In which we navel gaze in 2023 at proposed regulations, and see stranded assets, especially in states like California following technology regulation.
The recent news cycle was filled with the petty politics of gas stoves bans. We’ve long been critical of such policies here, as stoves are both deeply personal and immaterial to global warming emissions.
Carbon emissions from space heating on the other hand represent about a third of emissions from commercial buildings. You may not be seeing a condensing boiler on Late Night, but massive policy momentum is building to decarbonize buildings, and that boiler is target number one.
So if you are an owner or operator of real estate what does this mean for your buildings? First, if you develop new construction, you already may be subject to ordinances mandating that your building be all-electric. Over 100 local governments in 11 states have instituted bans on natural gas, largely for new construction. Predictably these ordinances are concentrated in California (73%), key East Coast cities, and liberal exclaves like Boulder and Austin. These mandates are challenging but workable and will set the future baseline for building performance in cities.
Of course most buildings are already standing – by most estimates 80% of the buildings we will have in 2050 are currently in operation. And retrofitting those buildings to run without natural gas is a huge lift, technically and financially. The retrofit expense for San Francisco building stock is estimated at up to $5 billion. For comparison, the entire Apollo space program cost $21 billion year.
Regulations that target gas in existing buildings fall into two categories.
The first category, more popular on the East Coast, imposes targets for building performance that are difficult to meet with on-site natural gas. Examples include New York’s local law 97, Washington DC’s performance standard, and the recently announced Energy Star Next Gen program. These programs balance competing goals of improved electric performance and the phasing out of gas infrastructure.
The second category, more popular on the West Coast, is an outright ban on natural gas heating. Under such mandates, even buildings with an Energy Star score of 100 have to take on the complex challenge of engineering for all-electric heating.
No jurisdiction is more hotly contested than San Francisco, where a mosh pit of three regulatory bodies seeks to ban natural gas. The unfolding battle may portend similar regulatory skirmishes in other states.
The City of San Francisco was first with their Climate Action Plan to set in motion a variety of strategies to address carbon emissions. The latest version of the plan seeks to eliminate the use of natural gas in all commercial buildings by 2031, although so far there has not been any accompanying legislation. This year, two other agencies, the California Air Resources Board (CARB) and the Bay Area Air Quality Management District (BAAQMD), are both seeking to ban the sale of new boilers by 2030 and 2031 respectively, on the basis of air quality rather than carbon emissions.
Will these efforts lead to regulations? Maybe. Will they be challenged in court? Absolutely!
Still, if you want to be a sustainability leader, or even just prudent with owner capital, it’s hard not to see a trend here and see a forlorn future for your boiler.
So what to do? Here are some practical tips to get a hold of the problem in your building:
- Understand what you have: Gridium has seen boilers in the field with a lifespan of 50 years. Newer models have a shorter lifespan. Will your equipment last until the early 2030s? If so, you should probably not make any major changes until regulatory clarity emerges.
- Be skeptical of natural gas investments: If you are in one of the affected cities, be very cautious of any natural gas investments, even in the name of efficiency. Any proposals for fuel cells, cogeneration, green gas or anything with combustion on site should raise an eyebrow.
- Dance with delight if you use district steam: Yes, steam is expensive, but every regulatory framework we have examined places the burden for decarbonization on the steam provider. In this market, it’s wonderful to have the capital risk lie with a third party.
- Start thinking about the path to electrification: We can argue about the timeline, but in major coastal cities, the time to start thinking about your path is now. What is the water temperature? Does the building’s volume support air source heat pumps? Are the VAVs two-row or four-row? Even if you aren’t going to electrify immediately, understand your options, because related investments like air handlers can box you out of certain electrification paths. If you are in a Gridium Alpha audit, we can also incorporate this into our study scope.
- Advocate for policy: policy makers often think that electrifying a high rise is as easy as putting heat pumps on a roadside hotel. It is not. Join your local BOMA or IFMA group and share your thoughts about the challenges of electrification
What do you think? How has your team thought about electrification? What are your strategies?
Feel free to call to discuss. I’ll be cooking pasta in 60 seconds on my induction stove!
