Bay Area Building Electrification & Energy Efficiency Strategy

According to the International Energy Agency in 2021, buildings are responsible for 40% of the global energy consumption and its greenhouse gas emissions. The largest concentrations of enclosed building areas are located in metropolitan areas—urban cores—where many old, sub-optimally built building stock (by today’s standards) still exist. Most of these buildings are not yet prepared for the changing climate. Therefore, cities across the globe are racing to improve buildings’ performance via electrification for their decarbonization.

So far, most of the conversation surrounding building decarbonization had focused on improving the building envelope, mechanical systems, and other heating needs. Older buildings tend to be leaky, due to the building envelope’s minimal insulation and/or lack of airtightness; losing heat during the winters and gaining heat during the summers. Likewise, older mechanical systems and other heating uses such as cooking and water heating that rely on fossil fuels also tend to be inefficient, because their combustion converts a majority of the fuels’ potential energy as waste heat to the surrounding air.

Tackling the building envelope, its systems, and end uses is a widely-accepted strategy to improve building performance. However, all of these measures are very costly for the building owners (and therefore the renters), to purchase and retrofit or upgrade into existing buildings. This concern has raised the eyebrows of environmental justice and disadvantaged community advocates, as well as policymakers, regulators, and the general public for a long time, who recognize that climate change and its mitigation measures may leave vulnerable populations behind if equity measures are not carefully considered.

Among the new solutions being developed and considered to encourage building decarbonization are rental services and financing models of building electrification and energy efficiency technologies. These solutions remove the financial barriers to electrify older and inefficient building stocks. By removing the need for upfront lump-sum investment from property owners and renters, and placing the onus of the systems’ installation, maintenance, and financial liability on the businesses providing these products and services over long-term horizons, this approach had gained critical traction at some jurisdictions in the United States.

Despite their obvious benefits as viable alternatives to building decarbonization in a sustainable, low-cost way, current regulatory frameworks and standards are complex and sometimes unfriendly to such novel approaches. Lack of regulatory clarity and unfamiliarity surrounding emerging technologies, such as blockchain, which is often employed to automate system processes and securely manage data associated with these services and products naturally create hesitation and resistance to adoption by the general public (and rightfully so, given the sensitivities around data privacy). Moreover, accounting, financial, and legal standards written to govern the reporting processes of assets and their liabilities, as well as mechanisms that encourage transparency of such assets, introduce complications to novel solutions that could enable equitable building decarbonization.

Building decarbonization is a hot topic; a techno-political issue in the socio-economic contexts of urban gentrification induced by “greenification” of building stocks. Indeed, solutions like rental service and financing models of building electrification and energy efficiency technologies are “greenification” measures by nature, which may lead to unintended and unknown consequences. Although initially conceived to assist equitable building decarbonization, the novelty of these approaches have yet to be proven. Therefore, much work remains in order to better understand the intersection between technological and business innovation, political and social economies in community development, and the role of evolving policy and regulatory environment in climate mitigation.