The focus on buildings is necessary and arguably overdue. California recently set a goal of becoming carbon neutral by 2045, and the state aims to cut greenhouse gas emissions 40 percent from 1990 levels within the next decade. Cleaning up the building sector will be critical to these goals.

As California Public Utilities (PUC) President Michael Picker explains, “Renewable electricity alone isn’t enough to help us meet our 2030 greenhouse gas reduction goals; we also need to electrify our homes and buildings to reduce the use of fossil fuels in California. Twenty-five percent of total emissions in California are from homes and buildings and we must make headway on reducing these emissions to meet the state’s overall aggressive climate goals.”

The concept of building decarbonization goes beyond reducing energy use and “zero net energy” (meaning the total amount of energy used by the building on an annual basis is roughly equal to the amount of renewable energy it generates)—and instead focuses squarely on reducing emissions, which can be achieved both by cutting energy consumption and by using cleaner energy sources such as electricity generated from renewable resources like wind and solar. Decarbonization requires attention to issues such as burning fossil fuels in buildings, particularly for heating and hot water.

New Programs the Work Horse

The commission, as required by SB 1477 passed last year, will develop two new programs to launch as early as July 1 this year: Building Initiative for Low Emissions Development (BUILD), and Technology and Equipment for Clean Heating (TECH). Each is designed to test different approaches to decarbonizing buildings. The programs will receive $200 million in funding over four years from natural gas utility carbon allowance proceeds from the state’s cap and trade program.

BUILD will focus on new buildings, encouraging technologies that push emissions savings beyond what could be achieved with building standards that are already in place. These options can include high-efficiency heat pumps, solar thermal heating, energy efficiency, and batteries to store solar energy.

While TECH will focus on low-emissions space and water heating technologies for both new and existing homes. Switching to highly efficient electric heat pumps, for example, is imperative to meeting the state’s climate goals, as about 90 percent of California’s furnaces and water heaters currently run on gas or propane.

Both programs stand to lower not just greenhouse gas emissions, but costs for consumers. With policy support behind these new technologies, upfront costs will drop, and so will energy bills. Nearly a third of the funding for BUILD must be spent on new low-income housing, where families tend to spend a higher percentage of their income on energy bills.

Already, the commission has approved a pilot program that will wean more than 1,600 homes from fossil fuels by helping San Joaquin Valley low-income homeowners and renters install high-efficiency electric heat pumps and other energy efficient upgrades, which expected to save participating households about $1,500 in energy costs each year, while also slashing local air pollution and greenhouse gas emissions.

Other Opportunities

The PUC is also considering building decarbonization opportunities in addition to what is required to implement SB 1477. One new focus area is strengthening incentives for homes being rebuilt after wildfires. Utilities “have limited ability to offer increased incentives to customers who agree to make permanent decarbonization investments when rebuilding damaged homes,” the PUC says, opening the possibility for pilot programs that encourage going all-electric.

The state’s building and appliance standards also offer decarbonization opportunities. The new rulemaking proceeding will consider how PUC policies and programs can help speed up adoption of emissions-reducing technologies, paving the way for the adoption of stronger building codes and standards.

Importantly, the commission also intends to create a framework to support building decarbonization through all of the tools available to the agency. This could include rates, programs, incentives, planning processes, and other direction it gives to the utilities.

We need this kind of holistic thinking about how to make buildings part of the climate solution. Panama Bartholomy, director of the Building Decarbonization Coalition that includes NRDC, argues that “We need a long-term strategy across regulatory bodies in California to drive down costs and quickly grow consumer experience with low-emission technologies.”

Across the country, from suburban homes to high-rise office buildings, too many buildings remain yoked to fossil fuels. California’s approach ultimately could offer a model that other states can follow to both reduce climate pollution and improve housing affordability.

Merrian Borgeson is Senior Scientist, Climate & Clean Energy Program for NRDC.