Navigating Green Requirements

Mar 25, 2021

The Biden administration has outlined an aggressive approach to mitigating climate change, and recently the House Committee on Ways and Means introduced the Growing Renewable Energy and Efficiency Now (GREEN) Act of 2021. But some states and many cities have been or are moving forward with policies to support a carbon neutral approach to buildings. There are 12 states (California, Colorado, Connecticut, Hawaii, Maine, Nevada, New Mexico, New York, Rhode Island, Virginia, Washington and Wisconsin ) and three territories that have taken either legislative or executive action towards achieving carbon neutral/clean energy requirements. It is worthwhile to note that 30 states and three territories have established Renewable Portfolio Standards that enable them to diversify and grow their renewable energy sources like wind and solar, which support both climate and energy independence goals.

Since buildings are the second largest emitter of CO2 after the transportation sector, policies to encourage the move towards carbon neutral buildings will have a significant impact in achieving climate-responsive policies. In California, Governor Brown signed executive order EO B-55-18 to mandate a statewide goal of achieving carbon neutrality as soon as possible and no later than 2045. It complements his previous executive orders, EO B-18-12, mandating zero net energy (ZNE) for new and existing state-owned buildings and aligns with assembly bill AB-32, known as the Global Warming Solutions Act of 2006. The state of Oregon, through Executive Order No 17-20, must achieve net-zero-energy ready buildings as standard practice statewide within the next code cycle. Various other states like Hawaii, New York and Washington have similar commitments to net zero carbon emissions statewide.

As these policies get adopted by states around the country, implementation of these policies can take many years, and some deadlines may come to pass without meeting their goals. In 2020, California implemented a statewide mandate to achieve ZNE for all new residential construction. While there have been some aggressive energy efficiency requirements enacted in the building codes, there is no code requirement for ZNE nor implementation or adoption of these requirements at the local level.

The next significant goal for California is the mandate to achieve ZNE for all new commercial construction and 50% of existing commercial buildings by 2030, as well as 50% of new major renovations of state buildings by 2025. Commercial projects include, but are not limited to, offices, industrial buildings, multifamily buildings with four or more habitable floors, hotels, retail, grocery stores, restaurants, storage facilities, schools, churches and assembly areas. While the state already has the most certified ZNE buildings in the country, it hasn’t come close yet to the ambitious mandated goals. For now, it appears that the California building codes are taking incremental steps towards achieving ZNE by requiring mandatory installation of solar panels for new residential buildings and solar-ready areas for new commercial buildings as of January 1, 2020, whether solar thermal or photovoltaic, and with increasing energy efficiency requirements. The industry recognizes that these ZNE goals will eventually be adopted within the building codes but not necessarily by the original deadlines.

The ensuing step for the state would be adoption of "all-electric" requirements in the upcoming 2022 update to the California Building Code. In the meantime, some cities within California have enacted these requirements for new construction and, in some cases, have banned the use of natural gas or limited the use of dual fuels in buildings. To date, there are 42 cities across the state with all-electric requirements, with the City of Berkeley (interestingly, the U.S. city with the first certified ZNE public library) being the first to enact this policy. Cities in other states have been pushing forward with similar all-electric policies with varying levels of success, as evidenced with the City of Brookline’s conflict with existing State of Massachusetts laws. Meanwhile in Seattle, the mayor recently announced the city will eliminate the use of fossil fuels for space heating and water heating for large multifamily construction by updating its energy code.

Because of the varying levels of adoption across the country and states, owners, developers and lenders should be aware of these carbon neutrality requirements where their projects are being considered. Without a comprehensive and consistent statewide policy or building code, we will continue to see local jurisdictions enact their own versions of carbon neutral initiatives, creating a patchwork of requirements that, while similar, will not be consistent from one city to another.

In addition, not all development/design teams are aware of these new policies, and it can be difficult to track them without a consistent policy across the nation and/or within each individual state. There are costly ramifications for a development should the requirement for all electric buildings be discovered late in the building plan check review or construction phase. As an example, there are some cities that have fines or additional fees if a building proposes dual fuel usage when an all-electric requirement is in place. However, there are potential costs savings for a project if this requirement is known at the start of a project.

There are studies that indicate that all-electric buildings can be constructed for less than or equal to traditional buildings, and the same applies to operational costs. The following are attributes of all-electric buildings:

• Reduced costs for not having to install natural gas infrastructure
• Some additional costs for all-electric appliances and equipment
• Potential reduction in schedule with one less utility to deal with
• Reduction in costs with one less below-grade utility to coordinate or provide a trench
• Support for all-electric building codes in California from several utility companies including PG&E, which is a dual fuel utility
• Anticipated savings of $1B over 5 years just for the state of California from not having to build natural gas infrastructure to support new buildings
• Reduction in overall CO2 emissions
• Increased load on the utility (electric) grid
• Potential lower overall utility bills and operational costs

To clarify the differences between carbon neutral initiatives: Understand that all-electric building goals are about the reduction in use of fossil fuels, whereas ZNE building goals are about buildings producing as much (or more) renewable energy on site than the energy they use over the course of a year. They are complementary to each other, but are not the same. A carbon neutral, all-electric building will contribute towards reduction in CO2 emissions and will help towards meeting global climate agreements. With a little imagination combined with smart design and engineering, a building could be developed with increased energy efficiency. And when coupled with all-electric requirements and sufficient renewable energy on site, this could potentially lead to a ZNE building. In turn, a ZNE building will accomplish something no other building (including an all-electric building) can achieve—the ability to pay for itself through the savings achieved in energy bills over time. Research indicates that well-designed ZNE buildings can be constructed with a budget that is on par with (or with a small premium) when compared to a baseline traditional building.

There are developers, building owners and architects who are pushing forward with ZNE buildings and carbon neutral buildings regardless of government policies. To many of them, the economics and the social benefits just make good sense. Though government policies that require, support or provide incentives for carbon neutral or zero-net-energy goals can help encourage the adoption of these sustainable projects, each project considering all-electric or ZNE should conduct its own assessment of the potential benefits or liabilities. Fortunately, there are many case-study examples of all-electric and ZNE buildings. The project case studies of the Living Building Challenge will provide examples of some of the most sustainable buildings designed and built to date and which all help contribute towards achieving a carbon neutral future.

We at Marx|Okubo provide professional support in navigating these requirements on your projects. Our in-house, dedicated sustainability and resiliency groups have been working with clients in developing Environmental, Social and Corporate Governance + Resiliency (ESG+R) assessments of their facilities across their portfolios to help them better understand the risks and impacts of carbon neutral policies.

If you have any questions or need guidance on carbon neutral or zero-net-energy requirements, please contact Gerard Lee at Gerard_lee@marxokubo.com.