Dive Brief:

• The California Public Utilities Commission (CPUC) last week issued a proposed decision outlining two new pilots that would set the state on the path toward decarbonizing its buildings — which currently contribute a quarter of the state's greenhouse gas emissions.

• The commission is proposing to launch the Building Initiative for Low-Emissions Development (BUILD) program, which would incentivize near-zero emissions technologies in new residential buildings, and the Technology and Equipment for Clean Heating (TECH) initiative, which would build out the market for low-emission space and water heaters in new and existing residential buildings.

• The pilots stem from SB 1477, legislation signed by then-Gov. Jerry Brown in 2018. The two programs are estimated to cost $200 million over four years.

Dive Insight:

The CPUC launched its building decarbonization rulemaking in January, 2019, and in addition to implementing the pilot programs, also intends to align its policies with building energy efficiency standards and create a broader framework for building decarbonization policy.

According to SB 1477, California has seen very little growth in near-zero emissions construction practices and clean heating, despite "the favorable economics of achieving deep emissions reductions in new buildings." The CPUC's proposed decision would allocate 40% of the total $200 million budget for the BUILD program, and 60% for the TECH initiative. The proposal can be voted on at the commission's March 26 meeting at the earliest.

As per the CPUC's proposal, the California Energy Commission would administer the BUILD program, providing incentives to "newly constructed projects that are, at a minimum, all-electric." Incentives would not be provided to projects that will ultimately require natural gas infrastructure extensions, and would be based on GHG performance models. The program's budget is $2 million per year for four years.

The agency is proposing that the TECH initiative be implemented by a third-party, which would be selected through a solicitation process conducted by Southern California Edison. The CPUC's approach to the TECH program allows flexibility and provides the implementer with "a menu of tactics," the proposed decision says. However, it will include an emphasis on driving upstream and midstream market development, and education and training, rather than directly providing incentives to customers. 

Bidders for the TECH program are required to propose technologies that would best meet the program's goals, with a special emphasis on technologies that are grid-enabled, and would address health, safety and affordability concerns for low-income households. 

The CPUC proposed decision does not adopt recommendations from Southern California Gas and other parties to specifically include renewable natural gas and hydrogen in the pilots, since SB 1477 **is not focused on "particularized infrastructure or fuels."**

The proposal "makes a lot of really smart choices," according to Michael Colvin, director of California energy at the Environmental Defense Fund.

"We're very supportive of the overall direction of where the commission is headed with these pilot programs," especially the emphasis on low-income communities and understanding the financial impact on the gas system, he said.

The American Biogas Council supports building decarbonization, but only allowing buildings that use electricity is "short-sighted," Patrick Serfass, executive director, told Utility Dive.

"In California, there seems to be a growing interest for 100% electricity solutions, which cuts out the opportunity for renewable gas to play the valuable role it can play," he said. 

When utilities wanted to decarbonize electricity, they didn't just cut down power lines — they put "better stuff" in them, Serfass said.

"That's what the gas industry is trying to do as well — we're trying to put better gas, renewable gas, low-carbon or carbon negative gas to replace fossil gas, and having the choice for different kinds of energy is important all across the country and certainly in California," he said.

Renewable gas and hydrogen need to be part of the zero-emissions future, Jack Brouwer, director of the National Fuel Cell Research Center and professor of mechanical and aerospace engineering at the University of California, Irvine, told Utility Dive. Brouwer is a board member and chair of the renewable hydrogen and energy storage sector action group of the California Hydrogen Business Council.

He supports electrification, heat pumps and battery storage, "but if you put all of those together and you try to get to just 80% of renewables on the grid, you cannot do it," he said.

He noted that the CPUC also needs to focus on resilience, especially in light of widespread public safety power-shut offs deployed by utilities during the 2019 wildfire season.

"Electrifying everything will not be as resilient as decarbonizing both the electric and gas systems," he said.

The Coalition for Renewable Natural Gas declined to comment on the proposed decision.