Will California Lead on Pollution-Free Construction?

The California Energy Commission (CEC) is moving closer to adopting its 2022 update to the state building code that sets minimum energy-saving requirements for new homes and other buildings. The last update included a first-in-the-nation requirement that new single-family and low-rise apartment buildings be powered by solar energy, along with better insulation, reducing costs for homeowners and tenants. Will the 2022 update follow suit and unleash a cleaner, cheaper, and faster way to build homes, helping mitigate the climate crisis and alleviate our state’s housing affordability challenges?

The CEC is navigating challenging waters: on the one hand a broad coalition of more than 150 public health and air quality, climate, and environmental justice advocates, businesses, investor-owned, municipal and community choice utilities, and elected officials, is urging CEC to require that new construction be all-electric statewide. On the other side are the oil and gas industry and builders, many of whom are opposed to a rapid transition to all-electric despite the fact that it would reduce construction costs and occupants’ utility bills.

A Carrots and Sticks Approach

The CEC last month unveiled a proposal that is basically a carrots and sticks approach to shift the market to pollution-free heat pump technology for heat and hot water, without imposing mandates to the industry. The idea is to provide incentives to builders who go all-electric by making it easier and cheaper to meet the code. Alternatively, the proposed code would be cost-neutral if they only switch either space or water heating to a heat pump, or require additional energy efficiency measures to offset the increased pollution if they choose to continue to use gas for both space and water heating. This portfolio of options provides flexibility for builders to transition to clean electric heat when they and their subcontractors are ready to do so, while discouraging the all-gas construction status quo.

This approach is not the all-electric code that the clean buildings coalition, including NRDC, and the hundreds of concerned California residents who have been speaking at public hearings over the last six months have been calling for. But with the right balance of carrots and sticks, it could effectively shift most of new construction toward highly efficient electric heat pumps.

Finding the Right Balance

CEC’s initial proposal could achieve just that in some regions of the state, in particular the Bay Area and Sacramento region, but it falls short of providing a meaningful signal in Southern California and in the colder parts of the state where the code would continue to support all-gas construction for at least another three years. These regions are home to some of the poorest communities already facing a disproportionate amount of pollution, which gas appliances contribute to significantly.

There is time to fix this in the draft regulatory language expected from CEC staff in the next few weeks, and it is important to do so because burning gas for heat and hot water in homes and buildings causes more climate pollution, and seven times more air pollution than all in-state power plants. Clean electric construction combined with renewable power is a critical strategy for meeting the state’s climate and air pollution goals. It also has a lower first cost than gas construction and saves consumers money over their life.

We are already seeing the devastating effects of the climate crisis accelerating, such as the massive and widespread wildfires that are becoming the new normal in California. Meanwhile, 42 California cities and counties have already adopted local “reach” codes that require or encourage clean electric new construction—and many more are considering it to meet their climate and clean air goals. It is time for the state to build on local leadership and extend their requirements statewide. An  analysis by RMI found that waiting three more years would not only miss an opportunity to unleash a faster, cheaper way to build housing in the Golden State, it would cost Californians $1 billion in unnecessary gas infrastructure, and lock them into 3 million tons additional carbon emissions by 2030.

How to Fix the Code Proposal

NRDC and 13 other organizations—including building engineering experts, Sacramento Municipal Utility District (SMUD), Environmental Entrepreneurs, the City of Berkeley and others—submitted comments to CEC laying out specific recommendations for the code to shift the market away from gas appliances in a flexible yet effective manner:

1. Raise the electrification bar in the code’s performance baseline. The performance baseline sets the bar for the electrification incentive and gas disincentive. The current proposal sets it as a meaningful level for the Bay Area and Central Valley, but not in Southern California, mountains, and most northern counties of the state. We suggested several measures that combined can achieve a meaningful and flexible baseline.
2. Require full heat pump water heater readiness if builders still install a gas water heater, to avoid locking homeowners into gas and save them money when the time comes to replace it with a clean electric alternative. The current code only covers electrical requirements, it needs to also include space and plumbing requirements to fully remove the barriers to installing an electric heat pump water heater.
3. Expand indoor air quality requirements proposed for multifamily buildings that use gas cookstoves to also include single-family homes. This will protect occupants of housing built beginning in 2023 from the harmful health effects of indoor gas use and the ineffectiveness of current ventilation requirements. This would set a level playing field for gas and electric cookstoves and require builders who choose gas to offset its higher pollution impact by installing a better range hood.
4. Ensure that the partially electric baseline does not disincentivize all-electric construction, which would hinder local government leadership on all-electric construction.

With these changes, the CEC can ensure most new homes enjoy pollution-free heating and hot water starting in 2023. This will also help contractors become familiar with the technology, bringing equipment and installation costs down, and making the technology more affordable when replacing burnt-out gas appliances in existing homes.