Building Decarbonization

“Building decarbonization” refers to the umbrella of methods to reduce greenhouse gas emissions from buildings. California buildings contribute approximately 24% of greenhouse gas emissions in the state. California has identified building decarbonization as a key strategy to meeting its long-term climate goals.

The largest source of GHG emissions from buildings comes from consumption of natural gas and electricity. Additional smaller sources of greenhouse gas emissions from buildings include use of propane, kerosene, diesel, and wood (primarily in rural areas) and high global-warming-potential refrigerants that are used in refrigeration, cooling, and heat pump systems. The materials used to construct and maintain buildings also contribute significant GHG emissions over the lifetime of a building. This concept is referred to as embodied carbon, defined by the California Energy Commission as the greenhouse gas emissions “resulting from the extraction, manufacturing, transportation, installation, maintenance, and disposal of building materials.” Decarbonizing buildings, therefore, means using strategies to address GHG emissions from the above sources.

The CPUC develops policies and oversees implementation of various program intended to encourage building decarbonization, notably including both the TECH and BUILD programs that were created as a result of SB 1477 (Stern, 2018). More info regarding what the CPUC is doing to encourage building decarbonization can be found below.

Recent News, Events, and Quick Links

December 14, 2023: CPUC approved D.23-12-004, which clarifies and modifies aspects of the Self-Generation Incentive Program Heat Pump Water Heater program, including expanding program eligibility to ensure inclusion of publicly-owned electric utilities and community choice aggregators.
December 14, 2023: CPUC approved D.23-12-037, which eliminates electric line subsidies for mixed-fuel new construction to further incentivize all-electric new construction.

July 31, 2023: CPUC staff released a staff proposal for Phase 2B considerations for the existing Mobilehome Park Utility Conversion Program proceeding, R.18-04-018. Staff recommend that the program adopt a 200-amp electric service standard for to-the-meter and behind-the-meter infrastructure, which is expected to add minimal cost to the existing program, but will remove potential barriers to future electrification of mobilehome parks. Staff’s third recommendation is to initiate a $50 million electrification initiative, wherein a few parks receive full behind-the-meter electrification measures and forgo installation of new gas infrastructure.
July 26, 2023: CPUC staff released a staff proposal for Phase 3B considerations as part of the CPUC’s main building decarbonization proceeding, R.19-01-011. Staff recommend the elimination of electric line extension subsidies for all mixed-fuel new construction and the requirement that all mixed-fuel new construction pay the final actual costs of an electric line instead of only estimated costs. The proposal suggests that all non-residential building projects that received an exemption from the prohibition on gas line subsidies as part of D.22-09-026 shall also be exempt from the elimination of electric line extension subsidies.

June 9, 2023: CPUC approved Resolution G-3598 in response to Advice Letter 6108-G, which modifies existing tariffs regarding pipeline extensions pursuant to D.22-09-036. This resolution requires that all gas utilities invoice prospective applicant builders the actual costs of extending gas pipelines to new developments, instead of only estimated costs. This is expected to save ratepayers approximately $26.8 million annually.

Building Decarbonization Proceedings (Open)

The below proceedings touch upon building decarbonization topics and remain open.

R.19-01-011: Order Instituting Rulemaking Regarding Building Decarbonization

CPUC opened this rulemaking to investigate alternatives that lead to the reduction of greenhouse gas emissions associated with energy use in buildings.
Phase 1 addressed implementation of SB 1477. On March 26, 2020, the CPUC adopted D.20-03-027, which established two pilot building decarbonization pilot programs: the Building Initiative for Low Emissions Development (BUILD) program and the Technology and Equipment for Clean Heating (TECH) initiative.
Phase 2 addressed the following issues, which were addressed in D.21-11-002, adopted November 4, 2021:
- Layering of incentives from the various building decarbonization program
- Adoption of a statewide Wildfire and Natural Disaster Resiliency Rebuild (WNDRR) program
- Guidance on data sharing of customer and other information between the CPUC, California Energy Commission, participating electric utilities, implementers, and evaluators of building decarbonization programs
- Direction to Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric to study net energy bill impacts resulting from when a residential customer switches from a gas water to an electric heat pump water heater. If the utilities find adverse bill impact, they are directed to proposed a rate adjustment to eliminate financial disincentive for switching to from gas to electric heat pump water heating.
Phase 3 comprises:
- 3A: D.22-0-026 adopted September 15, 2022 and eliminates gas line extension subsidies for all customers not otherwise granted a special exemption, beginning July 1, 2023.
- 3B: D.23-12-037, adopted December 14, 2023, which eliminates electric line subsidies for new mixed-fuel construction.
D.23-02-005, adopted on February 2, 2023, authorized the use of an additional $50 million appropriated by the California Legislature to augment the TECH initiative program budget.

R.20-05-012: Order Instituting Rulemaking Regarding Policies, Procedures, and Rules for the Self-Generation Incentive Program and Related Issues

D.22-04-036, adopted April 7, 2022, establishes the final budgets, incentive levels, and program requirements for the Self-Generation Incentive Program (SGIP) Heat Pump Water Heater (HPWH). The decision allocates $84.7 million to the SGIP HPWH program.
D.23-12-004, adopted December 14, 2023, which clarifies and modifies aspects of the SGIP HPWH, including expanding program eligibility to ensure inclusion of publicly-owned electric utilities and community choice aggregators.

R.18-04-010: Order Instituting Rulemaking to Evaluate the Mobilehome Park Pilot Program and to Adopt Programmatic Modifications

Rulemaking to evaluate the Mobilehome Park Utility Conversion Pilot program and whether to establish a permanent Mobilehome Park Utility Conversion Program (MHP UCP)
Phase 1: D.20-04-004, adopted April 24, 2020, established a permanent 10-year program that makes a few modifications to the previous pilot program
Phase 2A: D.21-08-025, adopted August 19, 2021, consumer protection measures for residents of mobilehome parks and prohibits mobilehome park owners from raising rents due solely to MHP UCP upgrades
Phase 2B: Currently underway, this phase explores the adoption of an updated electric service standard and whether to adopt an electrification pilot for mobilehome parks participating in the MHP UCP. On July 31, 2023, Staff released a proposal recommending the adoption of a 200-amp electric service standard and the initiation of a $50 million mobilehome electrification initiative.

A.18-05-015: Application of Southern California Edison Company for Approval of Its Clean Energy Optimization Pilot (CEOP)

Establishes a streamlined, technology-neutral approach to reducing GHG emissions at University of California and California State University systems. Campuses receive performance payments for measured GHG emissions reductions.
D.19-04-010, adopted April 25, 2019, approves $20.4 million of electric IOU Cap-and-Trade allowance proceeds for SCE’s CEOP program.

A.22-03-006: Application of Pacific Gas and Electric Company for Approval of 2023-2026 Clean Energy Optimization Pilot (CEOP)

PG&E proposes to use $50M in Cap-and-Trade allowance revenues over 4 years, used for clean energy and energy efficiency programs (CEEE funds), to replicate and scale-up the pilot authorized in D.19-040-010 (SCE’s CEOP).
The pilot proposes deploying the program at 16 campuses across the University of California and California State University.

A.22-08-003: Application of Pacific Gas and Electric Company for Approval of Zonal Electrification Pilot Project

Application by PG&E requesting approval of $17.224M in expenditures for zonal electrification of California State University Monterey Bay’s campus.

PG&E would replace the current gas distribution service provided by PG&E’s existing pipeline distribution system with behind-the-meter electrical investments.

Building Decarbonization Proceeding (Closed)

A.21-12-009: Application of Southern California Edison Company (U338E) for Approval for Its Building Electrification Programs

Application by Southern California Edison (SCE) for Approval for its Building Electrification Programs, filed on December 20, 2021.
The Application requests approval to recover a total of $677 million from rates between 2023 and 2027 to install heat pumps and provide electrical upgrades for households and businesses in SCE territory.

R.12-11-005: Order Instituting Rulemaking Regarding Policies, Procedures, and Rules for the California Solar Initiative, the Self-Generation Incentive Program, and Other Distributed Generation Issues

While this proceeding addresses a number of topics, D.19-09-027, adopted September 19, 2019, and D.20-01-021, adopted January 15, 2020, established the Self-Generation Incentive Program Heat Pump Water Heater (SGIP HPWH) program that will offer incentives to deploy HPWHs at scale in California.

A.18-03-001: Application of Pacific Gas and Electric Company for Approval of its 2018 Energy Storage Procurement and Investment Plan

PG&E filed this application to demonstrate compliance with the requirements of PU Code Section 2838.2(b), which was added pursuant to AB 2868 (Gatto, 2016). The goals of this legislation were to, in part, “accelerate the widespread deployment of distributed energy systems.”
This application was also filed in compliance with D.17-04-039, adopted April 27, 2017, which directed the IOUs to incorporate proposals for distributed energy storage systems into their energy storage procurement plans.
D.19-06-032, adopted June 27, 2019, implemented the AB 2868 energy storage program and investment framework and approved the AB 2868 applications, with modifications. The CPUC approved PG&E’s request for $6.4 million for its behind the meter thermal energy storage program, and requested the PG&E file a Tier 3 Advice Letter for final approval.
Consequently, on December 31, 2019, PG&E filed AL 5731-E to propose the WatterSaver program to provide BTM energy storage. The $6.4M program aims to reduce 2.5 MW of peak load.
Resolution E-5073, adopted January 14, 2021, approved PG&E’s Advice Letter to implement the WatterSaver program.

A.20-03-004: Application of Southern California Edison Company (U338E) for Approval of its 2020 Energy Storage Procurement and Investment Plan.

D.22-04-044, adopted April 21, 2022, approved, among other things, the implementation of SCE’s Smart HPHW program. Includes cost recovery of $13.9M to implement a program that will reach 17,000 customers and target 5 MW of behind-the-meter thermal energy storage by 2027.
Similar to PG&E’s WatterSaver program, SCE’s Smart HPHW program includes incentives for the replacement of natural gas water heaters with electric heat pump water heaters.

I.22-09-011: Investigation to Address the Potential Loss of Natural Gas Service for a Portion of the Santa Nella Community

D.23-04-057 adopted April 27, 2023, directs PG&E to install new electric and gas distribution infrastructure for a portion of the Santa Nella community in Merced County, and also gives residents the option to forgo gas service and fully electrify their homes at no cost.”

R.15-03-010: Rulemaking to Identify Disadvantaged Communities in the San Joaquin Valley and Analyze Economically Feasible Options to Increase Access to Affordable Energy in those Disadvantaged Communities

D.17-05-014, adopted May 11, 2017, adopts a methodology for identifying San Joaquin Valley (SJV) disadvantaged communities (DACs) eligible under Public Utilities Code Section 783.5.
D.18-08-019, adopted August 23, 2018, approves a data gathering plan to gather baseline data on energy, household, and community conditions within SJV DACs. The decision also adds nine communities to the list of SJV DACs and establishes a process for changes to the list.
D.18-12-015, adopted December 20, 2018, approves 12 pilot projects across 11 communities in the San Joaquin Valley; 11 of these pilots converted homes to all-electric end uses, allowing residents to move away from propane and wood for heating and cooking.
D.19-02-030, adopted February 25, 2019, corrects several errors in D.18-12-015.

D.20-04-006, adopted April 15, 2020, modifies D.18-12-015 and removes income eligibility requirements for four of the communities, making all residents in these communities eligible for full participation the SJV DAC pilot. The decision also directs PG&E and SCE to implement a two-way balancing account to track the costs of implementing the bill protection and transitional community solar discount authorized in Resolution E-5034.