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HomeMy WebLinkAboutStaff Report 14812 City of Palo Alto (ID # 14812) City Council Staff Report Meeting Date: 9/27/2022 Report Type: City of Palo Alto Page 1 Title: S/CAP Update and Initial Council Action: Acceptance of Sustainability and Climate Action Plan (S/CAP) Goals and Key Actions; Review of Proposed Reach Code Changes; Adoption of Resolutions Adopting Advanced Heat Pump Water Heater Program Guidelines, Creating and Funding Electrification Reserves, Amending the City’s Policy on the Use of Cap and Trade Allowance Revenues, and Adopting a Carbon Neutrality Goal; Approval of Budget Amendments in the Electric Fund, Gas Fund, and General Fund; and Direction to Staff to Amend the 2022 Utilities Legislative Guidelines From: City Manager Lead Department: Public Works Recommendation This supplemental report is attaching an Ad Hoc Memo document and attached for clarity of the administrative record. Attachments: • SCAP Ad hoc report to CC (3) To: Council Colleagues From: S/CAP Ad hoc Committee Climate Projects and Future Directions Since the December 2021 Staff update, the SCAP Council Ad-hoc Committee, working with staff and community members has pushed forward on pragmatic steps to achieve our 80% GHG reduction by 2030 goal. While challenging to achieve, we believe we can still meet this goal through a focused effort. Among the many necessary programs, we are first focused on implementing heat pump water heaters as a pilot leading to a scalable rollout across the city. Each ad-hoc member led a working team focused on three key challenges - technology, financing, and communication. Each team made valuable progress contributing to the proposal presented to Council. By focusing on efforts to implement a key program that reduces GHG from single-family homes, Palo Alto can take concrete steps towards that goal, while we continue to move forward with efforts in grid resilience, transportation, commercial buildings, and other challenges. The ad-hoc believes this focused strategy is required to effect real change and that this pilot will lay the groundwork for the additional building electrification programs that will be needed. The update to the Climate Action Plan represents the best thinking of a large, diverse group of people, including our knowledgeable staff. We are proud of this document and believe it outlines the steps to achieve our goal, and beyond. Additional programs and policies, beyond the hot water heat pump program, are both critical and complex. Staff and the community will need to work together to accomplish these. Future Councils will need to take additional policy actions that range from providing incentives to requiring changes. Finally, the Ad hoc recommends a Council discussion of how to move the climate action policies forward. The current Ad hoc will soon be concluding its work and ongoing Council engagement will be necessary for success. Options include establishing a new ad hoc with a specific focus, forming a Council standing committee, creating a new board or commission to formally include knowledgeable community members, and/or creating a blue-ribbon task force. Lessons Learned, Technical Questions, and Recommendations This memo supplements the 9/27/22 SCAP Staff Report, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2022/20220927/20220927pccsmlinked-updated.pdf, which covers our proposed Reach Code updates, updated SCAP Goals and Key Actions, and the proposed Heat Pump Water Heater Program. The memo summarizes “lessons learned” through the Ad hoc Committee process, identifies questions and prospective actions for further analysis and discussion, and makes recommendations for Council actions that are critical to meeting the City’s 80/30 Goal. Lessons Learned The Council S/CAP Ad hoc Committee, city staff, and community advisors have identified “lessons learned” that will inform our electrification program and the City’s ability to meet its 8030 Climate Goal: 1. Electric Utility system capacity, 2. the value of efficient low-watt home appliances, 3. the relationship of transportation/electric vehicle electrification with building electrification, 4. the importance of proceeding with the electrification of existing commercial buildings and, 5. next goals for the city. 1. Utility System and Capacity. City-wide electricity demand is anticipated to increase two to three times over the next decade upon full electrification, requiring additional renewable commodity purchases, system-wide upgrades to residential transformers, and other Electric Utility infrastructure. ○ State grid capacity. Currently, and in the coming years, the capacity of the State's grid to meet energy use and peak load demands is a major state project as California expands its renewable energy proportion and power demand increases due to statewide electrification. However, additional low-cost, renewable electricity supplies (through Power Purchase Agreements) are available at prices projected to be at or below current portfolio costs (SunShot). ○ Equipment and workforce shortages jeopardize our ability to keep up with utility system investments required for electrification. Currently, supplies are constrained for transformers required to upgrade our in-city capacity. More critically, there is a severe and growing shortage of high-voltage technicians and power-supply engineers, as well as general-purpose electricians. The workforce shortage has grown over the past decade and will become severely more acute in the coming years for all entities pursuing electrification. Currently, ~50% of city power supply engineer positions are unfilled and the need for these specialists will increase significantly due to upcoming electrification throughout the State. A State initiated training program should be adopted as soon as possible to increase workforce capacity. ○ Over-sized, high-wattage home EV chargers stress our utility system. A primary driver of the need for residential capacity/transformer upgrades has been our high adoption rate of home EV chargers, particularly high wattage models (40-50A/240V Level 2). EV manufacturers have promoted fast chargers to reduce “range anxiety” among EV buyers but residents may not need them. We are starting to recognize the negative impacts of those charger sizes on broader electrification goals and need better data on how this is impacting our grid system. Outside experts, our upcoming AMI pilot program, and other utilities that already use Smart Meters, will help us better quantify how much of our grid challenges are due to oversized EV chargers. ○ EV charging should be done during the day when renewable generation is highest and cheapest. Initially, owners were told to charge at home overnight when electricity demand was lower, but the reality is we have excess solar during the day, so from a GHG standpoint, it’s best to charge EVs then. This could be encouraged by adopting time-based electricity rates, expanding city-owned chargers in public places and on city streets, and incentivizing employers to install charging stations at all large parking lots (Washington Post article). ○ Methane has severe GHG impacts during generation and transmission. This is in addition to emissions from burning it. Methane has a 20X greater GHG impact over the next 20 years than CO2 emissions (IEA report). 2. Efficient, low-watt home appliances provide advantages to the city grid, as well as cost and health benefits to consumers. Community education is needed to share this information: ○ Methane (natural gas) in the home is more harmful to health, particularly children, than is widely known. Gas cooking stoves are the primary source of these indoor pollutants (Slate and Stanford news articles). ○ Most Heat Pump Water Heaters (HPWHs) are moderately low wattage and do not cause high enough load demands to trigger system (transformer) upgrades. ○ A pilot program of full-home electrification can proceed in residential locations that have already had or will soon have transformer upgrades. ○ Efficient, low-watt appliances (and more efficient EV chargers) help avoid costly home electric panel upgrades and reduce the need for city-grid upgrades. A watt “diet” calculator is available so you can see how to manage your electric load. ○ Wildfire smoke concurrent with hot weather periods is increasing the adoption of home air conditioners among residents (article). Heat pump furnaces can also serve as air conditioners, improving their cost-effectiveness. 3. EV Charging – The Transportation/Building Nexus o As discussed above, oversized home EV chargers are constraining our ability to electrify homes and expand home EV charging. EV manufacturers and vehicle dealers are recommending powerful 40 to 50 amp/240 volt Level 2 chargers to reduce range anxiety in their customers. This results in unnecessary, costly panel upgrades for homeowners and cumulatively triggers transformer capacity limitations. o Distributed generation and storage of solar energy will have significant benefits on our system infrastructure needs and energy management. Area microgrids will play an increasing role in strengthening our resiliency. In the coming years, energy storage through EV batteries (bi-directional charging) will be broadly integrated with building energy needs and will provide massive energy storage capacity. Our planning needs to include advancements in vehicle and battery capabilities to enable widespread 2-way charging (V2H and V2G) that are likely to have favorable impacts on system capacity, reliability, resiliency, and consumer electricity costs. o EV chargers in commercial locations should match vehicle recharging with optimal hours of energy generation. Our non-residential charger network needs to continue rapid expansion. In addition to the high growth in EVs operated by commuters and residents, EV charging should occur preferentially during the daytime at commercial locations when renewables are most plentiful and electricity cost will be lowest. The city has validated scaling of publicly owned chargers that provide more affordable charging rates than privately owned chargers. City rates currently cover capital (excluding from the transformer to the charger), maintenance, and energy costs. 4. Electrification of Existing Commercial Buildings. Technology advancements in Variable Refrigerant Flow (VRF) and heat pump Rooftop Units (RTU) provide efficient technologies to replace methane-based heating and cooling systems (roof-mounted Gas Packs), https://slipstreaminc.org/blog/state-of-commercial-electrification-hvac-vrf. “Smart building” technologies can improve energy while providing significantly healthier (lower sick leave) “and more comfortable work environments, https://www.epa.gov/report-environment/indoor- air-quality. 5. Goals ○ Carbon Neutrality. Palo Alto leads most cities in GHG reductions but, unlike other agencies, has not committed to a “carbon neutrality” goal. The California Air Resources Board (CARB) has defined carbon reductions and offsets and/or sequestration (preferred) as mechanisms to achieve carbon neutrality. Based on Palo Alto’s leading carbon reduction status and 8030 goal, carbon neutrality by 2030 is consistent with our trendlines. For example, if the city achieves 70% GHG reductions by 2030 and continues to purchase carbon offsets (or sequestration credits) equivalent to what we currently purchase to offset our methane use (32% of our remaining GHGs), we would meet or exceed carbon-neutrality by 2030 (Carbon Neutral Cities organization) ○ Scope 3 Emission Reductions. Future decarbonization accounting is likely to transition to measuring Scope 3 emissions which include upstream and consumption-based emissions. Early actions to reduce or offset our Scope 3 emissions (i.e. use of low carbon construction materials, reduced waste generation, in-city carbon capture, high-value sustainable offsets) are environmentally responsible and will better prepare us to meet future goals. Questions for Near-term Analysis. Informed decision making on future actions will be dependent on filling data and information gaps. The following topics need to be evaluated in the year ahead: a. Smart Meter Data. What data can the city obtain to inform strategic decisions through its initial 1000 Smart Meters (Advanced Meter Infrastructure or AMI) in the coming months or through data from other utilities that have already adopted AMIs? b. Commercial HVAC Systems. What cost-effectiveness studies are needed, such as for the conversion of Gas Packs to commercial heat pump HVAC systems upon end-of-life (EOL) mandates? What portion of commercial HVAC systems are candidates for conversion? What permitting changes are needed to incentivize such conversions? c. Transformer Capacity Issues. What residential electrification actions trigger transformer load-demand studies and transformer upgrades? To what extent do oversized EV chargers play such a role? d. Local Transit Impacts. How much GHGs would be reduced by restoring the city shuttle system? e. Impacts of Future Renewable Contracts. What are the estimated electricity commodity costs to the city from a 2-3X increase in renewable contracts over the coming decade? f. Energy Storage Impacts on Local System Reliability. What are the pros and cons of remote utility-scale batteries associated with city Power Purchase Agreements (PPAs) compared to such batteries at in-city utility sites? Which approach will provide greater reliability and resiliency, and which is more cost-effective? g. CEQA. Which elements of an expanded plan for electrification require CEQA analysis and which can proceed sooner because they are exempt? Future considerations The City’s most immediate project is its innovative conversion to electric Heat Pump Waters Heaters (HPWHs) upon End of Life for low-density housing. That program is intended to be a model for subsequent residential building electrification programs. However, achieving 80 by 30 will require a set of programs that go beyond our HPWH initiative. The following items should be reconciled with the draft 3-Year S/CAP Plan, along with more frequent Reach Code updates in the coming years due to rapidly evolving technologies and needs: ● Commercial Building Electrification. End-of-Life (EOL) conversions for Commercial HVAC systems. Variable Refrigerant Flow (VRF) and heat pump Rooftop Units (RTU) provide efficient technologies to replace methane heating and cooling systems, https://slipstreaminc.org/blog/state-of-commercial-electrification-hvac-vrf ● Home Electrification. o Identify which home electrification actions are triggering costly load studies that cause delays for homeowners and necessitate transformer upgrades. o Plan a full-home electrification pilot for homes that are served by transformers that are already, or soon to be, upgraded in capacity. o Consider the installation of home air-conditioning as a trigger for incentivizing or requiring electrification upgrades. As home A/C is being more adopted due to climate impacts such as wildfire smoke and increased summer temperatures, the value of heat pump HVAC systems (along with air filtration systems) increases due to their ability to provide heating and cooling through one unit. ● EV Charging o Rightsizing. Promote the adoption of low amp Level 2 chargers for homes will mitigate in-city grid capacity constraints that risk hindering building and vehicle electrification programs. The city should initiate education, incentives, and other potential measures. https://www.chargepoint.com/resources/how-choose-home-ev- charger o On-street, city-owned Level 2 charging for multi-family, commercial, and single-family homes lacking garages or driveways will help address equity and expanded EV adoption issues. o Multi-family EV charging. Develop an adoption plan for Multi-Family EV charging. a. A partial solution has been adopted by other cities that have piloted the installation of city-owned on-street Level 2 chargers (including installed from light poles and power pole power) with modest charging rates (lower and more equitable than privately owned chargers) covering capital and maintenance costs. https://electrek.co/2019/11/13/la-adds-hundreds-of-ev-chargers-to- streetlights-giving-renters-a-place-to-plug-in/ o Expand commercial area chargers to accommodate charging with green power during peak generation (lowest cost) time of day. Expanded privately and publicly owned commercial chargers can serve as the backbone of green energy storage during daytime peak renewable generation/lowest cost energy. The city has validated the scaling of publicly owned chargers providing more affordable charging rates than privately owned chargers. City rates currently cover capital (excluding from the transformer to the charger), maintenance, and energy costs. o Pilot on-street (light pole and power pole) Level 2 charging for residences without garages or driveways. ● Smart Systems. o Advanced Metering Infrastructure (AMI) Pilot. Determine the best strategic placement of the CPAU's 1000 Smart Meters pilot in Q4 2022 to determine optimal scenarios and locations for pilot programs. o Determine what program changes are anticipated from a full-scale Smart Meter roll- out. o Evaluate the benefits of Smart Panels and Smart Breakers in reducing panel and transformer upgrades while reducing consumer energy costs through managing the time of use. https://redwoodenergy.net/watt-diet-calculator/ o Look into emerging V2H (vehicle-to-home) and V2G (vehicle-to-grid) technologies to provide for lower consumer energy costs (based on upcoming time-of-use pricing), improve reliability and resilience, and reduce system upgrade needs. ● Microgrids. o Explore the creation of area microgrids for new and existing housing and commercial developments. Virtual microgrids comprised of distributed generation, energy storage at home, and vehicle-to-grid technology (V2G) can offer flexibility to our overall electrical system. ● Climate Impact Mitigations. Analyze the economic and social effects of mitigating climate impacts: o Wildfire Risks. Evaluate the public safety, public health, ecological impacts, GHG emissions, flood protection impacts, and the private, business, and city infrastructure costs from local large-scale wildfires. o Sea level rise based on the latest scientific estimates, including elevated groundwater impacts. o Riverine flood risk increases from more severe storm events/storm surges in the bay, combined with sea level rise and wildfire impact on watersheds. ● Leveraging Resources. o Officially recognize community climate partners, including the Palo Alto Student Climate Coalition (PASCC), Palo Alto 350.org, Acterra, Stanford University, and others. Future Evaluations ▪ Additional renewable supplies. Plan for and implement PPA contracts to meet projected increases in demand from electrification. ▪ Identify which carbon draw-down methods and measures to reduce carbon from consumption would be most effective. ▪ Plan for the future role of distributed generation and storage on grid resilience. Evaluate the role of local solar generation paired with battery storage (in households and larger microgrids) in grid reliability and capacity needs, including the impacts of 2-way EV charging. Proposed Council Actions o 2030 Carbon Neutrality Goal based on CARB definitions of a combination of carbon reductions with carbon offsets or sequestration. o Legislative Advocacy a. Electrification Workforce Development. Advocate for a statewide program to address the critical shortage of high voltage line workers, and power supply engineers. o High-Efficiency Commercial Rooftop (RTU) HVAC Electrification Upon End of Life (EOL). Evaluate cost-effectiveness, including through leveraging of outside experts, followed by a plan for conversion to electric systems upon EOL. o EV Charger Expansion in Response to Growing Demand, Environmental, and Equity Goals. Develop programs to meet projected demand for chargers, including multi-family housing, and for charging at commercial locations. o Rightsizing of Home EV Chargers to Enable Home Electrification. Develop a plan to promote rightsized chargers through consumer education, permit streamlining, reduced permit costs, and other measures. o Decide how Council will manage this work going forward. Choose a structure and commit to educating the city about the changes that will need to be made.