The workforce is the driving engine of the economy. This adage is equally true even when the engine is efficient and electric. Clean energy jobs in the fields of energy efficiency and electrification are increasing. While the U.S. workforce grew overall by 2.8% between 2020 and 2021, clean energy jobs grew 4% during the same period. However, employers are having difficulty filling these jobs because declining interest in skilled trade jobs over the past decades means there are few new workers in the fields of energy efficiency and electrification. Employers expect this picture to only get worse. In 2016, the U.S. Department of Labor estimated that as many as 500,000 energy industry workers would retire within five to 10 years.
Some states recognize this looming bottleneck and are taking action to advance comprehensive legislation on climate and energy policy, while simultaneously advancing workforce goals. Electrification and improving energy efficiency in buildings to reduce energy use save consumers money and advance climate goals. These upgrades and changes to buildings require a skilled workforce. The case for job growth in the energy efficiency and electrification sectors is bright due to projected exponential growth in clean energy jobs to meet demand. Many states have existing workforce development programs and are updating or changing the focus of these programs to educate the workforce in the clean energy sector. Only a handful of states, however, including Minnesota, Maine, New York, Massachusetts, Maryland and Illinois, have enacted legislation to launch or expand workforce development programs that provide the skills necessary for a successful and diverse building modernization workforce.
Successful state legislation to advance workforce development programs that prepare workers and businesses to meet the growing demand for energy efficiency, electrification and clean energy building upgrades can:
Ensure a just energy transition by increasing access to the education and training necessary for energy efficiency and building decarbonization jobs among underrepresented populations and businesses through equity-focused program outreach and curricula.
Develop training opportunities that enable those with nontraditional educational paths to gain the skills needed to successfully participate in the workforce.
Create programs to reach middle and high school students that allow students to get on-the-job experience in a trade at a younger age.
Remove barriers in existing workforce development programs, such as requirements for certain educational attainment, and barriers to individuals who have a criminal conviction or some connection to the justice system.
Provide skills-based networking and transition programs for workers and communities impacted by power plant closures. Workers affected by power plant closures may possess training and certifications not easily reflected in a job market focused on traditional degrees. State programs that focus on skills-based hiring and enabling nontraditional educational paths will be more readily able to connect displaced workers with quality jobs.
Enable more earn-as-you-learn programs through registered apprenticeships that provide participants with on-the-job learning while they earn a paycheck.
As more states enact laws to support the energy efficiency and building electrification workforce, they can use the legislative examples in the Building Modernization Legislative Toolkit to launch task forces and plans, create clean energy jobs networks and use state and ratepayer funds to create workforce development programs. States with robust energy efficiency and building electrification workforce development programs will be well positioned to pursue over $30 million in funds from the Infrastructure Investment and Jobs Act for training and education needs, including activities that address current workforce gaps. States can leverage these funds for purposes such as pre-apprenticeships, apprenticeships and career opportunities for on-the-job training and vocational school support. The infrastructure legislation also includes millions of dollars for energy efficiency programs, which will require a qualified workforce to deliver.
Valuable flexibility can be exploited with efficient heating and cooling systems
In the 1920s, the Parisian heat network burned coal to provide steam to pre-heat the trains leaving Gare de Lyon station. Over time, the network grew into a district heating system that delivers heat to around 20% of the city. With its reliance on burning household waste, fossil gas and biomass to deliver very hot steam at greater than 200°C through old and leaky pipelines, however, the system is stuck in the past.
By contrast, in Saclay, a suburb in southwest Paris and home to one of France’s most high-tech university campuses, a new vision for district heat is emerging. Clean, efficient and smart, it shows that heating (and cooling) networks can be a key piece of the puzzle of how to decarbonise our buildings.
District heat can potentially utilise a huge amount of excess, ambient and renewable heat, especially in urban areas with high-density heat use. At the same time, it can benefit the electricity grid by providing much-needed flexibility through power-to-heat technologies and thermal storage.
Tapping into clean heat
In a district heating system like Paris’s main network, heat is often produced at a few central locations and then transported by pipelines to the users. Although not the most energy-efficient process, this works well when producing high-temperature heat from big plants burning fuels or when using waste heat from industry.
Most clean, low-carbon heat sources, on the other hand, produce heat of lower temperatures, which would need to be upgraded to higher temperatures to transport over longer distances due to the losses that occur during distribution. It is therefore more efficient to use the heat as close to the source as possible.
District heat can potentially utilise a huge amount of excess, ambient and renewable heat, especially in urban areas with high-density heat use.
In Saclay, the local authorities opted for a decentralised approach that makes the most of the deep geothermal source they have available to provide heating and cooling. Low-temperature heat of approximately 30°C is pumped up and fed into a pipeline system that connects clusters of buildings, each with its own heat pump to upgrade the heat to the required temperatures (>60°C).
Over time, new locally available sources will be added to the network, such as waste heat from cooling processes in laboratories and a data centre. When fully operational, the Saclay district heating system aims to run on 60% renewable, waste and ambient heat. Another 36% will come from electricity used in the heat pumps, using fossil gas (4%) only in winter peak times. Compared to a system using gas boilers, the system’s CO2 emissions are four-to-five times lower, and, even before the gas price spikes, users paid less for their heat.
Storage, flexibility and smart management
Storage is essential for clean energy systems to efficiently match demand with supply. District heat can contribute to this. Thermal energy storage, which usually entails putting hot water in a tank, pit or aquifer, is cheaper than storing electricity in batteries and gives heat networks the necessary flexibility to integrate renewable and waste-heat sources.
For instance, systems can save the excess industrial or solar thermal heat available in summer for use in winter, or can allow heat pumps to produce heat at times of the day when renewable electricity is plentiful and cheap, and save it for when demand is highest.
The Saclay system uses the heat retained by the well-insulated pipes and buildings as storage, providing valuable flexibility. Combined with the fully digitised and automated operation of a network relying on smart meters, heating and cooling production can be more easily matched with demand, maximising efficiency.
The Saclay system shows that clean, smart and efficient district heat can play an important role in decarbonising our buildings.
With the planned addition of solar photovoltaics to the rooftops of the connected buildings, smart management and thermal storage will help make the best use of the electricity generated, running the heat pumps whenever the sun is shining and storing the heat until it is needed later in the day.
As an added benefit of digitised operations, leaks and faults can be detected and fixed more easily, quickly reducing system losses and downtime.
The challenge ahead
The Saclay system shows that clean, smart and efficient district heat can play an important role in decarbonising our buildings, allowing operators to tap into largely unused sources of renewable and excess heat while providing important flexibility and storage benefits by coupling the heat and electricity sectors.
The Paris systems represent different generations of district heating. The old system is one of the few remaining that still uses steam as a heat carrier. The Saclay heat and cold exchange network, by contrast, is of the newest generation, combining low temperatures and efficient infrastructure with digitised and smart operation—and largely relying on heat that is renewable or would otherwise go to waste.
Yet, this juxtaposition also shows the challenge to realise the great potential of district heat. There are hundreds of smaller and larger district heating systems across Europe that will need to be modernised and decarbonised. At the same time, many areas currently hooked up to a gas grid will have to shift to clean sources, including through newly built district heat.
A version of this article, part one of a three-part series, originally appeared on Foresight Climate & Energy.
According to the American Gas Association, from 2018 to 2020, natural gas utilities added an average of 753,619 customers and 20,724 miles of pipeline each year. This equates to adding more than one customer per minute and more than 2.4 miles of pipe per hour over that timeframe.
At the same time, however, consumers are showing increased interest in alternatives to gas, such as electric heat pumps. New state and local building codes are limiting emissions from new appliances or otherwise restricting or discouraging gas equipment installations, and states are putting in place decarbonization policies that require limitations on future emissions from gas distribution utilities. These trends collectively hint at a future of a declining customer base for gas utilities, and that in turn is driving customer, advocate and policymaker concerns about stranded assets. The risk is that those customers least able to afford alternatives to gas would be forced to shoulder more of the cost to run the gas system.
From the perspective of public regulatory commissions, investments being made by gas utilities today are expected to serve customer energy needs reliably and equitably throughout the useful life of those investments. However, in many cases, current regulatory processes and tools used to evaluate gas utility investment decisions are not designed to adequately reflect these countervailing uncertainties and risks.
The planning and regulatory processes for gas are not directly coordinated with electric system planning processes, and as a result they are unable to quantify a range of potential long-term risks and benefits for customers. Specifically, regulators are lacking insights that can be gained from transparent tools that can model major uncertainties in long-term planning assumptions. These uncertainties include the degree and speed of decline in customer demand, as well as the cost and availability of alternative gas resources that are less emissions-intense than fossil gas.
Many important questions facing our energy systems can be explored within updated gas utility planning, with decision support tools and consideration of complementary regulatory tools (such as revised line extension policies and accelerated depreciation) to mitigate increasing costs to customers.
What States Are Doing
At least 10 states have recently engaged in a regulatory proceeding exploring some aspect of the gas utility system transition: California, Colorado, Connecticut, Hawaii, Massachusetts, Minnesota, New York, Nevada, Oregon and Washington. Bills addressing some aspect of gas planning or line extensions have been introduced in Nevada, Vermont, Rhode Island, Maryland, Oregon and Massachusetts. Although the specific driver behind each state’s proceedings varies, the underlying consistent theme is one of exploration of uncertainties and minimization of risks to customers.
For example, Washington passed legislation in 2021 requiring that the Washington Utilities and Transportation Commission open an investigation to evaluate pathways for electric and gas utilities to achieve their share of greenhouse gas emissions reductions. An independent third party is to conduct the study, to which stakeholders will supply data and other input. Since two of the three investor-owned gas utilities operating in the state are gas only, this process could yield best practices for coordinating the sharing of customer and planning data between gas and electric utilities. The legislature also funded the study to be managed through the public utility commission (PUC), so no additional ratepayer funds need to be collected by utilities to enable the study. Although not complete yet, the study development process is well underway.
Another example of gas planning evolution comes from Colorado, where legislators passed S.B. 21-2646, a bill that requires gas utilities to file Clean Heat Plans pursuant to PUC regulations. These plans much achieve a 4% reduction in greenhouse gas emissions from 2015 levels by 2025 and a 22% reduction by 2030, using a mix of supply-side resources, including energy efficiency, beneficial electrification, recovered methane and green hydrogen. The PUC issued a decision in December 2022, and the first utility plans will be filed in 2023.
Other gas-planning developments have focused on line extensions. Another 2021 Washington bill, H.B. 1084, precludes cross-subsidization of line extensions for residential and commercial customers. It requires new customers to cover the full cost of the new line extension rather than allowing the cost (or part of the cost) of new service to be allocated among all gas customers. This reallocation of costs has the effect of more appropriately reflecting system cost to new users. Note it does not apply to new customers on an existing gas line but only to new line extensions for a new development or service area.
An Accelerating Trend
Washington and Colorado are not alone, as states, utility commissions and utilities grapple with new scenarios that don’t fit into old processes. According to a McKinsey article, “gas utilities could face a range of scenarios, including high rates of electrification with significantly declining gas consumption, or more moderated electrification with transitions to biogas, carbon capture, or hydrogen. As gas utilities consider different decarbonization pathways, they will need to plan for different business trajectories amid the uncertainty.” Consequently, business-as-usual planning is no longer serving the gas sector well. States and commissions across the country are recognizing the need to review and update their planning approaches.
Leadership from policymakers, particularly at the legislative level, can provide needed guidance and authority to utility commissions, helping to dismantle the silos of gas and electricity planning and allowing for fuel-neutral planning in the public interest.
Stephen King wrote, “Sooner or later, everything old is new again.” Many “new” regulatory approaches to encourage building electrification are actually just new applications of tried-and-true methods policymakers have been using for years. Take, for example, clean heat standards, which some states (e.g., Colorado and Vermont) are considering or have implemented. A clean heat standard requires heating fuel companies to gradually increase the amount of clean energy they use to provide heat to customers. This is analogous to a renewable portfolio standard for electric companies, which has been widely used by states for many years to drive adoption of clean electricity generation technologies.
Other policy approaches to building electrification similarly draw on experience and expertise that regulators have honed over the years. For example, regulators have been overseeing and directing utility plans and programs for investments in energy efficiency for many years, which can inform similar plans and programs for building electrification.
Some may require revisiting or revising existing policy and regulatory approaches to enable the new opportunities presented by building electrification. Others will require regulators to expand existing efforts — for example, to focus benefits and harm reduction on low-income and overburdened communities.
Our building modernization toolkit provides examples and options for decision-makers that include ways states can electrify buildings through public utility commissions and utilities.
Directing utilities to file plans for electrifying buildings with their public utility commission. This engages utilities and their expertise in electrification activities and enlists the regulators in making sure utilities are acting as intended.
Removing existing barriers in state policy. For example, state policy may forbid fuel-switching, which is a direct barrier to electrification. Removing this provision and other barriers can help level the playing field for electric technologies and promote electrification without requiring utilities to take other actions.
Focusing electrification and other efforts on low-income and overburdened communities, particularly those with the highest energy burden. This can be a highly effective way to combat energy inequality and ensure that the hardest-to-electrify customers are prioritized.
Setting fuel-neutral emissions reduction standards (e.g., clean heat standards) for delivered heating providers. This builds on state experience with renewable energy standards for electricity and engages fossil fuel companies in the creation of solutions for the heating sector.
All these approaches are being pursued by states in various forms. We expect this trend of involving utilities and regulators in building electrification to continue as more states recognize the cost, emissions and health benefits of transitioning away from direct combustion of fossil fuel in buildings. For example, it seems likely that interest in clean heat standards will continue to grow and that utilities will be interested in ways they can make investments to support electrification. States with carbon goals will begin looking to reduced fossil fuel use for meaningful greenhouse gas emissions reductions, and health concerns may drive even greater interest in electric technologies. Policymakers can help their states get ahead and start proactively planning for cost-effective building electrification.
When homes and buildings are first constructed, they must meet the building code in place at the time of construction. The median age of U.S. homes is 39 years, which means that most homes are decades out of date on the most efficient and cost-saving housing technologies. The replacement rate of buildings — demolition and new construction — is less than 2% per year, leaving a vast amount of outdated technologies in current building stock. This makes it clear that to modernize existing buildings, update appliances and mitigate the impacts of climate change, we must implement policy solutions beyond building codes that address the energy and carbon emissions of existing buildings.
Modernizing existing buildings can also save energy, save money and lead to more jobs. More than $279 billion could be invested in existing U.S. building retrofits, according to Deutsche Bank, yielding more than $1 trillion of energy savings over 10 years. The savings potential is equivalent to 30% of the total annual electricity spending in the United States and would create thousands of jobs.
Understanding this landscape, cities and states are increasingly pursuing mandatory policies that require improved energy and emissions performance across their existing building stock. The most comprehensive of these policies is the building performance standard (BPS), in which performance thresholds are set that building owners must meet at a specified time or when a triggering event occurs, such as a major renovation. A BPS can be designed to optimize the energy use in older buildings, as well as protect and conserve water, enhance indoor air quality, reduce waste and air pollution and create jobs. The power of a BPS comes from selecting the right metrics and setting the right targets — ones that align with the goals of a jurisdiction and drive action to ensure that investments achieve long-term compliance and emissions reductions.
Today, seven local jurisdictions (Boston; Chula Vista, California; Denver; the District of Columbia; Montgomery County, Maryland; New York City; and St. Louis) and three states (Colorado, Maryland and Washington) have enacted building performance standards. Capitalizing on this momentum, a growing number of cities and states are considering such standards to meet economic, equity, public health, climate and financial goals.
Considerations in Developing Building Performance Standards
Building performance standards will affect a large number of building owners, tenants and residents, so policymakers need to ensure that compliance is feasible for everyone and addresses broader priorities beyond climate. Key considerations in shaping a BPS include:
Alignment with established commitments and long-term goals.
Regulatory certainty over time.
Consistency of language and terms.
Ability to drive early action.
Accommodation of building life cycle events.
Transparency and ease of implementation and compliance.
Social and racial equity.
Jobs and economic growth.
The central component of a BPS is the performance standard and associated metric, which must be met to comply with the law. A design may incorporate multiple standards so that all aspects of high-performance buildings are addressed.
One of the first decisions in designing a BPS is the type of primary metric to use. The BPS can measure energy use (site or source energy use) or carbon emissions and can incorporate time of use.
Several metrics are commonly applied in the development of a BPS. Those are summarized in the table below, adapted by New Buildings Institute.
Other key considerations in defining BPS metrics include:
Electrification: The BPS can be designed to support electrification of end uses by incorporating carbon metrics or measuring on-site fossil fuel combustion.
Grid interactivity: The BPS can incorporate requirements that facilitate grid interactivity, including the installation of a building automation system that supports demand response.
Resiliency: The BPS can include components that evaluate a building’s passive survivability during disasters and capacity to serve as a community resource in responding to disasters.
Public health: The BPS can include metrics that directly impact the health of building occupants, including indoor air quality and radon mitigation.
Solid waste and water: The BPS can incorporate additional non-energy sustainability metrics, including solid waste, recycling and water use.
Understanding the complexity of designing and implementing these policies and the urgent need to address greenhouse gas emissions from the built environment, RAP has worked together with expert organizations to pull together key resources and information for policymakers looking to implement building performance policies within their jurisdiction.
Legislative Toolkit and Additional Resources
The Building Modernization Toolkit consolidates key considerations for policymakers in designing and implementing a BPS. These include contextual information about the impacts and benefits of building performance policies, legislative pathways for improving the performance of a building, and example policy language from jurisdictions that have already implemented a BPS and other performance policies. The toolkit also includes information on energy codes and other policies for modernizing buildings.
States and cities that are seeking to enact BPS policies have additional resources to draw from on top of the RAP legislative toolkit. New Buildings Institute has published several blogs explaining aspects and application of BPS policy.
Laying out the case for investing in existing building efficiency with building performance standards as a policy strategy.
Explaining key aspects of BPS policy, including metrics and goals, how to determine the parameters of the standard and which buildings should be covered, as well as compliance considerations.
Presenting additional benefits jurisdictions can derive from energy efficiency investments in existing buildings, including measures that are known to also improve the health and safety of residents and create better-paying jobs that fuel local economies.
Future-proofing a building or portfolio by designing with the end in mind, including plans to meet future zero-energy and carbon targets in a clearly articulated time frame.
Buildings should last decades or longer, but to do so they must be periodically modernized — and that’s challenging when financing options are limited. This means we are missing opportunities to implement new technologies that support efficiency, health and productivity in homes and businesses — and opportunities to equitably improve buildings.
Our homes, offices, stores and recreational centers consume 41% of total U.S. energy use. In cities, this figure can be as high as 70%. Home energy use should not be a significant financial burden, but over 25% of U.S. households pay more than 6% of their monthly income on energy bills, and 13% pay more than 10%; these disparities are concentrated among people of color and low-income communities in Southern states.
New buildings benefit from updated energy codes and consequently tend to be more efficient. However, half of the U.S. housing stock was built before 1980, and most of it lags far behind current building standards. Even some newer buildings do not perform as intended, wasting more than 30% of the energy they use. While we have the tools and technologies to upgrade these buildings, retrofits are expensive and often require financing, and though many energy-efficient and electrified options reduce costs over time, they cost more up front.
The Building Blocks of Effective Finance
Many states have adopted financing policies to overcome these cost barriers. These generally fall into three categories: direct or indirect financial grants to decrease cost at the point of sale; policies that decrease cost over time through rebates and tax incentives; and policies that provide low-cost financing. Most states have financing policies that fall into the first two categories, such as point-of-sale rebates and tax incentives. About half of the states have policies that provide low-cost financing.
State decision-makers should review both proposed and existing mechanisms in all these three categories to answer several questions:
Do existing policies reach intended population segments? Depending on state goals, financial incentives may be targeted to certain populations. For instance, many states target financial incentives to low- or moderate-income households, aiming to decrease energy costs while addressing inequality and the legacy of systemic racism. Others may focus on incentives to owners of large commercial or industrial buildings to increase efficiency and decrease cost and carbon emissions.
Does the structure of the incentive achieve the desired results? States need to ensure that the customer segment they are targeting can take effective advantage of the incentive. For instance, tax incentives are more easily used by wealthier individuals and businesses, while point-of-sale rebates are more accessible to low- and moderate-income households and members of overburdened communities.
Does financing cover the newest and most energy-efficient technologies? One potential barrier to efficient and cost-effective electrification is state policies that bar fuel switching or rely on a limited definition of energy efficiency (e.g., covering only kilowatt-hours rather than total energy saved).
Have technologies reached market parity or saturation? When this is the case, it’s possible that incentives can be reduced or eliminated, at least for specific target segments.
Are incentives aligned with wider energy goals? Where practical, policymakers should strive to design incentives to align with ultimate goals (e.g., addressing climate change and reducing peak load) and to be technology-neutral.
Beyond these traditional categories, recent innovations in financing policies have stretched the bounds of market transformation, especially when paired with other policies.
One set of innovative policies falls under the category of promoting performance-savvy appraisal. This approach recognizes that appraisals play a critical role in financing the construction and renovation of buildings, but that they typically do not account for the full value of energy efficiency and high performance. This blind spot leads private parties to underinvest in building performance. One example of this is owners’ reluctance to invest in renovations to improve energy efficiency out of concern that they will not recoup the investment when they sell the building.
As laid out in a fact sheet from the Institute for Market Transformation, the elements of a performance-savvy appraisal policy are:
Require that government appraisers receive training on energy efficiency and building performance broadly.
Provide technical assistance to industry: Help appraisers and their clients to fully value building performance and to understand why doing so is in their interest.
Add building performance training courses to requirements for individuals to receive and renew appraisal licensing (continuing education). Oregon is the first state to require this.
Facilitate training courses for appraisers and others on valuing building performance.
By making building performance visible to the market, benchmarking and transparency laws are a good complement to performance-savvy appraisal policies.
Setting an Ambitious Example: Ithaca, New York
The most ambitious financing policies recognize that while traditional finance has done much good, it is not producing investment in improved building performance on pace with what climate scientists (as reflected, for example, in the 2022 report from the Intergovernmental Panel on Climate Change) have determined is necessary to prevent catastrophic climate change or to meet many states’ bold climate commitments.
The leading example of truly ambitious building decarbonization finance policy is the small city of Ithaca, New York. Recognizing that despite decades of leading policies and programs to drive building renovation, it was far from on pace to achieving its climate commitment, Ithaca put in place a boldpolicy to finance the renovation and electrification of 6,000 buildings.
Ithaca developed a strategy to leverage private equity finance, state incentives and other sources for this project at a total cost of $600 million (a figure that dwarfs the city’s annual budget of $80 million). Ithaca recognized that such renovations will pencil out for some but not all buildings. So, Ithaca took a portfolio approach and aggregated its buildings together for financing portfolios that include buildings with varying paybacks for such renovations. Using local taxpayer, ratepayer and federal funds, the city directs subsidies to owners, including low- and moderate-income households where low credit scores and lack of capital posed barriers. Ithaca further facilitates the financing of renovations, especially by low- and moderate-income ratepayers, by arranging on-bill financing so that ratepayers can repay renovations on their utility bills. To secure private equity investment — investors have already committed about $105 million for Phase 1 — the New York State Energy Research and Development Authority and the Kresge Foundation provide loan loss reserves to insulate investors from risk.
Considered as a whole, Ithaca’s financing policy may be the first in the United States to put a U.S. jurisdiction on a path to achieve building decarbonization at a pace consistent with bold climate commitments.
Risks, Standards and Planning
Even Ithaca’s approach may fall short in one regard. The experience of Massachusetts, which provides energy efficiency renovations for affordable housing at essentially no cost, shows that home and building owners will often not avail themselves of even extremely generous financing programs. Many have more pressing demands on their time and resources, particularly when one in five U.S. households reported reducing or forgoing necessities such as food or medicine to pay an energy bill.
Combining financing with building performance standards and other mandates can help overcome this inertia. Ithaca has committed to put in place a building performance standard and joined President Biden’s National BPS Coalition. The Institute for Market Transformation has developed a concept that simultaneously addresses all the root causes of inaction on building renovations by marrying the bold financing, contracting and workforce development approaches used by Ithaca with a building performance standard.
As part of the Biden administration’s whole-of-government approach to fighting climate change, federal financial regulatory agencies including the Commodity Futures Trading Commission and the Federal Reserve have moved to require companies to account for, plan for and take steps to prepare for risks associated with climate change, including transition risk as governments put in place policies like building performance standards and carbon taxes to drive decarbonization of the economy. The most prominent such step is the Securities and Exchange Commission’s proposed rule requiring public companies and other issuers of securities to assess and publish their risk exposure and greenhouse gas emissions. These policies will give financial incentives to lenders and investors to invest in high-performing buildings and renovations and serve as a force multiplier for building performance standards and other mandates to drive action on the ground.
A broad range of both proven finance policies and exciting and innovative new policies is available to states. With the impacts of climate change and the barrier of housing affordability presenting a twin crisis, now is the time for states to act.
Across the country, state and local governments are awaiting a windfall investment from the federal government to modernize infrastructure and ensure energy security. Everything from housing to bridges, airports and the electric grid will receive an injection of funds to provide safer, more efficient, more equitable and more climate-aligned basic services to everyone living in the United States. In the housing sector alone, historic and new programs will be receiving billions of dollars instead of their usual millions. States will receive between a threefold and thirtyfold increase in funds through the historic Weatherization Assistance Program (WAP) and millions of dollars from the State Energy Program and the Energy Efficiency and Conservation Block Grant Program. And in the coming years, states will have access to over $50 billion in federal funding to invest in energy projects for buildings thanks to the Inflation Reduction Act (IRA), with the potential to transform the building retrofit industry. How states use, leverage and stack these weatherization and energy security funds could have a monumental impact on housing infrastructure, families’ daily lives and our climate. This is an opportunity states cannot let slip by.
Compounding Burdens
Recent years have more glaringly exposed the compounding economic, health care and environmental burdens that are constantly knocking on the door of U.S. households:
Nearly 52% of low-income households reduced or forwent expenses for basic necessities, such as medicine or food, in order to pay an energy bill for at least one month in the last year.
Thirty-four million U.S. households reported facing energy insecurity at some point in 2020, with a disproportionate impact on low-income households, renters, Black and Hispanic households and households with children.
Over 700 million metric tons of climate pollution are emitted from the direct combustion of fossil fuels in U.S. homes every single year.
Children in homes with gas stoves have a 42% higher risk of experiencing asthma symptoms.
Lower-income populations and communities of color may be disproportionately impacted by risk factors such as a greater likelihood of living in an older home and increased exposure to air pollution, causing higher rates of asthma.
These combined drains on families require holistic solutions: We must act with more urgency and ambition to make housing healthier and more energy-efficient. A keystone tool to accomplish this is hiding in plain sight — evolved weatherization assistance programs that can be expanded to deliver whole-home retrofits.
State of Play and Ongoing Innovation in Program Delivery
Since its inception in the 1970s, the federal WAP has delivered tangible energy efficiency interventions (energy audits, envelope upgrades, appliance replacement, etc.) to qualifying households across the nation and has resourced and trained a network of state programs and local organizations. Despite its successes, WAP has shortcomings. Homes that have faulty wiring, structural problems, or mold, lead or other toxins present may be deferred from WAP — meaning that weatherization upgrades cannot be done until those other issues are addressed, which may require a new program and new point of contact. WAP funds cannot always be leveraged for electrical upgrades and structural repair or to address mold and dampness issues, nor can the funds be used to directly assist households with burdensome energy costs.
To properly address the systemic burdens in the housing stock, we need products and programs that deliver whole-home retrofits to low-income households. A whole-home retrofit delivers five critical products:
Health and safety interventions.
Weatherization and energy efficiency measures.
Appliance electrification.
Energy assistance.
Renewable energy (where possible, including on-site generation or community renewables).
These whole-home retrofits will be best delivered by a “one-stop-shop” program that guides a participant through the entire process of connecting with technical assistance and contractors, getting verification and, critically, securing financial support. To deliver this model, federal, state and local governments, utilities and other providers need to be working together to ensure that funding sources can be stacked and braided together — not running competing programs that create barriers to access. In a whole-home retrofit approach, WAP funds could be seamlessly combined and delivered to a household in one package with lead remediation funds, federal tax credits, local utility rebates, climate change mitigation and resilience funds, energy bill assistance funds, health care funds and more.
Momentum in States and Local Governments
The whole-home retrofit model is being tried by states and cities across the country, which are starting to launch programs that layer funds together and deliver combinations of those five key products. Philadelphia’s Built to Last program braids together 20 funding streams to deliver whole-home retrofits. The D.C. Sustainable Energy Utility launched a low-income decarbonization pilot to electrify and provide solar access to participants’ homes. California’s Low-Income Weatherization Program has provided efficiency and electrification measures, solar, health and safety retrofits, and energy assistance benefits to thousands of households. The Maryland General Assembly passed a bipartisan bill in 2022 that was ultimately vetoed by the governor but would have required better leveraging of housing health and safety improvement dollars and utility energy efficiency incentive programs, established a specific energy savings target for utility-funded energy efficiency programs, and convened a new interagency task force to chart a course to retrofit all low-income housing over the next decade. The federal government is taking note, too: The WAP initiative announced millions of dollars for the Weatherization Readiness Fund for states to use to address health and safety concerns that would otherwise result in a deferral. And the Department of Housing and Urban Development recently followed through on a federal grant to initiate better coordination between lead remediation and WAP programs.
These examples indicate that braiding together existing programs can work, but doing this requires effort and will. Legislative direction can provide helpful guidance to state agencies. Legislation in California called for improved coordination among state agencies for weatherization. Washington state legislation expanded WAP and the Low Income Home Energy Assistance Program (LIHEAP) at the state level with health additions, known as WAP Plus Health. Such policy direction helps fill the gaps in the federal WAP program to provide the most benefit to building occupants.
Where Do We Go From Here?
A number of factors are driving an evolution in weatherization policies, including a recognition of increasing energy and housing costs and the numerous benefits from a holistic approach to improving buildings, particularly for low- and moderate-income residents. Consequently, we expect to see state policy efforts building upon successes in other states and innovating to respond to the needs of families. Besides the holistic, one-stop-shop and coordinated approach we describe above, states could look to policy solutions that feature:
Accounting of non-energy benefits in any cost-benefit tests applied to weatherization programs, including but not limited to health benefits, comfort benefits and environmental and climate benefits.
Investments in workforce development programs and strong labor standards for careers in the building, construction, efficiency, and heating, ventilation and air-conditioning sectors.
The growth of the whole-home-retrofit approach could not be coming at a more critical moment. As a result of the American Rescue Plan Act, the bipartisan Infrastructure Investment and Jobs Act and the IRA, billions of dollars are flowing to states and local governments to invest in communities and families. The federal WAP received an investment of over $3 billion; $500 million was allocated to the Energy Efficiency and Conservation Block Grant Program; hundreds of millions are going to LIHEAP to help with direct energy assistance and weatherization; nearly $9 billion will be delivered to states for new efficiency and electrification rebate programs; and so much more.
With this influx of funding, states can begin early preparation by creating cross-agency task forces and public stakeholder engagement processes, allowing them to plan out and then implement retrofit programs that are collaborative, whole-home, human centered and climate aligned. Now is the opportunity for states and local governments to think creatively, innovate, leverage existing WAP networks and braid together sources of funding for more holistic approaches to housing sector retrofit programs.
City dwellers without their own parking space, small business owners such as taxi drivers and a growing number of car-sharing users rely on the public charging network to access electric driving. The affordability of electric vehicles (EVs), compared to the fossil-fuelled cars they replace, in part, relies on not only upfront cost but also lower running costs.
The recent fossil gas crisis has led to high energy prices that make fixed-price electricity contracts expensive and affect those running costs. This should get those who procure, operate and use public charging infrastructure thinking: Which charging models help reduce fossil fuel dependence in transport and energy, and make public charging more affordable?
Currently, most public charging prices are flat rates. Users pay the same price whether they charge during the evening peak or overnight. Tariffs are high to cover peak prices within the energy supply contract. Yet they do not help reduce peak electricity demand, nor are the lower costs of charging off-peak passed on to EV drivers.
Smart charging is a solution that reduces costs for EV drivers, provides assurance for future EV users and supports the electricity system in the transition to renewable energy sources. It also, importantly, maintains or even improves the profitability of charge point operators. We need to extend the benefits of smart charging to users of public charging networks, as high prices turn otherwise interested drivers away from EVs.
Where current public charging tariffs fall short
Electricity prices on wholesale markets fluctuate: there are clear differences between days and within each day. In 2022, these differences increased six-fold compared to 2020, meaning that there is even more money to be saved if drivers can take advantage of price fluctuations.
EV charging flexibility can enable a reduction in energy demand at peak times. This not only lowers the price for individual drivers, but it also decreases costs for all power system users as it reduces the need for peak power plants that run on expensive fossil fuels.
EV drivers with their own home charging port can keep their bills under control by shifting sessions to cheaper periods, for example, through a time-varying or dynamic pricing contract with their supplier.
A dynamic tariff reflects wholesale prices in retail tariffs, for example with hourly prices communicated a day in advance. Homeowners can also save by investing in rooftop solar for their charging needs.
What can be done to offer EV drivers who rely on public charging points equal opportunities?
Removing obstacles to smart public charging
The UK government and energy regulator Ofgem recognise the importance of extending the benefits of smart charging for users and the energy system and included public charging in their joint 2023 Smart Charging Action Plan.
This requires changes to the status quo, however, in the UK and across Europe. Currently, customers and the electromobility service providers offering charging subscriptions have little choice but to accept the energy prices set by the charge point operator (CPO). Unfortunately, charging subscription prices usually reflect the most expensive CPO rates—so even if cities keep prices stable in their concession to operate the charging infrastructure, EV drivers often still pay more because of rising prices in other places.
Giving users the tools to save
CPOs and electromobility service providers could help EV drivers lower their bills by enabling user-centric smart charging services. As the name indicates, these services place consumer needs first, including enabling access to the lowest possible rate within the driver’s desired charging period.
Automation can help with the lower charging speeds typical for on-street charging when parked. For fast charging, an activity where people typically stay nearby their vehicle while the charging is happening, time-varying pricing—as offered by a growing number of operators—could affect when drivers show up at the station.
EV drivers can see the prices a day in advance, allowing them to plan and benefit from lower off-peak charging rates.
Delivering additional benefits at the local level
Cities can also look for ways to maximise local benefits. One way to do so is by connecting EV charging to locally produced clean energy from citizen-owned renewable energy communities.
The same smart charging technology that is based on dynamic prices from wholesale markets can also match EV charging sessions with wind and solar energy. In some countries, renewable energy communities even benefit from reduced network tariffs as they help use local networks more efficiently.
Provided discounts are genuinely reflective of the value added, this allows the expansion of renewable energy generation and the charging network to go hand-in-hand while ensuring predictable and affordable prices. Combined with car-sharing, EV charging within a renewable energy community offers the benefits of both generating renewable electricity and promoting the use of electric cars to city dwellers.
This solution can further reduce private car ownership by making sharing an attractive option.
Dynamic public charging extends smart savings beyond the driveway
A wide range of available smart charging services have demonstrated that the perceived complexity of dynamic prices can be handled in a user-friendly way, such as with retail rates that offer off-peak extra points. Consumers will benefit from a broad diversity of offerings, as not all will have the same preferences and needs. They might want to try out different options to find their perfect match. It is important that consumers feel confident in offering and benefiting from the flexibility that EV charging can provide.
Facilitating dynamic pricing is an important step forward that can benefit the entire energy ecosystem, minimising the costs of the transition. Everyone benefits from energy system cost savings achieved through EV charging responding to dynamic price signals. The local planning process offers the perfect opportunity for authorities and grid operators to reflect the value of smart charging in their vision for a decarbonised energy system.
Governments and regulators can give EV drivers with and without off-street parking the same opportunities to participate in and benefit directly from smart charging. It is a sustainable way to bring smart charging rewards to all EV users.
In a representative democracy, all citizens have the right to access government services, to meaningfully contribute to government decisions and to share equitably in the benefits of government programs. The many decisions made in Washington, D.C., have important implications for our day-to-day lives, as do the decisions being made in state capitals across the country.
While public input into decision-making is a critical component of our democracy, studies indicate that, in particular, overburdened communities — those excluded from the mainstream due to factors such as race, gender identity, sexual orientation, age, physical ability, language or immigration status — are largely unrepresented in certain critical aspects of decision-making. These include energy planning and decision-making processes that drive energy production, distribution and regulation.
Government agencies shape and define public access and allocate program burdens and benefits. When these agencies lack the direct or informed lived experience of inequity and being overburdened by injustice, their work will be at risk of continuing to overlook public needs. Left unchallenged and unchanged, there is the increased likelihood that government policies will inadvertently perpetuate injustices.
While agencies recognize their specific mandates and work to fulfill those goals, policymakers are also becoming aware that they need to do more to reach communities that may be unaware of and underserved by their programs. This includes communities of color, indigenous communities and low-and moderate-income communities. Consequently, it is necessary for these communities to be more meaningfully engaged as partners and stakeholders in government decision-making.
President Biden’s Executive Order 13985 on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, the first order he issued after taking office on January 20, 2021, notes that “equal opportunity is the bedrock of American democracy, and diversity is one of our country’s greatest strengths.” The order recognizes that certain individuals and communities have been denied equal opportunity and that the negative effects of that denial have produced “entrenched disparities in our laws and public policies, and in our public and private institutions.”
In response, the order directs federal agencies to embark on a “systematic approach to embedding fairness in decision-making processes.” It directs agencies to, among other things, adopt “methods to assess equity, including assessing whether agency policies and actions create or exacerbate barriers to full and equal participation by all eligible individuals.” It also directs agencies to “conduct assessments as to whether underserved communities and their members face systemic barriers in accessing benefits and opportunities available pursuant to those policies and programs.”
The order also launched the Justice40 Initiative, which is a whole-of-government effort to ensure that federal agencies work with states and local communities deliver at least 40% of the overall benefits from federal investments in climate and clean energy to overburdened communities. Although the order only applies directly to federal agencies, it may still affect state agencies that receive money for federal programs.
State Action
A number of states also recognize that engaging all of the public leads to improved discussions, inclusion of more and varied information, better informed decision-making and stronger solutions to problems. States such as California, Colorado, Illinois, Maine, Massachusetts, New York, Oregon, Washington, New Jersey, Hawaii and Connecticut have all taken action at the legislative and regulatory level to increase access. The multiple benefits of increased inclusion demonstrate that it is worth the investment of government, community groups and organizations who work for the common good.
These states understand that the structure of many agency engagement practices can discourage diverse public participation, with barriers related to timing of agency public engagement; effective notice to communities of proposed agency actions; sufficient publicity to effectively reach community members; the accessibility of venues for meetings; and language access.
Legislative options exist for promoting equity and access both broadly across state agencies and specifically in state public utility commissions. For example, Maine requires state agencies to specifically consider equity effects on communities as part of agency consideration of the climate effects related to agency actions. The statute also requires agencies to bring recommendations back to lawmakers regarding further improvements that the Legislature could make.
Colorado’s H.B. 21-1266 (2021) seeks to incorporate overburdened communities and historically underrepresented voices in public processes and decision-making by codifying outreach best practices at the air quality control commission. The bill also requires that a plan be developed to promote the adoption of environmental justice processes in other state agencies. This legislation creates an independent environmental justice ombudsperson who reports directly to the executive director of the Department of Public Health and Environment. H.B. 21-1266 also creates an independent environmental justice advisory board to help inform agency policy and decision-making.
In recent years, state lawmakers have also passed laws requiring utility commissions to do a better job ensuring that all customers benefit from the transition to clean energy. For example, Illinois’ Climate and Equitable Jobs Act (S.B. 2408, 2021) requires the Commerce Commission to study and report to the Legislature regarding the effectiveness of low-income electricity and gas rates and suitable design improvements. Upon completion of the study, the commission is authorized to permit or require utilities to file tariffs establishing low-income discount rates. The bill also significantly increased minimum spending levels for low-income energy efficiency programs.
Colorado’s S.B. 21-272 (2021) requires the state’s Public Utilities Commission to adopt rules to inform all of its work “to provide equity, minimize impacts, and prioritize benefits to disproportionately impacted communities and address historical inequalities.” Another bill (S.B. 21-103, 2021) gives the Colorado Office of the Utility Consumer Advocate expanded authority to intervene before the commission on environmental justice, just transition and decarbonization issues.
Only with a conscious effort to rehabilitate public access and participation will government agencies be able to reflect the needs of overlooked Americans — rural and low-income communities and communities of color — and ultimately empower those communities and the rest of the public to make state government more inclusive and thus more representative.
Energy efficiency and electrification are the dynamic duo of a modern building. Technology advances in both these areas mean that we have the ability to improve the comfort and health of a building’s residents, save them money, reduce air pollution and better manage demand on the power system. In a time of rising costs and rising concern about environmental impacts, the opportunity to modernize buildings is more urgent than ever.
But various barriers to building modernization continue to exist:
A lack of financial help to address the high initial cost of making upgrades;
The “split incentive” problem for renters, where they pay the energy bills but their landlords bear the costs of improvements;
Regulatory barriers such as outdated building codes or energy efficiency rules that prohibit load-building by utilities;
Gaps in the energy workforce; and
A sometimes arcane decision-making process that doesn’t lend itself well to diverse public participation.
The key to breaking this status quo and catalyzing change is held by state policymakers and legislators, who can pass new policies to give regulators, consumers and utilities the tools they need to modernize buildings. That’s why we’re introducing our Building Modernization Legislative Toolkit, a resource for policymakers seeking to help move forward the energy transition in buildings. Working with partner organizations, we’ve assembled a comprehensive look at key topic areas for building modernization along with legislative options for each area, which states can consider and adapt to their own situations and goals.
The good news is that legislative change is already starting to happen, and the options outlined in the toolkit are inspired by or based on actions that states have already taken.
We’ve organized our legislative options into seven topic areas:
Access to the decision-making process. Energy costs and the impacts of climate change both fall most heavily on overburdened communities. Without wide-ranging public input, policy decisions to address these challenges are less likely to result in equitable outcomes. The toolkit outlines options to set requirements for state agencies in general, or public utility commissions or environmental regulators specifically, to ensure inclusive access.
Funding and finance policies. Most states already have funding and finance policies; however, existing funding policies may not be updated to address current technologies or may not be effectively reaching all segments of society. Innovative policy options from other states could provide examples of how states can help households and businesses mitigate the cost of modernizing their buildings’ energy use. These include rebates, loans and grants; direct installation programs; income tax credits and deductions; and sales tax exemptions or reductions.
Weatherization and home repair. Energy-burdened households’ need for financial assistance far outweighs the amount available via federal programs such as the Low Income Home Energy Assistance Program and the Weatherization Assistance Program. State action can fill this gap to help improve energy efficiency, comfort and health. Funding can specifically target homes that need repairs, such as mold remediation, before weatherization can be done effectively. Cutting-edge examples from states include providing authorization and direction to state agencies that take a more holistic approach, improving coordination, “braiding” funds from different programs together and offering a one-stop-shop application process.
Building codes and standards. Up-to-date energy codes can produce significant health, environmental and economic benefits but are not always updated to take full advantage of current efficient, electrified technologies. Building codes also address new buildings but do nothing to modernize buildings built decades ago. Consequently, some states and localities are going beyond the traditional options to experiment with a more holistic approach in the form of building performance standards to ensure buildings aren’t stuck in the past.
Electrification. Legislation may be needed to remove various barriers to households going electric, such as prohibitions on fuel switching. The toolkit suggests options for states where policy direction is needed for public utility commissions to create beneficial electrification plans, revise planning processes and promote equity.
Gas utility planning. As policymakers, utilities and consumers all rethink how to meet their space and water heating needs, the role played by fossil gas will change, and the approach to system planning needs to change likewise. The toolkit focuses on planning and line extension policies; it also introduces the idea of clean heat standards, currently under consideration in several states.
Workforce development. Without enough qualified workers to weatherize homes and install new appliances, the energy transition will be less affordable and slower than necessary. States have an opportunity to open up new education and training paths, especially for potential workers from overburdened populations. Vocational programs can be designed for students to earn as they learn.
This blog is the first in a series; in the coming weeks, we’ll take a closer look at each of the tools in our building modernization toolkit. We’ll showcase policy options that legislatures in various states are moving forward — demonstrating how lawmakers can make use of these tools to build an approach that works for their state. Legislative change has the potential to lift barriers, drive market transformation and prioritize communities that need support to realize the benefits of modern buildings.
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