The Complex, Politically Fraught Path to Building Electrification

Residential and commercial buildings account for nearly a third of climate warming greenhouse gas emissions in the United States.  Yet efforts to reduce the climate footprint of buildings have become political lightning rods.  Local regulations requiring new homes to be fully electrified often encounter fierce pushback, while at least 20 states have moved to outlaw local bans on natural gas connections in new homes.  Politics aside, business and home owners may have little awareness of their building’s climate footprint, and often lack the time and motivation to explore alternatives like electric space and water heating.

Judy Chang, former Massachusetts undersecretary of Energy and Climate Solutions, discusses the political and economic hurdles to cutting the climate impact of buildings.  She also examines the role that consumers will play in efforts to decarbonize, and the need to educate consumers on the imperative to cut building emissions.

Full Transcript

Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone.

Residential and commercial buildings account for nearly a third of climate-warming greenhouse gas emissions in the United States. Any effort to achieve climate targets, such as the Biden administration’s net-zero goal for 2050 must include widespread cuts in emissions from buildings. Yet efforts to reduce building greenhouse gases have become political lightning rods. Local regulations that would require new homes to be fully electrified have often encountered fierce pushback, while at least 20 state legislatures have passed laws making it illegal for cities to ban natural gas connections in new homes. Politics aside, businesses and homeowners may have little awareness of their building’s climate footprint and often lack the time and motivation to explore alternatives, like electric space and water heating.

On today’s podcast, we are going to look at some of the political, economic and consumer awareness hurdles to cutting the climate impact of buildings. My guest is Judy Chang, who served as Massachusetts Undersecretary of Energy and Climate Solutions until January of this year. In her role, Judy was a leader in developing and implementing the state’s energy policies and climate targets. She’ll discuss the need to educate consumers on the imperative to cut building emissions and financing frameworks to do so. Judy, welcome back to the podcast.

Judy Chang: Thank you so much for having me.

Stone: So it has been nearly three years since you were last on the podcast, and you have been very busy in the interim. Most recently, you were the Massachusetts Undersecretary of Energy and Climate Solutions. To get us started, I wonder if you could give us an overview of the responsibilities in that role, and maybe in particular as they relate to state energy and climate goals, and in the context of today’s conversation, building electrification.

Chang: Yes, as the Undersecretary of Energy and Climate Solutions, I sit under a secretary that oversees energy and environment and, of course, climate. Part of my responsibility is to help advise the governor and the state government about the energy policies for the state, as well as develop the climate plan for the state. In Massachusetts, we call that plan a Clean Energy and Climate Plan, and set in statute, the state had to set a plan for near-term and long-term.

The near-term, in 2022 last year, we set a near-term target for years 2025 and 2030. Overall, the state must meet 50% greenhouse gas emissions reduction in 2030, and 85% greenhouse gas emissions reduction in 2050, all relative to the 1990 level. And as part of the legal requirement, the state also must set the emissions target by sector. So it’s not just in general, as the economy, how we meet 50% in 2030 and 85% in 2050, but sector by sector, how are we going to do that? What are the policies? What are the programs? And exactly what are the greenhouse gas emissions levels we are targeting for each of the five-year intervals going into the future?

In addition, the state has a legal requirement to meet net-zero economy-wide in 2050. So all of that requires, in my mind, long-term planning to make sure that we can achieve these legal requirements and targets for each sector. So I led a team from the energy end on the environment side and on the climate side to set out the policies and the programs for the state.

Stone: So you were with the outgoing administration of Governor Charlie Baker. Massachusetts has a new governor now, Maura Healey. Do you expect her to follow pretty much the same trajectory that you were following and the governor was following up until the beginning of this year?

Chang: I do expect the new governor and her administration to follow the same trajectory and perhaps push harder on some of the policies that are underway.

Stone: I wonder if you could frame for us the need for building electrification within the larger context of decarbonization.

Chang: As you mentioned in the introduction, residential and commercial buildings emit about 30% of the greenhouse gas emissions in the United States. And out of those emissions from residential and commercial buildings, about 40% of the energy used in buildings is associated with heating. In addition, thinking about 2050, where we need to meet net-zero for some of the states — and in Massachusetts, that’s a legal requirement — but we also know that 80 to 85% of the buildings that will be standing in 2050 are already built, which means that our jobs require us to reduce emissions not only in building new buildings, which I will talk about, but also reduce emissions from existing buildings. We essentially can’t get there by only working on new buildings, but the effect of energy efficiency programs and transition to clean energy on existing buildings is an essential part of the decarbonization of our building sector.

So in new buildings, I will just start, the most important thing, of course, is to make sure that every single new building built from this day forward should be as efficient as possible. And that means that we need to tighten the envelope of every building so that, especially in a cold climate like in New England, we want to make sure that the heating consumption or the energy consumption associated with heating and cooling in the summer are the lowest possible. And once we do that, then we can talk about what type of heating and cooling systems are the most efficient systems for those buildings.

In most cases, not all cases, but in most cases, once you shrink the energy consumption or the energy footprint of a new building, then it’s actually cost effective or even lower cost to just electrify the building. That means the heating system of new buildings can be cost effective using heat pumps.

Stone: That’s interesting. I want to get more into the details of the costs and the complexities involved in both new builds, as well as retrofits of old builds, to electric appliances, electric heating in just a moment. But I want to make note of something on the political side here for a moment. So building electrification has become a lightning rod political issue in this country. And on one side, you have a growing number of cities around the country that have mandated new buildings use electric space and water heating, or on the flip side, ban natural gas hookups in new construction.

In 2019, Berkeley, California was the first city to ban natural gas in new construction, and now we have similar rules in place in places like Denver, New York, and a growing number of cities. Also a couple of months ago, Montgomery County, Maryland, which I believe is outside of D.C., became the first county to ban gas heating in new construction. And that goes into effect in 2026.

So there’s a lot of momentum for building electrification, but you have the backlash, right? As we mentioned earlier, 20 states have outlawed natural gas bans. We’re familiar with the divide here, right? Generally the bans on natural gas construction are in coastal states, liberal coastal states, of which Massachusetts is a prime example. But even in Massachusetts, as you saw when you were in the government there, the politics of natural gas bans can get tricky. Massachusetts has settled on a couple of political compromises on this issue. I wonder if you could talk about the complexities, the political issues here, and these compromise solutions that the state has come up with.

Chang: This is a very tricky area, particularly for New England because we’re in a cold climate, and there are debates about whether requiring new buildings to all go electric is a wise thing to do at this moment in time. And natural gas for heating is a dominant — not all, but about 40 to 50% of heating in buildings in Massachusetts are using natural gas. So banning new natural gas hookups is and has been a controversial question. On one hand, we want to drive toward decarbonization, and that requires not only changing the fuel but actually first and foremost, to make sure that existing buildings and new buildings are as efficient as possible, as I just mentioned.

And I also mentioned earlier, once you have new buildings designed and built to their maximum efficiency and shrinking the energy consumption need, then electrifying that building is actually less costly or at comparable cost as hooking up natural gas. Of course there are exceptions, so not every building is exactly the same, depending on the use and the location. So from a factual basis, the cost is approximately similar for new buildings that can really consume as little energy as possible. But banning natural gas in new buildings brings up other concerns. For example, in some ways you can think of leakage issues with any carbon price, right? So it’s comparable to if you have a specific region that has a carbon price, but no carbon price outside of that region. You have this leakage issue where perhaps manufacturing would move to a nearby location, instead of in that region that has carbon price.

Similarly, for housing particularly, with a ban on natural gas. What that might mean is that you’re not actually helping in the total emissions reduction. Instead, you’re just moving the problem elsewhere, or you’re moving the buildings or new buildings elsewhere. So there is a risk of communities that ban certain resources that consumers still want — in this case natural gas — to actually move those developments elsewhere or, in our current situation in Massachusetts and really across the country, we have a shortage of housing, affordable housing. The danger of banning a certain type of fuel used for consumers is the risk of reducing the amount of housing that’s made available for people.

So any kind of policies that are either statewide or region wide or countrywide, this is a type of policy that we need to carefully design and carefully evaluate what the potential impact would be by banning certain fuel that consumers are still demanding. The Ten-Town Pilot in Massachusetts does provide certain municipalities to adjust their own ordinances to require no new natural gas hookups. Now these types of policies can be effective for new buildings, but as I mentioned earlier, that’s not the only policy that we need. There are also trade-offs, as I just mentioned. There are reasons why builders and building owners want natural gas.

So until we can make sure that the demand for natural gas shrinks, we may end up shifting the buildings out of those communities, or simply reduce the housing that’s needed for certain communities. There is a delicate balance here. We can’t just think about one side of the equation and hope for the best for the other side, or leave the other side of the equation to be solved by somebody else. That’s why banning the gas or not, or banning the policies to ban gas are tricky policy questions, and we need to really make sure that we understand the potential impact before setting those policies.

Stone: I’m curious about Massachusetts and again, this ten-town ban. So the state said ten municipalities, ten cities can ban fossil fuel hookups, gas hookups in new construction. Why the ten community ban? I believe Boston wanted to get in on this, but they were too late. Ten municipalities were already chosen.

Chang: Well, it’s exactly what I just mentioned. Along with the allowance or the ability for ten towns to be as initial pilots is a requirement on the Department of Energy Resources, which is the energy policy arm of the state to evaluate the potential impact of such bans on those communities and compare them with cities and towns that don’t have such bans. So it’s trying to make sure that we evaluate the potential impact before making it a broader policy for the states.

Stone: And you also have this voluntary, pre-wired building code, as well, right?

Chang: Yes, separately, there is a new building code that’s effective starting this year, for various different commercial and residential buildings. And as part of the new building code, there is a municipal opt-in stretch energy code that’s promulgated. And that provides municipalities, cities and towns, an ability to follow a more stringent energy code. And under that opt-in, stretch energy code is a requirement. So if you follow that, then you should pre-wire all buildings for potential future electrification, even if they’re not electrified today.

Stone: It’s interesting, a few minutes ago, we were talking about the costs of electrified new builds, right? Housing and commercial properties. And as you pointed out, the costs are comparable when those buildings are fully electrified, versus using gas heating, gas water heating, that type of thing — gas-fueled. But it really gets complicated when we start looking at retrofits, and you alluded to that, as well. And this comes to the issue of who’s going to pay for this? Obviously, retrofitting a house is extremely expensive. Massachusetts has a one hundred percent electrification rebate for low-income households. I’m sure that exists in other states, as well. But I wonder if you could talk about this challenge of the retrofits and how you make sure that all consumers are brought along on this — not just people who could actually afford to go this alone.

Chang: Yes, that’s a really good question, and in my mind, again, setting the policies or setting the directions for new builds is only part of the equation. We can’t reach the decarbonization goals without actually addressing the existing building stock. And looking around New England, there are a lot of buildings that are very old, and you essentially heat the building, and the heat just goes out the window or out the walls or the roofs. So there is a lot of retrofit work that’s necessary.

And as you also mentioned, this is a very expensive undertaking. And we have to do it by making sure that those that are most vulnerable, the low-income households, have the assistance to choose to make these changes going forward. So currently there is a significant amount of money in the Mass Save Program, which is the state energy efficiency program, but it’s really energy efficiency and energy transition. And that’s using money from electric and gas rate payers to fund the energy efficiency measures, to tighten all existing buildings’ envelopes and to help people transition from fossil-based heating systems to electric heat pumps. This is 4 billion dollars over three years, which is a lot of money, but it’s not enough. This is only the tip of the iceberg. The amount of retrofits necessary is significant.

So I do think that while the rate payers’ funding has been made available in Massachusetts, and with the additional funding through the federal Inflation Reduction Act, this will kick start this effort, but the overarching cost issue will still have to be addressed. Now low and moderate income households need to be at the forefront of this transition, and the reason is, we don’t want to leave the low and moderate income households behind, when, as people move away from, for example, natural gas systems, the cost of the natural gas system per unit of usage will increase over time, as well.

So what we don’t want to do is leave the low-income folks behind, and them being the ones holding the bag or paying for the eventually high cost of delivering natural gas. So this gets pretty complicated, but I think it’s really important for government to step in and help reduce the energy burden for the low and moderate income and historically underserved population. Massachusetts has already witnessed that additional efforts are necessary to help low and moderate income residents to engage with energy efficiency measures.

Just imagine if you’re busy caring for your children and holding down a job, it’s actually very challenging, even for people who are in the business of energy. It’s still challenging to find the time to call people and schedule an energy audit, and then call three to five vendors to come and give you a quote and get the work done. So this is hard enough, even if it’s free. I think the state and the utilities, which are the program administrators, have a responsibility to make it easy and easier for low and moderate income people to engage. There’s a lot more work that needs to be done here.

Stone: What role might green banks play in private finance of the energy transition generally?

Chang: Yes, that’s a really interesting question. It has become one of my passions to explore this area of green banks. Of course, there are many types of green banks, and it’s more or less a generic term, but in my mind where “green bank” can really play a role here is to funnel public money. For example, there are 27 billion dollars dedicated to this in the Inflation and Reduction Act to set up green banks across the country, or a national green bank to facilitate and attract private capital into really decarbonization or greenhouse gas reduction. But I think the building sector and the decarbonization of buildings is ripe for this.

We have seen this already in solar and wind, but I think for the building sector, the public money can be public, including rate payers’ money, can be used to de-risk, to reduce the risk for private investments so that when the private sector comes in — especially these days, when there are private investors looking for climate-friendly investments that can help reduce greenhouse gas emissions — I think the public money can help funnel or help attract and de-risk some of the investments.

What that means is the private investor would still seek some return, but that return can come in the form of, of course, the financial return, but in addition to financial return, a climate-friendly return. And then the public money can receive a lower return, so that it absorbs more of the risk. This is still at the conceptual level, but I think I will be spending more effort in this area to structure many public/private partnerships in the space of decarbonization of buildings.

Stone: Are there any examples of projects out there where private funding is used in any structures to make this happen? I wonder if you could tell us about that.

Chang: There is money out there from financiers, private financiers. But as always, private investors need to evaluate their risks and the return to make informed investment decisions. So while I can’t cite a particular example — I mean, there are many examples for commercial buildings or perhaps municipal buildings, but there isn’t yet a clear example where residential households can be financed easily with private investors. So there are currently public and private joint efforts out there that we need to learn from, investors who are looking to make climate-friendly investments that are not just wind and solar and storage, which we hear a lot about, and those are very important. But we need to figure out ways to make it attractive for private capital to enter into this building electrification space. This means that public sector, both federal and state, and rate payer incentives can help reduce the risks and should help reduce the risks for some decarbonization investments. And then work with the private investors to test out different investment models.

There are tax credits, as I mentioned earlier, through the Inflation Reduction Act, and developers and their financiers will likely make some investments that pencil out with the increased tax credit. But to scale this up, especially in the residential space and truly decarbonize on a larger scale, we need a lot more participation from the private sector. And this area, I believe, is quite rich, with a lot more understanding and research really, and to try to create public and private partnerships that can work in the decarbonization of building space.

Stone: All retrofits, as you just mentioned a few minutes ago, will depend on consumer involvement, right? Home owners, business owners will need to make the decision, whether there are good incentives or not, to retrofit their buildings for electric heating, electric water heating, et cetera. And you have talked in the past about the importance of education, that consumers need to understand not only the solutions that are out there, the cost of those solutions, but they need to more generally also understand the role of their own homes and their businesses in the process of decarbonization. And there’s also a lot of misinformation out there, as well.

There was recently a story that appeared in Grist that mentions that contractors talked to consumers, and many actually try to talk consumers out of installing electric heat pumps, because they say they really don’t work that well. But I want to hear your thoughts on this — the importance of education, of fighting misinformation in this area.

Chang: My assessment of the situation is that technology is moving pretty quickly, so heat pumps that are installed even four or five years ago are not the same as the heat pumps that are coming onto the market today. So there is some misinformation — it’s not really misinformation. It’s more dated information that gives the consumer an impression that heat pumps don’t work, for whatever reason. But it turns out heat pumps work differently. So people who have experience in this will say that it’s hard for you to just crank it up. You’re used to cranking up the heat by turning up the thermostat. Well, heat pumps take longer time, so it’s more of a sustained temperature, gradual temperature changes. So there are just areas where people are not used to, or people who use radiant heat, who might not be used to heat pumps that actually blow air, for example.

There are just areas where people are not used to a new technology. So there’s that piece of it. The other thing is it’s absolutely true that our H-rack experts that come to our homes or businesses may not yet be up to date on the technologies available today. And that is a big barrier for adoption because what we want people to do is to plan ahead and not wait for that moment when you’re in the dead of winter, and your gas boiler breaks down, and you’re calling that number that’s on your boiler and saying, “Okay, now what do I do?” Because in those moments, you will most likely replace what you already have with the same type of boiler — in this case a gas or an oil boiler.

What we need people to do — which is a big ask, if you think about how busy everybody is with their lives — we need people to actually plan ahead and be informed to make the transition before that equipment breaks down. If we miss those opportunities, those opportunities don’t come up very often, so we want to make sure we capture those opportunities before the breakdown. Every time people transition to another new fossil-based boiler, that’s another opportunity missed. So it is extremely important that we get the information out, to not only the consumers, but also the H-rack experts that are working with customers every day. We need to work with union leaders and schools, connect them up with vendors, manufacturers, and make sure that those H-rack experts that come to people’s homes have the most up-to-date information, and they can share the experience of the customers who have already changed over.

Another thing that’s really important for consumer engagement, that I’ve observed in the solar industry — people trust their neighbors probably more than government or even utilities. So these joint or neighborhood-based or regional joint purchasing programs can also work for heat pumps. When you have a neighbor switch over to a heat pump, you’re likely to find out more about that and choose to find out more about the transition for yourself. So these kinds of programs are probably a good way to help consumers to change over.

Stone: You hit on such an important, and I think underappreciated point here, and that is how many opportunities do we have to replace boilers in homes? Or how many opportunities do we have on the transportation front to replace somebody’s car with an EV, right? So a boiler lasts, let’s say 15 years. You keep your car for 10 years. That’s one or two opportunities to turn over this infrastructure by the middle of this century. We think about this as, “Oh, you’ve got 27 years to go.” But there are actually only a couple of key decision points. I think that’s really important to take into consideration here.

Chang: Yes, absolutely. That’s why it seems so strange that even just a few years ago, we thought, “Well, 2050 is so far out in the future.” But then once you start looking at the stock turnover, this concept that you were just talking about, when you start thinking about stock turnover, you’re right. I’m looking for a new car today, but once I have that car, I’ll have it for ten years at least, right? So I really don’t need another car for a decade, and same thing with boilers. So we can’t miss those opportunities because once we put in a new oil-based boiler, that boiler is going to last 15 years. And it’s even more expensive to retrofit something when it’s not at the turnover, when it’s not at the end of its life.

So we don’t want to increase the cost for consumers by trying to change over their equipment before the end of life. We want to capture these moments at the end of the equipment life for the transition.

Stone: An interesting point here, and I think something that is worth mentioning for a moment, although it’s going to seem pretty obvious. Obviously, electrification only makes sense, only works in the climate sense, assuming that that electricity is clean, that that electricity is cleanly generated.

Chang: Yes.

Stone: And this brings up the issue of New England, where you live and where you’ve worked — the energy mix there. A lot of natural gas in New England. And I believe in New England, or maybe it’s Massachusetts specifically, natural gas consumption is still on the rise generally. So you’ve got this situation here where you’re trying to switch over everybody’s homes and businesses to use electricity, when at the same time, you’re still seeing a rise in natural gas, which is used obviously directly for heating, as well as for electricity generation. Can you talk about the challenge of using and maintaining the gas infrastructure at the same time you’re trying to move away from it?

Chang: Yes, that is one of the major challenges of this transition to clean economy. You’re absolutely right, so I’ll try to paint a simple picture, but it’s actually quite complex. We want to make sure that people start adopting electrification, both of buildings’ heat and transportation. At the same time, to support that, we need to make sure that consumers have positive experience with that, so we don’t want blackouts — which means what? We need electric distribution systems to make sure that they’re upgraded enough so that when we add on all this electricity for transportation and for heating, distribution systems are available. In addition, we need generation. So we need clean generation to support the electrification, so that we’re actually not increasing the greenhouse gas emissions from the electric sector at the power plants.

We need to simultaneously integrate clean energy onto the electric grid, and that, for New England, at least, means wind and solar and storage and large hydro. And if we don’t have hydro in the US, we need to import hydro from our neighboring country, Canada. And that’s similar in other parts of the country. We need to build the necessary clean energy, whether it’s maintaining existing nuclear or imports from Canada or increasing the capacity of our hydro systems, in addition to building up the wind, solar, and storage across the country.

So this is a huge undertaking, to make sure that we have the clean electricity on the grid. And then also, that’s just building the generation. I’m sure you’ve talked about this on your other podcasts, too — the transmission system and the network of bringing high-voltage lines from remote areas, where the hydro and solar and wind are, to the areas where electricity is needed is also a big investment that this country is trying to develop and to make sure that we have sufficient amounts of transmission investments. And just to add to the complexity of this, it turns out transmission systems cross many states often, even if it’s like wind in North Dakota bringing to Minnesota or other parts of the Midwest, those transmission projects cross many states, and the permitting process and the cost allocation process is actually a barrier for deploying transmission investments.

And then back to your question: What about the pipelines? So while we’re making the transition from fossil-based, both power generation and heating, while we’re making the transition, we still need the natural gas to be available. We see this both at the debate of the national level policies, as well as the local level. So in Massachusetts, for example, as we transition the heating of buildings from, for example, natural gas, but it’s also from oil and propane. But natural gas has the large scale infrastructure needed to transport. So as we transition from natural gas to electricity, we still need to make sure that natural gas is available when you need it. So before you actually transition to clean electricity, you want to make sure that the investments in the pipelines are still being made, but not made so much that the assets and the payback and the payment for those natural gas infrastructures last for the next 30 or 40 years. So this is a very delicate balance that we have to strike.

So in a nutshell, we still need to make the investment to make sure that we have reliable gas service while we’re still on the gas service. But we don’t make too much investment, such that we have stranded investments that people have to pay for in the future, for the next 30, 40, 50 years. And this is both a challenge at the local level, at the state level, and a challenge for the country, as you hear the debates at the national level on energy policies.

Stone: Okay, so Judy, a final question for you here. We’ve talked about the role of consumers in battling climate change. I wonder if there are any general messages that might be taken away from our conversation about their role as enablers of the energy transition.

Chang: I’ve already talked about there being a lot of work to be done to help consumers move away from fossil and thereby reducing greenhouse gas emissions. We’ve also talked about the challenges of making these transitions, in addition to the technical and the economic challenges and the policies that need to be set to move us forward. I think there’s one area where everybody can participate and can really contribute, which is on the education and what I call the “climate campaign” more broadly. Because it’s really important that we explain to folks the importance of the choices we make. You mentioned earlier that we only have a few more opportunities to change the cars we drive and the heating systems that we use. But it’s important to help consumers understand why this is important.

So there’s a big challenge in figuring out how to get that message in a simple way to everyone. And that’s, I think, where the government needs to come in and work perhaps with the private sector, but also with the advocacy groups to really create ecosystems, where consumers hear the same message, and it’s clear, and it’s fact-based, so that they can hear them over and over again. Again, I mentioned that people trust their neighbors, so what can we create from a community basis to share the information that we hear about the success stories — whether it’s air-source heat pumps or ground-source heat pumps, or EVs, or charging infrastructure? All of these things must come through one by one to reach out to our communities and people.

That actually also means that every opportunity we have — for example, investments in state facilities, municipal buildings, schools, whether it’s ice rinks or any building that the public goes to — those are all opportunities to communicate to the public what’s necessary to make these transitions.

So I guess I’ll just end by saying that we all take a part in this energy transition, and the more we can collectively share success stories, the faster we can get there.

Stone: Judy, thanks very much for talking.

Chang: Thank you for having me.