Innovation in energy and climate policy for buildings

June 24, 2021 | Howard Geller

The Colorado legislature adopted a wide range of new policies to advance clean energy and cut greenhouse gas (GHG) emissions in its recently concluded 2021 session. In addition to approving new policies to lower GHG emissions in the utility, transportation and oil and gas sectors, the legislature approved several innovative policies that will increase energy efficiency and decarbonize energy use in Colorado’s buildings. Here’s a summary of these new policies.

SB21-246 advances electrification in buildings. It directs investor-owned electric utilities to:

  • develop plans to help customers replace gas- and propane-fueled equipment with high efficiency heat pumps, heat pump water heaters, and other electric equipment;
  • include the social cost of carbon and methane emissions in the cost effectiveness analysis of electrification programs;
  • include programs targeted to income-qualified households in electrification plans; and
  • implement electrification plans approved by the Colorado Public Utilities Commission (PUC).

This new law also directs the PUC to set longer term targets for utility beneficial electrification programs. In addition, the bill includes labor standards for electrification projects implemented in larger commercial buildings. It also encourages non-regulated electric utilities to implement electrification programs. 

HB21-1238 updates state policy on gas utility demand-side management. It directs the PUC to:

  • establish energy savings targets for gas utility energy efficiency programs based on the maximum cost-effective and achievable level of energy savings;
  • ensure that gas utilities devote at least 25 percent of residential program expenditures to assist lower income households;
  • include the social cost of carbon and methane emissions in the “base case” analysis of the cost effectiveness of natural gas energy efficiency programs;
  • discount future customer costs and utility bill savings recognized by customers at the long-term rate of inflation rather than at the utility’s average cost of capital;
  • adopt labor standards for gas-saving projects implemented by larger commercial buildings that receive a rebate directly from utilities; and
  • approve natural gas revenue-sales decoupling if this policy is proposed by a gas utility.

HB21-1286 establishes benchmarking requirements and performance standards for larger commercial buildings. It directs:

  • commercial buildings 50,000 square feet in floor area and over to benchmark their energy performance using the ENERGY STAR Portfolio Manager tool starting in 2022;
  • utilities to provide energy consumption data to building owners to facilitate annual performance benchmarking;
  • the Colorado Energy Office to make benchmarking data for covered buildings publicly available;
  • the Air Quality Control Commission (AQCC) to promulgate performance standards for covered buildings that achieve a seven percent reduction in overall GHG emissions by 2025 and a 20 percent reduction by 2030 for covered buildings relative to emissions in 2021. In setting these performance standards, the Commission shall not include reductions due to decarbonization of electricity or natural gas supplies;
  • the Colorado Energy Office to appoint and convene a Task Force to advise the AQCC on the performance standards.

SB21-264 requires gas utilities to reduce the GHG emissions associated with providing fuel to homes and businesses (full service customers only). It directs gas utilities to:

  • file clean heat plans that reduce GHG emissions by four percent in 2025 and 22 percent in 2030, relative to emissions in 2015. Up to one percent of the 2025 target and up to five percent of the 2030 target can come from recovery of methane from landfills, wastewater treatment plants, coal mines, anaerobic digesters and other sources;
  • file additional clean heat plans to meet GHG emissions reduction targets established by the PUC covering years 2031-2050;
  • implement clean heat plans approved by the PUC, including complying with a cost cap of 2.5 percent of annual gas bills for all full service customers; and
  • report annually on clean heat plan expenditures and impacts.

It is expected that gas utilities will implement a combination of expanded energy efficiency programs, robust electrification initiatives, methane recovery projects and other allowed resources to meet the clean heat targets.

Colorado Governor Jared Polis has now signed these bills into law. Taken together, the new laws should greatly expand energy efficiency upgrades, adoption of high efficiency heat pumps and other electrification measures, thermal renewable resources and methane recovery projects, with a strong focus on serving lower income families and disproportionately impacted communities.

While Colorado’s nearly three million homes and commercial buildings will still use a large amount of natural gas and other fossil fuels in 2030, direct GHG emissions from buildings will be declining because of these new laws. Moreover, the technologies, market infrastructure, and consumer demand should be in place to accelerate decarbonization of energy use in buildings after 2030, thereby enabling buildings to do their part towards meeting the state’s economywide GHG emissions reduction targets.

Howard Geller is Senior Policy Advisor and previously served as Executive Director of the Southwest Energy Efficiency Project (SWEEP).