As low-income households face the dual burden of weather extremes and high energy costs, energy efficiency is an increasingly important strategy for both climate mitigation and lower utility bills.

Passive House standards — which create a building envelope so tight that central heating and cooling systems may not be needed at all — promise to dramatically slash energy costs, and are starting to appear in “stretch codes” for buildings, including in Massachusetts, Illinois, Washington and New York.

And while some builders are balking at the initial up-front cost, other developers are embracing passive house metrics as a solution for affordable multifamily housing.

“We’re trying to make zero energy, high performing buildings that are healthy and low energy mainstream everywhere,” said Katrin Klingenberg, co-founder and executive director of Passive House Institute-U.S., or Phius. 

Klingenberg says the additional work needed to meet an aggressive efficiency standard, is, in the long run, not that expensive. Constructing a building to passive standards is initially only about 3%-5% more expensive than building a conventional single family home, or 0%-3% more for multifamily construction, according to Phius.

“This is not rocket science… We’re just beefing up the envelope. We’re doing all the good building science, we’re doing all the healthy stuff. We’re downsizing the [heating and cooling] system, and now we need someone to optimize that process,” Klingenberg said. 

Phius in practice and action

A Phius-certified building does not employ a conventional central heating and cooling system. Instead, it depends on an air-tight building envelope, highly efficient ventilation and strategically positioned, high-performance windows to exploit solar gain during both winter and summer and maximize indoor comfort. 

The tight envelope for Phius buildings regulates indoor air temperature, which can be a literal lifesaver when power outages occur during extreme heat waves or cold snaps, said Doug Farr, founder and principal of architecture firm Farr Associates.

Farr pointed to the example of the Academy for Global Citizenship in Chicago, which was built to Phius standards. 

“There was a really cold snap in January. Somehow the power went out [and the building] was without electricity for two or three days. And the internal temperature in the building dropped two degrees over three days.”

Farr said that example shows a clear benefit to high efficiency that justifies the cost.

“You talk about the ultimate resilience where you’re not going to die in a power outage either in the summer or the winter. You know, that’s pretty valuable.” 

There is also a business case to be made for implementing Phius and other sustainability metrics into residential construction, such as lowered bills that can appeal to market-rate buyers and renters, and reduced long-term maintenance costs for building owners. 

AJ Patton, founder and CEO of 548 Enterprise in Chicago, says in response to questions about how to convince developers to consider factors beyond the bottom line, simply, “they shouldn’t.”

Instead, he touts lower operating costs for energy-efficiency metrics rather than climate mitigation when he pitches his projects to his colleagues. 

“I can’t sell people on climate change anymore,” he said. “If you don’t believe by now, the good Lord will catch you when He catch you.

“But if I can sell you on lowering your operating expenses, if I can sell you on the marketability, on the fact that your tenants will have 30%, 40% lower individual expenses, that’s a marketing angle from a developer owner, that’s what I push on my contemporaries,” Patton said. “And then that’s when they say, ‘if you’re telling the truth, and if your construction costs are not more significant than mine, then I’m sold.’”

Phius principles can require specialized materials and building practices, Klingenberg said. But practitioners are working toward finding ways to manage costs by sourcing domestically available materials rather than relying on imports.

“The more experienced an architect [or developer] gets, they understand that they can replace these specialized components with more generic materials and you can get the same effect,” Klingenberg said.

Patton is presently incorporating Phius principles as the lead developer for 3831 W Chicago Avenue, a mixed use development located on Chicago’s West Side. The project, billed as the largest passive house design project in the city to date, will cover an entire city block, incorporating approximately 60 mixed-income residential units and 9,000 sq ft of commercial and community space.

Another project, Sendero Verde, located in the East Harlem neighborhood of New York City, is the largest certified passive-house building in the United States with 709 units. Completed in April, Sendero Verde is designed to provide cool conditions in the summer and warmth during the winter — a vast improvement for the low-income and formerly unhoused individuals and families who live there.

Barriers and potential solutions

Even without large upfront building cost premiums and with the increased impact of economies of scale, improved technology and materials, many developers still feel constrained to cut costs, Farr said.

“There’s entire segments of the development spectrum in housing, even in multifamily housing in Chicago, where if you’re a developer of rental housing time and again …  they feel like they have no choice but to keep things as the construction as cheap as possible because their competitors all do. And then, some architecture firms only work with those ‘powerless’ developers and they get code-compliant buildings.”

But subsidies, such as federal low income housing credits, IRS tax breaks and resources from the Department of Energy also provide a means for developers to square the circle, especially for projects aimed toward very low-income residents. 

Nonetheless, making the numbers work often requires taking a long-term view of development, according to Brian Nowak, principal at Sweetgrass Design Studio in Minnesota. Nowak was the designer for Hillcrest Village, an affordable housing development in Northfield that does not utilize Phius building metrics, but does incorporate net-zero energy usage standards.

“It’s an investment over time, to build resilient, energy-efficient housing,” he told the Energy News Network in June 2023.

“That should be everyone’s goal. And if we don’t, for example, it affects our school system. It affects the employers at Northfield having people that are readily available to come in and fill the jobs that are needed.

“That’s a significant long-term benefit of a project like this. And that is not just your monthly rents on the building; it’s the cost of the utilities as well. When those utilities include your electricity and your heating and cooling that’s a really big deal.”

Developers like Patton are determined to incorporate sustainability metrics into affordable housing and commercial developments both because it’s good business and because it’s the right thing to do.

“I’m not going to solve every issue. I’m going to focus on clean air, clean water, and lowering people’s utility bills. That’s my focus. I’m not going to design the greatest architectural building. I’m not even interested in hiring those type of architects. 

“I had a lived experience of having my heat cut off in the middle of winter. I don’t want that to ever happen to anybody I know ever again,” Patton said. “So if I can lower somebody’s cost of living, that’s my sole focus. And there’s been a boatload of buy-in from that, because those are historically [not] things [present] in the communities I invest in.”

No longer a niche, Passive House standards becoming a solution for highly efficient affordable housing is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

Activists pushing San Diego to take over the city’s investor-owned utility aren’t letting last year’s defeat of a similar effort in Maine deter their goal of establishing a nonprofit power company. They recently submitted petitions bearing more than 30,000 signatures from residents who want the City Council to let voters decide the matter this fall.

Advocates say a municipal takeover of San Diego Gas & Electric would deliver cheaper rates and a faster, more affordable, and more equitable transition to clean energy. Still, the measure faces long odds from skeptical council members who have twice rejected similar proposals.

The campaign is the first public power ballot initiative since 70 percent of voters in Maine rejected a proposal to take over the state’s two largest utilities. A group called Power San Diego delivered several cardboard boxes filled with petitions to the San Diego city registrar’s office on May 14. If just over 24,000 of the signatures on those documents are deemed valid, the Council will have to decide whether to put the question to voters in the next election.

What’s happening in Southern California reflects growing frustration with the high rates and lackluster service investor-owned utilities often provide — and a desire to accelerate the green transition. Similar campaigns are afoot in Rochester, New York and San Francisco, and Empire State lawmakers recently introduced a bill to buy out Central Hudson Gas & Electric and create a public power authority. 

“Across the country, people are talking about public ownership of energy,” Sarahana Shrestha, a New York state assembly member who co-sponsored the bill, told Grist. “If we want a just transition — taking care of workers, and making sure that it’s affordable and brings benefits back into communities — there’s no effective way of doing that while you’re still answering to shareholders.”

San Diego residents pay some of the nation’s highest electricity rates, and by one estimate, more than a quarter of customers are behind on their payments. (The utility has attributed its high rates to the cost of everything from wildfire prevention to building transmission lines and other clean energy infrastructure.) Takeover advocates say the move would save residents 20 percent on their utility bills because a nonprofit model eliminates the need to provide shareholders with a return. It estimates the cost at $3.5 billion, citing a study commissioned by the city last year.

That analysis found that the utility’s 700,000 customers who live within the city of San Diego could save 13 to 14 percent annually if the city bought the utility’s grid assets for $2 billion and created a municipal utility. The math is less favorable if the cost of the buyout goes up, however; at a price of $6 billion, ratepayers could face additional costs of $60 million over the first decade but see long-term savings after 20 years.

San Diego Gas & Electric vehemently opposes the effort and has backed the political action committee Responsible Energy San Diego to block it. The organization calls itself “a coalition of diverse San Diego leaders” fighting “a reckless ballot initiative to force a government takeover of the energy grid.” The utility has contributed well over $700,000 to the committee, according to records on the San Diego Ethics Commission website. 

That’s more than twice what Power San Diego has raised and reflects a dynamic in which political action committees supported by Maine’s two investor-owned utilities received 34 times more money than public power advocates. Activists there say that allowed the utilities to finance a robust campaign of advertising and misinformation to defeat the referendum.

San Diego Gas & Electric has hired Concentric Energy Advisors, the same consultants who helped defeat the effort in Maine. The company’s study commissioned by the San Diego utility estimated the cost of a public takeover of the grid at $9.3 billion. 

Matt Awbrey of Responsible Energy San Diego told Grist the city should address other priorities like affordable housing rather than a proposal “to create a new government-run utility that has no plan, budget, or verifiable cost estimates.” He said the cost of the takeover likely would bring “higher taxes, higher electric bills, and/or cuts to essential city services we all depend on.” 

Power San Diego intended to gather 80,000 signatures by July, which would have placed the proposal on November’s ballot. But it lacked the funding for such an effort and decided to seek 30,000 signatures, or roughly 3 percent of registered voters. That would require the City Council to vote on whether to put the matter to voters.

Dorrie Bruggeman, senior campaign coordinator for Power San Diego, doesn’t expect the council to do that; it already has rejected such a proposal on two occasions, with council members calling for greater detail on costs and projected revenues. Council President Sean Elo-Rivera is among those with reservations.

“I have no love for corporate monopolies reaching into the pockets of everyday working people,” he told the local news outlet La Jolla Light. “But this is a very complex and important issue and I don’t think this is baked enough to go to the voters.”

Regardless of any qualms the council may have, Bill Powers, chair of Power San Diego, said his organization has prompted an important discussion within the community and sparked voter engagement on the issue. The next step is getting policymakers behind the idea.

“If we can get a couple of council members that are open to public power, if we can get a mayor who is open to public power, which we’ve had in the past, then the movement isn’t dependent on the endpoint of a ballot initiative,” Powers said.

Such campaigns are gaining momentum elsewhere. Public power advocates in Rochester, New York, want the city to evaluate the costs and benefits of a municipal utility. In San Francisco, city officials are currently working with the California Public Utilities Commission to determine how to set a fair price for Pacific Gas & Electric’s distribution grid, in the hopes of creating a citywide public power system. 

On May 17, New York Assemblymember Shrestha and State Senator Michelle Hinchey introduced a bill to create the Hudson Valley Power Authority, a public power entity that would buy out Central Hudson Gas & Electric. The utility has drawn criticism for its high rates and a string of billing failures since 2021. If the measure passes, the Hudson Valley Power Authority would seek to lower rates, improve service, and hasten the green transition while protecting labor rights.

Joe Jenkins, Central Hudson’s director of media relations, told Grist the proposed takeover would involve “significant hidden costs, loss of jobs, and loss of tax revenue for towns and schools,” adding that rates for municipal utilities in New York are nearly 9 percent more expensive than those of investor-owned utilities. 

Shrestha said the legislation reflects her constituents’ growing interest in public power. Her office has hosted seven town halls this past year to discuss energy democracy. “People are so fed up with getting bills that are inconsistent and late,” she said. “People are really excited about learning how we can actually get public power done.”

High rates, poor service spark new wave of utility municipalization campaigns is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

Environmental agencies in nine states will work together to reduce planet-warming carbon emissions by making electric heat pumps the norm for most new home HVAC equipment sales by 2040. 

The memorandum of understanding, spearheaded by the inter-agency nonprofit Northeast States for Coordinated Air Use Management, or NESCAUM, was released today and signed by officials in California, Colorado, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon and Rhode Island. 

While it is not legally binding and does not commit particular funding, the agreement calls for heat pumps to make up 90% of residential heating, air conditioning and water heating sales in these states by 2040. 

An interim goal of 65% by 2030 is based on last fall’s target from the U.S. Climate Alliance, a group of 25 governors, to quadruple their states’ heat pump installations to 20 million in the same timeframe. 

The residential sector is one of the top two or three contributors to greenhouse gas emissions in most of the East Coast states signing on to the agreement, driven in part by cold climates and a heavy reliance on oil and gas for home heating. Residential emissions rank far lower in the Western states participating.

In a press release, NESCAUM emphasized the harmful smog, haze and ozone driven by nitrogen oxide and particulate emissions from fossil fuel combustion, calling buildings “a hidden source of air pollution.” 

Senior policy advisor Emily Levin said states must move quickly to help residents replace these fossil-fired HVAC and water heating systems with heat pumps in time to limit the harms of global warming. 

“You may only have one more crack at these buildings between now and 2050, because these are long-lived pieces of equipment — they can last 10 or 20 years,” she said. “So we really can’t miss our opportunity.” 

Clear market signals

Matt Casale, senior manager of market transformation with the Building Decarbonization Coalition, said the new agreement’s market-share approach adds specificity to how states will meet existing, number-based goals for heat pump installations. 

“The idea is to send a clear signal to the market that heat pumps are the future of home heating and cooling, while reflecting the urgency with which we need to act to meet GHG emissions reduction targets,” he said. 

Manufacturers have called for this kind of “long-term signal,” said Levin — “they need to plan, they need to make significant investments.” She said agreements like this show companies that “this is the direction we need to go in” and that state governments are committed to helping make the transition happen.

“Greater demand for heat pumps will also put pressure on installers,” Casale added. “We will need policies that both grow and further develop the workforce. The MOU is a great opportunity to bring them in more directly, learn from them, and talk about their needs.” 

Under the new agreement, participating states will “collaborate to collect market data, track progress, and develop an action plan within a year to support the widespread electrification of residential buildings,” according to NESCAUM.

Afton Vigue, a spokesperson for the Maine Governor’s Energy Office, said taking advantage of consolidated industry data will help prevent another new reporting requirement for participating states and will help align with varying state metrics.

The states’ forthcoming action plan is expected to include emphasis on workforce development and supply chain constraints, which have tempered otherwise strong heat pump progress in states like Maine. 

“It really does focus on that element of driving the market and collaborating with manufacturers,” Levin said. “Right now, states don’t really necessarily know … how their heat pump market is developing. Creating systems to bring visibility to that, provide insights into that … it’s a really important element.” 

The agreement tees up annual reports on each state’s progress toward the 2030 and 2040 goals, and schedules a 2028 check-in about any necessary adjustments. 

Collaborative tools for affordability and access

“A greater focus on consumer education, workforce development, and affordability will be critical to the success of the transition,” said Casale. “This means getting the most out of the Inflation Reduction Act and other incentive programs, but we also need to answer the questions of how this solution best serves multi-family buildings, renters and others for whom purchasing a new system isn’t entirely within their control.” 

In the agreement, the states pledge to put at least 40% of energy efficiency and electrification investments toward disadvantaged communities — those facing high energy cost burdens or disproportionate pollution — in line with the federal Justice40 program, which underlies similar rules for the IRA.

Working through NESCAUM and other existing groups, the participating states will brainstorm tools for reaching these goals, potentially including funding for whole-home retrofits, building code enforcement and other uniform standards, data collection, research projects, use of federal resources and more. 

“It’s going to look a little different in every state,” Levin said. “But they’re committing to collaborate and to advance a set of policies and programs that work for their state to accomplish those broader goals.”

This could include adapting or building on each other’s approaches. Levin highlighted Maine and California as having successful models for consumer outreach and heat pump market coordination, and said Maryland has shown strong impact and ambition around clean building performance standards. 

Maine, which relies more on heating oil than any other state, is among the participants with existing heat pump goals in their climate plans. The state surpassed an initial target — 100,000 installations by 2025 — last year, and now aims to install 175,000 more heat pumps by 2027. 

Officials in Maine have said that heating oil use appears to be slowly falling in concert with increasing use of electricity for home heat. Vigue said the new agreement lines up with existing state goals and will help Maine “bolster our ongoing collaboration with other states, share experiences, and see where gaps may exist.” 

Nine states pledge to boost heat pumps to 90% of home equipment sales by 2040 is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

This story was originally published by Canary Media.

Last month, utilities in New York state submitted plans for 13 pilot projects meant to replace fossil-gas pipelines with infrastructure that can power clean, carbon-free heat pumps.

These underground thermal networks range from dense midtown Manhattan commercial centers to low-income housing, and from neighborhoods in the Hudson Valley to the upstate town of Ithaca.

But the projects, spurred by a 2022 state law that puts New York on the cutting edge of a decarbonization strategy now being explored by a growing number of states, share a common goal: to cut fossil fuels and carbon emissions out of the gas utility business, while still carving out a role for those utilities in the decades to come.

That work will still involve digging trenches, laying pipelines and installing equipment — the same kind of capital investments that earn gas utilities long and stable rates of return today. But instead of flammable and planet-warming gas, those pipes will carry water or other liquids that transfer heat from underground — or from other buildings and sources in the network — that can be used by heat pumps to keep buildings warm.

Heat pumps, which operate like reversible air conditioners, are much more energy-efficient than fossil-fired furnaces or boilers. They’re even more efficient when they can exchange heat and cold with fluid at a stable temperature, rather than from cold outside air, as the more common air-source heat pumps do.

The U.S. Department of Energy estimates that ground-source heat pumps reduce energy consumption and emissions by up to 44 percent compared to air-source heat pumps and 72 percent compared to standard air-conditioning equipment.

Capturing and sharing waste heat from thermal energy networks can increase efficiency even further. That, in turn, can cut the electricity bills of customers, which will rise as they switch from gas to electric heating.

But most building owners would struggle to afford the cost of drilling boreholes and installing pipes for their own geothermal heat pump systems, or to craft contracts with their neighbors to build and share underground networks. That’s why New York’s approach to adapting the gas utility infrastructure holds so much promise. Doing so will help all those individual homeowners and businesses share in the costs and reap the rewards, said Lisa Dix, New York director for the nonprofit Building Decarbonization Coalition.

Her team led an effort to rally utility labor unions, environmental groups and community organizations behind the 2022 law, called the Utility Thermal Energy Network and Jobs Act. These groups have since coalesced into a coalition called UpgradeNY that hopes to see these pilot projects serve as a model for a statewide conversion.

The newly proposed projects in New York are meant to offer a ​“clear understanding of neighborhood scale thermal energy networks,” she said, ​“so that as the transition happens, we can get to the scale we need to get to.”

The projects could also help serve as an early blueprint for the other half dozen or so states pursuing or exploring this method of decarbonization, she said. ​“We’re going to have to stop digging the hole, stop subsidizing the expansion of the fossil fuel system.”

New York’s pilot projects 

By design, the 13 pilot projects in New York cover a variety of different neighborhoods.

UpgradeNY has endorsed 11 of the projects but is asking the New York Public Service Commission to review the remaining two, one on Long Island and another in the city of Buffalo, that would continue to use fossil-gas-fired boilers for high-temperature heat.

Con Edison, the utility serving New York City and Westchester County, has proposed three projects taking on some of the most challenging urban settings, including the landmark Rockefeller Center.

For that project, Con Ed plans to convert three large commercial buildings from the utility’s district steam-heating network to heat pumps. These heat pumps would draw on water that’s warmed up by waste heat from sources including the sewers, data centers and adjoining buildings’ cooling systems. 

“There are some misconceptions out there — people think you have to drill a million boreholes” to capture underground heat, Dix said. ​“But you can get your heat from different [underground sources]. You can get it from the subway. You can get it from the sewer. And it’s going to help decarbonize Con Ed’s steam system if we do it right.”

Real estate company Tishman Speyer, the owner of 30 Rockefeller Center, is a key partner in the project, she noted. The firm has a strong incentive to participate because the project could lower the cost of complying with New York City’s Local Law 97, which requires all large buildings to reduce their carbon emissions by 40 percent from 2019 levels by 2030.

Hitting those targets will require an estimated $18.2 billion in investment in alternatives to fossil-gas-fired boilers and furnaces. Shared networks could significantly reduce the cost to individual buildings, but property owners ​“don’t want to deal privately with all that permitting — they want the utility to deal with all that,” Dix said.

Another Con Ed project in Manhattan’s Chelsea neighborhood plans to get 100 % of heating, cooling and hot-water needs for a low-income multifamily residential building from a nearby data center. ​“We can have a data center literally heating an entire multifamily building or a big skyscraper,” Dix said.

Other projects on the list will test how thermal energy networks can link residential and commercial buildings in less dense environments. Those include a project by utility NYSEG in the city of Norwich that will connect homes and buildings to underground networks and waste heat from a grocery store’s refrigeration system, and a project by utility Orange & Rockland in the town of Haverstraw that will build two networks — one serving new waterfront construction, and the other municipal and school district buildings — that are close enough to be linked together in future expansions.

Dix highlighted a project that utility NYSEG has proposed in Ithaca, which in 2021 became the first U.S. city to pledge to completely decarbonize its buildings by 2030. It’s also the home of Cornell University, which has a district heating, cooling and cogeneration system that now uses fossil gas, but which the university hopes to convert to geothermal power. 

How thermal energy networks could transform the gas utility business

New York is an early leader on this front, but thermal energy networks are gaining ground across the country.

Today, three other states — Colorado, Massachusetts and Minnesota — have passed laws that allow or mandate gas utilities to undertake thermal energy network pilot projects. In Massachusetts, the first utility-built network, covering 32 residential and five commercial buildings and 140 customers in the city of Framingham, is expected to be complete in the next few months.

Other states including Illinois, Maine, Vermont and Washington are exploring similar laws. And 13 gas utilities have created a Utility Networked Geothermal Collaborative to explore options.

To be clear, thermal energy networks, also called geothermal networks or geo-districts, aren’t a new idea. A number of cities, colleges and corporate campuses in Europe, Asia and North America use district energy systems — shared steam or hot water exchange networks — for heating and cooling needs, and many of them aim to switch from fossil fuels to zero-carbon electricity. In the U.S., geothermal networks that tap into underground heat, cool water from nearby lakes or waste heat from sewers and other buildings are proving the efficiency and cost benefits of the concept.

But gas utilities are an ideal party to carry out thermal energy networks at scale, said Audrey Schulman, co-executive director of the Home Energy Efficiency Team (HEET), a Cambridge, Massachusetts–based group that helped spur the state’s first such pilot projects by utilities Eversource and National Grid, including the project in Framingham.

First, gas utilities have the workforce, expertise and access to capital needed to build the sprawling and interconnected underground networks required, she said. Second, they’re already spending billions of dollars per year on fossil-gas pipeline expansions and repairs that will inevitably become ​“stranded assets” long before their costs are paid back by customers.

In Massachusetts, the state’s six investor-owned gas utilities plan to spend more than $40 billion on a Gas System Enhancement Program to replace the roughly 22 percent of gas lines in the state that are prone to leaks, she said. Customers pay the cost of those investments via increases on their bills that can persist for decades — far past the state’s deadline to reduce greenhouse gas emissions by 85 percent from 1990 levels by 2050.

The state’s push toward thermal energy networks will likely be accelerated by a December decision from the Massachusetts Department of Public Utilities to reject gas-utility decarbonization plans that relied too heavily on alternative fuels like hydrogen and renewable natural gas. Beyond that, the department’s ​“beyond gas” order calls for ​“minimizing additional investment in pipeline and distribution mains” and specifically calls out thermal energy networks as an alternative.

“The whole thing is about setting up the regulatory structure by which we get off gas and onto something else,” Schulman said.

New York faces similar choices as it works to implement its 2019 climate law that calls for cutting fossil gas use by at least one-third by 2030 and converting the ​“vast majority” of customers to electric heating by 2050, Dix said. Despite these imperatives, gas utilities in the state have spent $5 billion on infrastructure investments and identified $28 billion in pipeline replacement plans since the law’s passage.

This disconnect between climate imperatives isn’t limited to Massachusetts and New York. Consultancy Brattle Group found in a 2021 report that U.S. gas utilities may face $150 billion to $180 billion of ​“unrecovered” investment in pipelines over the coming decade. States including California and Colorado have set policies to limit expanding gas lines and to push gas utilities to transition customers to less-polluting alternatives.

Gas utilities across the country have largely fought such mandates or pushed proposals that rely on continuing to use their pipelines to carry carbon-neutral fuels such as biomethane or hydrogen. But a growing body of research indicates that these plans will likely falter due to the high cost and low availability of those alternative fuels.

At the same time, when looking for large-scale conversion of entire neighborhoods to low-carbon alternatives, ​“utilities make the most sense to do this,” Dix said. ​“They’ve got rights of way, they have the permitting authority, they have access to capital, and they have the workforce, which is already unionized.”

Like many other states with decarbonization mandates, New York has offered hundreds of millions of dollars in incentives for heat pumps and building electrification, and has imposed regulations limiting the expansion of fossil gas to new buildings.

But according to a 2023 report from the Building Decarbonization Coalition, this ​“house-by-house” approach could end up leaving gas utilities and regulators in a bind — being forced to maintain expensive gas distribution networks to supply fuel to a dwindling number of customers.

The customers that remain, meanwhile, will bear a greater and greater proportion of the cost of paying off those gas investments, leading to a vicious cycle of cost increases being imposed on people who can’t afford to make the switch to heat pumps on their own. These left-behind customers are more likely to be lower-income earners already struggling to afford increasingly expensive utility bills.

Thermal energy networks, by contrast, can be planned on a neighborhood-by-neighborhood basis, she said. That gives utilities and regulators an opportunity to target disadvantaged communities, areas with the most aged or leak-prone infrastructure, or other strategic approaches to shifting people from gas to electric heating and appliances en masse.

The efficiency benefits of these networks can also provide significant relief to power grids that will experience massive growth in demand from building heating and electric vehicles. Department of Energy research has found that installing geothermal heat pumps in nearly 80 percent of U.S. homes could reduce the costs of decarbonizing the grid by 30 percent and avoid the need for 24,500 miles of new transmission lines by 2050.

From pilot projects to statewide transformation 

Many steps remain for New York to bring these on-paper pilots into the real world, however.

First, each utility will have to negotiate with the customers involved in the pilots on how to share the costs of installing heat pumps and other new equipment. Then they’ll need to build the projects and get them up and running, track the performance of the equipment and underlying networks, and assess the cost-effectiveness of the projects.

Bringing down the cost of these projects will be an important first test. Heat pumps are more expensive than gas furnaces, and designing and constructing the pipes, boreholes and networked heat-exchange technologies involved will be more costly than standard gas infrastructure projects.

“There will be a marginal cost increase compared to business as usual,” said Matt Rusteika, Building Decarbonization Coalition’s director of market transformation. ​“But because you’re not buying the gas, and the gas is like half the bill, the cost for consumers would come down.”

Altering laws now on the books in New York, Massachusetts and other states to allow utilities to switch customers from gas to thermal energy network service without triggering ​“obligation to serve” objections will also be important, he said. Under those laws, ​“if the customer says ​‘I want gas,’ the utility has to give gas to them,” he said. That obligation is a core part of a utility’s mission, but its strict application could allow a single customer in a neighborhood slated for a thermal energy network to stymie the entire project.

In New York, the Utility Thermal Energy Network and Jobs Act suspends that law for the pilot projects now being considered, Dix said. But another law would need to be passed to extend that shift to the state at large. In Massachusetts, the Home Energy Efficiency Team and other environmental and community groups are endorsing a ​“Future of Clean Heat” bill that would make similar changes.

More complexities will emerge as utilities and regulators start to consider the methods for some members of a thermal energy network to exchange their waste heat with others, Rusteika said. ​“How you compensate people who provide it and those who use it is a more complicated question.”

For now, backers of thermal energy networks are waiting for the first pilot projects in Massachusetts and New York to provide the real-world testing grounds for answering these kinds of questions. Eversource’s first project in Framingham, Massachusetts is set to come online later this spring, he said. ​“We’re going to learn a lot about efficiency and functionality and comfort and cost from that pilot.” 

New York will replace gas pipelines to pump clean heat into buildings is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

This article originally appeared in Canary Media.

Local Law 97, New York City’s groundbreaking, multistage effort to rein in carbon emissions from its big buildings, is facing its first major test — and it’s just a preview of the much steeper challenges to come.

Last week, New York City Mayor Eric Adams released proposed guidelines for how owners of the worst-performing buildings can comply with the law’s mandate to curb emissions by 2024. Next year, the city will begin imposing fines on buildings that haven’t reduced their emissions below certain thresholds, with even steeper cuts and rising fines to come in 2030 and 2040.

The response to the new compliance guidelines was swift. Real estate owners opposed to the law reiterated long-standing complaints that the mandates will force them to choose between paying steep fines or making efficiency investments that don’t make economic sense today.

Environmental activists countered with evidence that near-term compliance is not nearly as costly as opponents say it will be. They also worry that two parts of the proposed regulations, which would allow laggard buildings to postpone compliance for two years and use clean-energy purchases to offset continued building emissions after that date, amount to a surrender by the Adams administration to real estate interests at the expense of fighting climate change.

“Mayor Adams is proposing a gigantic giveaway to his real estate buddies that’s going to increase pollution and crush jobs,” said Pete Sikora, climate and inequality campaigns director of New York Communities for Change and a former member of the Local Law 97 advisory board.

That’s why Sikora’s group and a host of environmental and community activists are protesting what they describe as loopholes in the new proposed guidance. The conflict over these proposals underscores a key tension around the broad goal of decarbonizing buildings: how to balance the carrots with the sticks. If the cost of meeting the law’s emissions-reduction mandates is too high, building owners may simply choose to pay the fines instead, an outcome that does little to help the climate.

But building-efficiency experts agree that meeting the law’s 2024 targets should be relatively simple for the vast majority of commercial and multifamily residential buildings in New York City. As evidence, they point to the fact that 89 percent of buildings covered by the law are already in compliance with its requirements, including many older buildings that are harder to retrofit to become more energy-efficient. They also note that alternative compliance options have been established for more challenging buildings such as low-income housing.

“I do not believe there is a serious building professional in this city who would say that a building making a good-faith effort, absent very unusual circumstances, would not be able to get under the 2024 limit,” said Sikora. ​“In some buildings, they could do it almost immediately if they wanted by making some very basic changes — putting in LEDs [and] aerated shower heads, insulating exposed heating pipes, tuning the boiler correctly” and other such remedial actions.

What will be harder, he said, is meeting Local Law 97’s longer-term goals. Roughly 70 percent of the city’s buildings do not yet comply with the law’s tougher targets of cutting carbon emissions by 40 percent from 2019 levels by 2030.

Hitting that end-of-decade figure in particular will require far more extensive efforts to switch from the oil- and fossil-gas-fueled systems that heat the majority of buildings today to electric heat-pump systems or low-emissions steam heat systems. It will also require deeper building-efficiency retrofits to ease stress on the power grid.

Difficult as it may be to pull off, it’s crucial to meet these targets. Buildings contribute 70 percent of the carbon emissions in New York City, which means ​“we will not achieve our climate goals without addressing buildings,” said John Mandyck, CEO of the nonprofit Urban Green Council, which has played a key role in creating the law and monitoring its implementation. While building owners have been waiting for key guidelines on how the law will be enforced, with last week’s proposed guidance, ​“the compliance pathway is now evidently clear,” he said.

But the ongoing political fight over the law’s short-term targets could derail these longer-term efforts, Sikora said. New York City officials estimate the costs of hitting the law’s 2030 targets to range from $12 billion to $15 billion. If building owners don’t start making investments now, they run the risk of missing the law’s targets, which are designed to reduce the city’s carbon emissions in line with the Paris Agreement, he said.

“The law’s limits are achievable and affordable,” he added — a view backed by the Urban Green Council and other groups. The 2024 targets were meant to ​“get the most polluting buildings here to cut their pollution as a warmup to the 2030 requirements, which are quite a bit tougher.”

The ​“good-faith effort” pathway: A helping hand or a dodge? 

Environmental groups have two key complaints about the regulation proposed by the Adams administration last week.

The first is the proposal to allow the roughly 11 percent of buildings not yet hitting their targets to escape fines through 2026 if they make a ​“good-faith effort” to get on track. Some environmental groups argue that building owners have already had four years to prepare for 2024 targets and shouldn’t be rewarded for inaction.

“Responsible landlords are already doing that, not just to cut pollution but to save money on bills, too, and raise the property value,” Sikora said. ​“The mere fact that some landlords are incompetent doesn’t mean they should be let off the hook.”

But in Mandyck’s view, the good-faith exemption is a reasonable approach to forcing buildings that are behind schedule to meet the law’s mandates. Since Local Law 97 was passed in 2019, ​“we had Covid; we had supply-chain delays,” he noted. ​“It took the appropriate amount of time for regulations to unfold. And we’re now months away from compliance. So we have two options: We fine all those buildings and forfeit the carbon savings, or we find a pathway for compliance.”

The law’s fines — $268 per metric ton of carbon dioxide emissions that exceed an individual building’s cap — equate to ​“the highest price of carbon in the world,” he noted. ​“Do we tie up the administrative courts and start issuing fines? Then people are paying fines and not doing investments in the buildings. We need carbon savings — we don’t need fine revenue.”

Tristan Schwartzman, energy services director and principal at New York City–based building engineering consultancy firm Goldman Copeland Associates, agreed that a two-year extension could help a number of his clients that ​“do have a path that’s going to be arduous but feasible” to meet their compliance deadlines.

To qualify for the good-faith exemption, ​“you have to have a plan in place; you have to show that you’ve done something that’s been impactful,” he said. ​“There are a lot of hurdles you’re supposed to jump — but those are hurdles you’re supposed to be jumping anyway.”

But as Sikora and other environmental groups point out, it’s virtually impossible to discern whether owners of noncompliant buildings are indeed acting in good faith. These critics fear that the exemption will instead offer a two-year reprieve from fines for a subset of property owners who have been working to undermine the law.

Those efforts include a lawsuit filed last year by groups representing residential cooperative buildings in the borough of Queens demanding that the law be overturned. They also include millions of dollars of advertising and lobbying by the Real Estate Board of New York, a politically powerful group led by Douglas Durst, the owner of high-profile properties including some that are out of compliance with the law, such as the Bank of America Tower at 1 Bryant Park in Manhattan.

The group issued an analysis in January claiming that the fines from Local Law 97 could add up to $213 million for 3,780 buildings in 2024 and $902 million for 13,544 buildings in 2030, citing these findings as proof of ​“significant economic disruption that will occur if property owners are not provided adequate tools to reduce emissions.”

But Sikora noted that these figures misrepresent the financial impact on individual buildings and their tenants.

He cited the example of Bob Friedrich, the board president of Glen Oaks Village, a 2,900-unit co-op in Queens, who has been an outspoken opponent of Local Law 97 and a plaintiff in the lawsuit seeking to overturn the law. Friedrich has claimed that Glen Oaks would have to invest about $24.5 million to upgrade its gas and oil boilers to seek to comply with the law, and may still face an estimated $400,000 per year in fines from 2024 to 2030.

But divided among 2,900 units, that fine adds up to about $130 per unit per year through 2030, or ​“the equivalent of a parking ticket,” Sikora said. Similar economics apply to many other properties, making the law’s fines far from the death blow that many property owners have claimed they will be, he said.

Offering noncompliant buildings a route to avoid penalties for failing to achieve the relatively lax 2024 standards also risks setting a bad precedent for the much tougher 2030 targets, he added. That makes the good-faith exception a potential ​“signal to landlords and others that, well, maybe they’ll be delayed too.”

The battle over RECs 

It’s certainly true that the carbon-intensity of New York City’s electricity supply will influence the emissions impact of building electrification, Sikora said. But that doesn’t mean building owners should be able to use clean-energy accounting to avoid investing in fundamental efficiency improvements.

And that brings us to the second key criticism environmental groups have made against the Adams administration’s proposed regulations. This critique centers around the role of renewable energy credits (RECs) — contracts between building owners and clean-energy producers — in the Local Law 97 scoring regime.

Today, building owners can use RECs to procure clean electricity that can be delivered to the larger New York City grid to offset their building’s emissions from electricity usage. But environmental groups have been demanding that the Adams administration set a more stringent standard, one proposed by the Local Law 97 advisory board and supported by energy experts, to limit the use of RECs to offset no more than 30 percent of a building’s total emissions.

The problem with RECs, Sikora said, is that Local Law 97 doesn’t require that they be ​“additional,” or tied to paying for a renewable energy project that wouldn’t have been built without the money from their purchase. Instead, building owners can purchase RECs from already existing clean-energy projects and use them to comply with the law.

That’s a problem, because in New York state, as with many other parts of the country, these RECs are becoming so plentiful that they offer building owners a much cheaper path to compliance than investing in energy-efficiency upgrades to their properties.

Today, New York City gets most of its electricity from fossil-fueled power plants. But with new transmission lines capable of carrying massive amounts of zero-carbon energy into New York City now being built and expected to be complete by 2026, building owners will soon have access to plenty of RECs from clean-energy projects that have already been built.

The Real Estate Board of New York has pushed for expanding the opportunities to use RECs to offset not just building emissions associated with electricity consumption but all building emissions. The new proposed compliance guidelines did not take up that proposal — but it also declined to institute the 30 percent cap that environmental advocates are pushing for.

It’s important to note that buildings that take the good-faith alternative pathway will be barred from using RECs to meet their requirements. But Sikora said the real danger of the current REC policy is that it could be extended to 2030 and later, threatening the law’s more ambitious longer-term goals. The Urban Green Council has estimated that 40 percent of multifamily properties and 80 percent of office buildings could offset their emissions over their 2030 limits through the use of RECs alone.

That’s a problem because ​“in reality, it’s not possible for the city and the state to reduce pollution unless they reduce pollution at the source — at the buildings,” Sikora said. ​“And that means they have to get a lot more energy-efficient.”

Green groups including Sikora’s are calling for the Adams administration to put a REC cap into place and reconsider the good-faith exemption over the coming month of public comments and hearings on the proposed rules.

Where will the money come from? 

Sikora didn’t downplay the challenge of paying for the deep efficiency and electrification efforts that New York City buildings will need to undertake to meet Local Law 97’s longer-term mandates. But he sees a much larger role for public funding to close that gap — and while city and state agencies are providing money through a variety of programs, it isn’t yet enough, he said.

“We think the city and state should apply billions of dollars per year to decarbonize the building stock,” he said. That big one-time transition away from gas or oil to heat pumps is a big cost.” On the other hand, ​“we do not think the city needs to subsidize affluent [building] owners.”

That work must start with increased funding for the variety of affordable-housing units that are currently allowed to comply with the law via so-called ​“prescriptive pathways,” he said. The Urban Green Council estimates that rent-controlled apartments, public housing and other affordable-housing units make up one-third of all buildings covered by Local Law 97.

Mandyck noted that the new proposed guidance provides more clarity on how those buildings can comply via ​“commonsense” measures, such as insulation on water heaters and steam pipes and thermostats or temperature controls on radiators.

But Schwartzmann contended that many of these buildings ​“are really poorly maintained because they don’t have money to maintain them properly,” due to the challenging economics of financing improvements in rent-controlled buildings or tight budgets for public housing. ​“The city should be throwing money at that problem, not pushing it downstream.”

Last week’s proposed regulations also included a booster for buildings exploring the switch from fossil-fueled to electric heating, primarily via heat pumps — a new credit that increases the value of electrifying at least part of their heating demands.

The new credit system ​“not only gives you a zero-emissions equivalent for the electricity it uses, it gives you a negative” carbon score, said Jared Rodriguez, a principal with Emergent Urban Concepts and adviser to the New York State Energy Research and Development Authority. ​“It’s a very clear signal that they want you doing at least partial load electrification — and that you’ll get some credit for it.”

That’s an important boost for a technology that still costs more than fossil-fueled boilers and furnaces, both in terms of upfront equipment and installation costs and in ongoing utility costs, Schwartzman said. ​“There was a real hesitancy to move toward these electrified options because they’re not going to save you money at this point, because electricity costs more than gas,” he said.

Last year’s Inflation Reduction Act will help make efficiency and electrification more affordable via tax credits and incentives for equipment, installation and workforce training, Mandyck noted. City officials have said they will pursue funding from a variety of federal sources, such as ​“green bank” loans, to ease the cost burden.

The New York state government is also funding efforts to bring down the cost of novel decarbonization technologies, he added. Some examples include a $70 million initiative to develop window-mounted heat pumps that both cool and heat apartments and the $50 million Empire Building Challenge that’s targeting high-rise commercial and residential buildings for complex efficiency and electrification retrofits.

“Because of the scale of New York City and the state…we’re going to spur innovation that’s going to help the whole market,” he said. Local Law 97 is just the most ambitious of a number of similar mandatory building-performance standards already in place in cities including Boston, Denver and Washington, D.C. and in states including Colorado, Maryland and Washington, he noted.

Finally, it’s important to remember that the climate emergency requires building owners to think differently about the costs and benefits of efficiency and electrification, Mandyck said. ​“We need to think about payback differently. Climate is a life-safety issue now. Nobody asks what the payback is to put a sprinkler safety system in your building. There’s no payback there — if there isn’t a fire.”

NYC’s big building-decarbonization law faces its first major test is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.