levels of renewable gas comparable with those of electricity in an affordable manner by 2030.

California has a clear choice:

  • Either transform the state’s space and water heating technology market, so that by 2030 high-efficiency electric heating technology becomes the mainstream and most affordable option, giving every Californian access to clean and affordable space and water heating;
  • Or continue to prop up incumbent, high-emissions, fossil-based technologies, delaying the inevitable transition to clean and affordable space and water heating and wasting more money on fossil fuels, thus increasing its long-run cost to Californians.

It is time for California to implement its zero-net energy policy in a way that better aligns with the climate goals of the state, the nation (minus the current federal administration and its fossil fuel industry vested interests) and the world.

With our federal government in the hands of fossil fuel interests, this is a critical opportunity for state leadership.

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