New State And City-Led Measures Are Promoting Building Electrification

In 2015, the United States and representatives from nearly 200 countries reached a landmark agreement to combat climate change and transition towards a low carbon economy at COP 21 in Paris. In the agreement, countries agreed to limit the rise of global temperature to below 2°C by 2100 and signal to global financial and energy markets a fundamental shift away from fossil fuels and towards zero-carbon energy. At the time of signing, then-President Barack Obama described the agreement as “a strong, enduring framework to set the world on a course to a low-carbon future”. However, in June 2017, President Trump announced that the United States would withdraw from the Paris Climate Agreement — creating a void in leadership at the federal level on climate change. Shortly after this announcement, mayors from 407 U.S. cities and more than a dozen states — representing 40% of the U.S. economy — committed to reducing fossil fuel emissions and achieving the goals of the Paris Climate Agreement in response to President Trump’s decision. 

Over the past few years, a key initiative for U.S cities to decarbonise their economy and respond to the climate crisis has been to reduce dependence on natural gas, which accounts for 32% of U.S. primary energy consumption and 33% of total greenhouse gas emissions. As part of the initiative, a growing number of cities have policies to discourage natural gas equipment in new buildings and passed laws to encourage all-electric construction. By encouraging this climate-friendly transition, these city-led efforts have started to create structural changes that are helping reduce carbon emissions in buildings, showcase the viability of electrified products and attract new capital to decarbonise carbon-intensive industries. These measures will also help cities and state governments meet their Paris Agreement commitments to transition to a low carbon economy. 

Promote the adoption of electrical products in buildings

In the United States, energy use in buildings - from heating and cooling homes to lighting offices is responsible for about 40% of all carbon dioxide (CO2) emissions. In 2018, the burning of natural gas for heating and cooking in buildings alone contributed 10% of total US CO2 emissions. The recent city-led policies opposing natural gas and encouraging all-electric construction are designed to decarbonise the buildings sector and spur innovation to help accelerate the adoption of electrical products. 

Over the past few years, the State of California has been a leader of decarbonisation efforts in the country and has received strong stakeholder support for shifting to fully electric buildings, including some utilities such as PG&E. In 2018, California set a goal of relying entirely on carbon-free energy sources for its electricity by the year 2045 and pushed forward $80 million in funding to incentivise zero carbon new buildings, including advanced water heating technologies that use clean electricity rather than gas. According to the Rocky Mountain Institute (RMI), the most efficient and cost-effective way to reduce emissions in new buildings would be for California to require all-electric new construction in the upcoming 2022 code cycle. The RMI has estimated that a statewide ruling in the upcoming 2022 code cycle versus waiting until the next code cycle (2025) could save California 3 million metric tons of carbon emissions by 2030. Furthermore, RMI analysis also pointed out that statewide ruling on all-electric new construction in 2022 would also avoid $1 billion in spending on new gas connection infrastructure that may become obsolete as California looks to eliminate statewide greenhouse gas emissions by 2045.

However, these efforts only impact new constructions and retrofitting older buildings would remain a key challenge. Today, 75% of California's existing buildings were built before the Building Energy Efficiency Standards were developed in 1978, and by 2045, buildings will be of an older vintage. But according to David Hochschild, Chair of the California Energy Commission, the steps taken to "tackle emissions in new construction [are] important because by applying clean technologies along with larger complementary efforts to retrofit older buildings, California will be able to push towards its goal of 100% carbon-free electricity by 2045". In recent years, the measures taken by the State have allowed electrical products to scale across a wide variety of sectors. For example, the Sunmaid Raisin Company's processing facility in California recently transitioned from gas to electric dryers for its raisins, and new home builders like City Ventures are constructing all-electric homes in the Greater Los Angeles region. 

Alongside the important role played by the California Energy Commission, municipal governments are also implementing initiatives to complement policies and ensure a cost-effective transition to all-electric construction. In July 2019, Berkeley, California became the first city in the United States to prohibit natural gas infrastructure in new buildings. Later that year, Berkeley also formalised an electric-preferred reach code - a local amendment to the California Energy Code that favours all-electric new construction by requiring buildings with natural gas to exceed the State's efficiency requirements, while all-electric construction only needs to meet the State's requirements. By combining both the natural gas prohibition and electrification reach code, Berkeley has integrated compliance frameworks that make it easier for building electrification in newly constructed buildings and also allowed others cities to adopt related policies that eliminate natural gas in new buildings as well. 

In addition, the City of Berkeley has also been collaborating with community-based electricity providers such as East Bay Community Energy (EBCE) and non-profit housing developers to set up technical assistance programs to help new construction projects incorporate the latest in all-electric building design and construction. A key part of these programs has been to allow developers to consult directly with architects and engineers experienced with all-electric construction to scope projects in greater detail and ensure the right stakeholders are involved in the construction process. Billi Romain, Manager of the Office of Energy and Sustainable Development at the City of Berkeley, highlighted in an interview that "Berkeley has been collaborating at the local, regional and state-level around building electrification and advancing all-electric construction with stakeholders in mind". Meanwhile, her counterpart in the Office of Economic Development, Elizabeth Redman Cleveland, the City's Chief Strategist of Sustainable Growth pointed out that the process also contributes to the city's economic vitality by creating new opportunities for renewable energy entrepreneurs to build electrification products and other low-carbon alternatives for buildings and construction. The City of Berkeley has partnered with UC Berkeley, the Berkeley Lab, the Berkeley Chamber and the Downtown Berkeley Associations to develop an innovative ecosystem where Berkeley is a vibrant, accessible, and equitable place for startups to launch and grow.

Highlight the effectiveness of zero-emission technologies

As mentioned earlier, the natural gas ordinances and reach codes have aimed to facilitate the integration of all-electric infrastructure in newly constructed buildings and mitigate the potential environmental and health hazards produced from the consumption and transportation of natural gas. In the case of Berkeley, before the city's ban went into effect, natural gas was the leading source of greenhouse gas emissions (GHGs) in buildings and responsible for 27% of the GHGs released in the city. The shift to all-electric buildings will reduce this share going forward, resulting in benefits for public health and the environment, but eliminating GHGs entirely will require new products capable of replacing natural gas usage across the broader economy. Shop owners and businesses that purchase machinery powered by natural gas lock in this polluting infrastructure for years, prolonging the dependence of the wider economy on fossil fuels. However, the recent restrictions on natural gas have provided an opportunity for zero-emission technologies to highlight their value propositions, which can include environmental, quality, and cost advantages. 

One example is the coffee industry, where the roasting stage of the coffee supply chain contributes about 15% of the overall carbon footprint in the sector. Traditionally, cafes from large chains to independent shops have relied on carbon-intensive infrastructure to roast the coffee beans they deliver to end consumers. Berkeley-based Bellwether Coffee, developer of a zero-emission electric coffee roaster, offers a decarbonised roasting solution aligned with the recent electrification efforts in buildings. Their technology eliminates particulates and volatile organic compounds created during coffee roasting, reduces the carbon footprint of each roasting cycle by 90% on average, and allows for precision control of the roasting process without using natural gas. In addition to its sustainability benefits, Nathan Gilliland, CEO of Bellwether Coffee, stated in an interview that the Bellwether roaster saves a "typical customer $1,000/month, assuming they brew around 300 pounds/month". In recent months, these cost savings helped local coffee businesses adjust to lockdown measures, with Bellwether customers continuing to roast 8,500 pounds a week throughout the Covid-19 shutdowns. 

As cities look to reopen their economies, many municipal authorities have outlined their commitment to a green recovery from Covid-19. For the coffee industry and particularly for large chains that operate in these markets, integration of zero-emission technologies such as the Bellwether roaster can play an essential role in not only driving down the industry's carbon footprint - and that of the cities in which they operate - but also in bringing structural changes to their roasting practices. Currently, large coffee chains rely on a "hub and spoke," model with very large centralised roasteries sending coffee to their retail locations and other café customers. According to Mr Gilliland, the present roasting practices will soon "shift towards in-store roasting to reduce the expensive and carbon-intensive nature of the coffee supply chain, and thus, create sustainable, fresher products for consumers while lowering costs for producers and retailers". As cities further decarbonise, policy measures - such as banning natural gas in new buildings – send strong signals that innovative, zero-emission technologies will play a key role in displacing systems that have previously relied on fossil fuels. 

Attract capital to decarbonise carbon-intensive industries

As the trends toward natural gas bans indicate, city-led climate measures have been a major driver of the transition to a low carbon economy. In recent months, cities have used the reduction in activity caused by Covid-19 as an opportunity to implement structural changes and promote a green recovery, including steps to reduce emissions from urban mobility. During a time when policymakers are formulating their recovery plans from the coronavirus crisis, products that are successfully commercialising electrification, such as Bellwether Coffee, offer examples for the development of new electric solutions in other carbon-intensive industries. In the past, the federal government played a leading role in these types of energy transitions. Given the political landscape, the transition to a low carbon economy and development of electrified products will now require greater levels of private capital to complement policy action at the local and state levels. Policies like the natural gas bans can accelerate private investment by signalling that low-carbon solutions, such as fully electric buildings, are the future, which removes the risk for funders considering investments in new electric products. 

The breakthrough of companies such as Tesla and SolarCity demonstrates how electrified solutions can shift entire industries toward a path of greater sustainability. For example, the progress made by Tesla catalysed improvements in the range, performance, and reliability of electric vehicles, building a foundation for more recent innovation in electric micro-mobility, electric bussing, and electric freight technologies. Nancy Pfund, Managing Partner of DBL Partners and an early investor in both Tesla and SolarCity, said in an interview that “Electrification as a movement will continue to accelerate in every sector that has relied on fossil fuels”. Ms Pfund added that “Just as Tesla and SolarCity offered a ‘zero sacrifice’ approach to sustainability, delivering superior driving and electricity experiences as they slashed carbon footprints, Bellwether is poised to do the same: on-site electric roasting not only significantly reduces the carbon footprint of coffee, it delivers a better-tasting cup of coffee, something coffee lovers around the world can enthusiastically endorse.” Ms Pfund noted that this electrification transition is already well underway in the buildings sector. In addition to Bellwether, she pointed to innovations in space and water heating systems, improvements in electricity-powered air-source heat pumps, and the growth of induction stovetops technology. 

The adoption of new technologies to enable decarbonisation can be aided by further reforms, along with updates to standards and labelling in buildings. Based on recent recommendations from the International Energy Agency (IEA), all levels of governments will need to look into narrowing the gap between electricity and natural gas prices to accelerate the usage of electrical products in new and existing buildings. The report highlighted that lifting taxes on the electricity used in power-to-heat applications would facilitate the uptake in electrical products and make such products more attractive for consumers. For cities and state governments, continued bold action on climate will be critical to the development of new electric products, including efforts to increase consumer adoption and attract further investment.