The journey started, in part, with a bit of green-shaming.
When a colleague was thinking about buying a heat pump for his home, Justin Guay asked how much more expensive it was than a gas furnace. “It doesn’t matter,” the colleague replied. “You’re supposed to do your part to bring it down the cost curve.” In other words, it was his duty as a climate hawk to do for heat pumps what Germany did forsolarpanels.
Justin Guay is indeed a climate hawk. First at the Sierra Club, later at the Packard Foundation, and today at the ClimateWorks Foundation, Guay has worked to deploy clean energy, especially beyond the grid, and shutter coal-fired power plants around the globe. (Full disclosure: Guay is a good friend.)
Guay’s climate activist bona fides include foreign travel challenges — ask him about it over a beer sometime — but, until this year, he hadn’t completed the clean energy transition in his own home. Few of us have, and that’s a big problem for the climate.
Guay and his family live in a modest 1,200-square-foot, single-story home in the hills above the east side of San Francisco Bay, California. Built in the 1950s, the home predates California’s building energy-efficiency standards, which were launched a few decades later.
A previous owner had installed wall cavity and attic insulation and dual-pane windows, but Guay and his wife, Kat, wanted to do much more. Like many other climate-conscious San Francisco Bay Area residents, the Guays own a Toyota Prius, which they use for longer road trips. They also own an all-electric Chevy Bolt, a recent upgrade from their shorter-range Nissan Leaf.
One of the first things the Guays did when they moved into the home four years ago was to install a 3.5-kilowatt rooftop solar photovoltaic system. Later, they added a Level 2 EV charger for the Leaf.
Driving the Leaf, running on electrons generated by their rooftop solar panels, was the second trigger for what became the Guays’ electrification project. “Once I got the EV,” said Guay in an interview, “I got enamored with the notion that I was driving on sunshine. As soon as you take that step, you can’t go backward.”
The Guays decided to go all-in on renewable electricity. The wall-mounted natural gas furnace in the living room and the gas-fired water heater, convection oven and cooktop, and clothes dryer, all had to go. The gas lines would be capped. Surely, they thought, replacing four appliances wouldn’t be so difficult.
Justin and Kat — highly motivated, knowledgeable consumers from a solidly middle-class household — would soon learn they had walked into a frustrating thicket of gas-friendly legacy state policy and corner-cutting contractors. Time and again, hurdles tested their determination to go on.
“Unless you have gone through it,” Guay told me, “there is stuff you never would have foreseen.”
The fuel-switching surprise
The Guays sensibly started with a home energy audit to assess their home’s envelope and equipment and to identify available rebates. To their surprise, the $400 assessment didn’t uncover major problems. But then, another surprise: They learned that equipment that displaces natural gas with electricity, such as an air-source heat pump, is not eligible for rebates and incentives for energy-efficient equipment offered by their utility, Pacific Gas and Electric Company.
What did it matter to PG&E, Guay wondered, if he was swapping gas for electricity? PG&E sells both; he’d still be an electricity customer. It turns out the California Public Utilities Commission, which regulates PG&E and the state’s other investor-owned utilities, does not permit the utilities to encourage fuel-switching.
The confounding rules prompted one creative, if shady, contractor to suggest a rebate hack. If the Guays installed a backup gas heater — even if they never intended to use it — alongside a heat pump, the system could qualify for a rebate.
How is it that in a state with some of the most ambitious clean energy and emissions reduction targets in the world, existing policy for buildings favors a fossil fuel, natural gas, over electricity delivered by California’s increasingly renewable grid?
Legacy state policy favors gas
“The default today in new home construction and commercial construction is gas. That was done at a time when we were leveraging coal-fired generation to power electricity,” Caroline Choi told me in an interview. Choi is the senior vice president for regulatory affairs at Southern California Edison, another of the state’s investor-owned utilities.
In an interview, Pierre Delforge, director of high tech sector energy efficiency for the Natural Resources Defense Council, said the lack of a decarbonization plan for buildings is a “big gap” in California’s climate policy.
Ninety percent of water heating in California is done with gas, he said. Delforge added that the emissions from burning natural gas in California’s residential and commercial buildings are equivalent to the emissions from all the state’s gas-fired power plants.
Like Choi, Delforge tied the existing preference for gas to legacy state policy. “The challenge we have is to evolve the state policies that were created 20 or 30 years ago when electricity was much dirtier than it is today, and the heat pump technology didn’t exist, or probably wasn’t available,” he said. “Gas was perceived as the cleaner fuel, and that’s no longer the case.”
Putting gas and electricity on a level playing field
State policymakers are beginning to shift course and address the preference for gas in buildings, but they are operating under constraints in existing California law. Every three years, the California Energy Commission (CEC) updates the state’s building energy-efficiency standards to reflect advances in technology. Solutions like duct-sealing and air-tightness in attics or solar-ready new homes often start as voluntary measures before becoming mandatory measures in the code.
The process is deliberate and iterative, but over time, updating the standards to require the best-available, cost-effective technologies raises the floor on energy efficiency.
“We do push the market through the building code and through appliance standards. We do establish a trajectory that will get them to scale,” Andrew McAllister, a California energy commissioner, told me in an interview. McAllister’s portfolio includes California’s energy efficiency standards for buildings and appliances.
McAllister cautioned, however, that the commission must account for cost-effectiveness when implementing policy. “Carbon currently is the No. 1 organizing principle of our energy planning, but we also have statutes that require us to establish cost-effectiveness for things we require people to do.”
He went on: “We have to show the regulation is in the best interests of California broadly. We have to show that the benefits outweigh the costs.” The problem today: cheap natural gas.
“If you compare the cost of service with natural gas over electricity, it’s not always straightforward to show the electric path is more cost-effective than the gas path. We have to be judicious because we don’t want to saddle Californians with additional costs that aren’t well considered,” said McAllister.
But, in the pending 2019 version of the building energy-efficiency standards, which take effect on January 1, 2020, commission staff included a provision enabling electric appliances and equipment to compete on a level playing field with gas. In an interview, Mazi Shirakh, a senior engineer in the CEC’s building standards office, said staff “eliminated some of the disadvantages for all-electric packages that exist.”
Their creative solution is a two-track system: an electric baseline for all-electric homes and a natural gas baseline for mixed-fuel homes. It would allow each type of home to comply with the code without competing with the other fuel.
Shirakh cited an example of how the simple tweak could help to electrify homes. Staff research found that in some of the state’s climate zones, electric heat pump water heaters were at an economic disadvantage compared to gas-fired water heaters. “By removing that barrier,” he said, “the all-electric home has a clear path for compliance without being penalized.”
For climate advocates like NRDC’s Delforge, the change is a welcome first step.
“It’s a good step forward — and an important step forward to level the playing field and remove the bias against electric technologies — but it doesn’t go far enough, at least for the long term,” he said. “In the long term, we’re going to need a building code that aligns with the state’s climate goals and incentivizes the low-carbon options.”
He added that while the updates to the building code are essential to get new construction right and not lock in avoidable emissions, the measures apply to new construction and major renovations, reaching about 1 percent of the building stock each year.
Much harder will be retrofitting and decarbonizing existing buildings, especially those predating California’s building energy-efficiency standards.
Potential legislative solutions
Delforge said one of the reasons the state’s investor-owned utilities are prevented from establishing programs for electrification rebates and incentives is the so-called “three-prong test.” An adopted policy measure must constitute an improvement from an environmental, energy and cost perspective.
“But the way these prongs are defined is still grounded in that ‘90s world where the grid didn’t have much renewables on it. It’s an outdated test, and it needs to be revised,” he said.
His employer, the NRDC, filed a motion with the California Public Utilities Commission nine months ago, so far without a response, asking commissioners to update or amend the three-prong test.
California regulators could go much further to promote a transition to cleaner electrified buildings if given a political signal from the legislature to prioritize decarbonization in buildings. NRDC is pushing a package of four bills awaiting action in the legislature:
- AB 3232: This bill would require all new residential and commercial buildings to be zero-emission buildings by 2030. It also directs the CEC to develop a strategy to reduce greenhouse gas emissions in California’s building stock to 50 percent below 1990 levels by 2030.
- AB 3001: This bill specifically addresses the three-prong test by directing the CEC to add a greenhouse gas metric: to “include societal and environmental costs of energy use in determining the cost-effectiveness of programs.” The bill also requires the CEC to require new residential and commercial buildings to be electric-ready buildings from 2022.
- SB 1477: This bill aims to do for zero-emission space- and water-heating technologies what the California Solar Initiative did for rooftop solar and the Clean Vehicle Rebate Project is doing for plug-in electric vehicles: build a market. The bill directs the CEC to develop a statewide “market transformation initiative” for low-emission space and water heating equipment and to establish a Zero-Emission Building Program to provide incentives for these products.
- AB 2195: This bill directs the Air Resources Board to track greenhouse gas emissions from natural gas leakage and venting during the production, processing, and transporting of natural gas imported into California.
Even if all the above bills were to become law, formidable political obstacles remain. What if the market for zero-emission space and heating equipment takes too long to mature? Might California regulators move to enact a ban on fossil-fuel-fired heating equipment in existing or new buildings? Denmark banned the installation of oil- and gas-fired boilers in new buildings from 2013 onward; oil-fired boilers were banned in 2016 in existing buildings in areas connected to district heating or with natural gas service.
I put the question to Andrew McAllister, who didn’t want to make a prediction, leaving the “large policy questions there” to the governor and legislature.
“There’s not yet an established clear pathway to substitute a large portion of our existing natural gas system over to non-fossil options,” he said.
He added that for existing buildings in particular, “there are big sunk costs in all of these systems.” And he hadn’t given up on the idea that renewable gas or power-to-gas solutions might be possible as well.
I asked Caroline Choi if SCE customers in new buildings will even have a gas connection in 2030. “It’s possible there wouldn’t be for new home construction,” she said.
Looking out even further to 2050, when the state aims to have reduced its greenhouse gas emissions by 80 percent compared to 1990 levels, Choi thought it even more likely builders wouldn’t include a gas hook-up in new construction. “Do you put in infrastructure in new home construction that is not going to be really used and useful as you move toward the 2050 goal?” she asked.
In my conversations with experts for this story, a subject McAllister touched on above — sunk costs — came up repeatedly. If California were to make a wholesale transition to electrified buildings, and demand plummeted for natural gas, who pays for the stranded assets?
Southern California Edison released a white paper in late October 2017 envisioning using electricity to power nearly 30 percent of the space and water heaters in California homes and businesses in 2030. Southern California Edison’s service territory almost completely overlaps that of the single-fuel Southern California Gas Company.
How will California’s political leaders manage such a scenario?
“We recognize it has to be done in a systematic way to help ensure that the companies, their distributors and their employees can take the necessary steps to do that in the least impactful way to people,” Choi told me.
For NRDC’s Delforge, the gas-to-electricity transition presents several important questions. On the stranded assets issue alluded to by Commissioner McAllister, how do you pay for this legacy gas infrastructure, which was rate-based? And how do policymakers ensure that the customers remaining on the gas network are not those least able to switch to electricity? Rates may need to go up because fewer customers remain on the same-sized network.
“There are real issues in terms of equity and even political feasibility of the transition,” said Delforge. California needs to reach a clear consensus at the state level on the best path forward.
“We haven’t had this discussion yet at the political level in California,” he said.
Shady contractors, uncertainty, and a savior
The Guays, meanwhile, were ready to move forward with their electrification overhaul without waiting for rebates or for the adoption of new state policy. They would be the trailblazers.
Guay knew his circa-1950s home was likely to require upgrades to handle the additional power draw from the new electrical appliances, especially the tankless water heater. He was right.
First, multiple electricians told him he’d have to upgrade the existing 100-amp main electrical service panel to a 200-amp unit. There was no room left to connect new equipment to the existing panel, and, as suspected, the new electric appliances required an electrical panel with a higher ampacity.
The 2016 update to California building energy efficiency standards included 200-amp main electrical service panels as a mandatory measure in new and renovated homes. So, future homeowners who follow the Guays’ lead will avoid at least that hurdle.
Guay thought the project was stuck. Electricians told him he’d have to pay for PG&E to drop a new higher-capacity line from the distribution feeder because the existing line didn’t deliver enough electricity to power the new electric appliances he wanted to install.
Worse, quotes from electricians were all over the map. One said it would cost $3,000 and take six months to install the new feeder line. Another said it would cost $6,000 for a new 200-amp electrical panel and $4,000 for the upgraded feeder line. Still another said he could install a new electrical panel the next day for $2,800, but without notifying PG&E about the upgrade or pulling a permit.
Several electricians even told the Guays they weren’t allowed to install tankless water heaters. “There is an urban myth going around Berkeley that tankless water heaters are illegal,” Guay said. He called the county to check. The urban myth was just that; he had no problem getting a permit.
But then, more than four months into the electrification project, the Guays’ savior appeared. Scrolling through reviews for home heating and cooling contractors on Yelp, Guay happened upon a company based in Vallejo, not far from their home, called A-1 Guaranteed Heating & Air, Inc.
If he and Kat hadn’t found A-1 Guaranteed, they might not have kept going, Guay said. “Everybody else was trying to push natural gas on me, even though I was telling them I don’t want gas.”
Guay resolved the question about the distribution feeder by having a technician from PG&E come out and inspect the line. It turned out there was plenty of capacity on the existing line. A-1 Guaranteed installed a new 200-amp electrical panel, matching the $2,800 price quoted by the corner-cutting contractor.
But, even more important for the Guays, A-1 specializes in installing electric air-source heat pumps.
Larry Waters, a technician at A-1, installed a ducted mini-split air-source heat pump for the Guays. The company has installed 30 of the units over the last half year alone.
“These units sip electricity,” Waters told me in an interview. “They keep the house at an exact temperature. You can’t hear them operate.” A-1 uses Wrightsoft’s Right-Suite, a load calculation and duct-sizing software, to precisely calibrate air flow to each room of the home.
Waters said that whereas conventional gas-fired furnaces installed in the United States are often 100 percent oversized, the electric air-source heat pumps he installs are sometimes one-third the size of the furnace they replace.
HVAC installers are still skeptical of the technology, said Waters. “Whenever I talk to my peers in the industry about what we’re doing, they all say it won’t work. I’m OK with being the only guy who knows how to make it work.”
The Guays paid $13,100 for the installation of an 18,000-BTU mini ducted heat pump from Fujitsu and accompanying duct work. A-1 had to install duct work for the unit because the home had lacked central heating.
The Guays secured a property-assessed clean energy financing package from Oakland-based Renew Financial to cover the cost of the heat pump system. PACE financing enables the homeowner to avoid the upfront cost for equipment. Instead, the Guays will pay off the project via an assessment tied to their property tax bill.
To complete the electrification package, they paid out of pocket to install a Stiebel Eltron Tempra Electric Tankless Hot Water Heater, Frigidaire Electric Range, and LG Energy Star Electric Dryer.