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HomeMy WebLinkAbout2025-10-17 Climate Action and Sustainability Committee Summary MinutesCLIMATE ACTION & SUSTAINABILITY COMMITTEE SUMMARY MINUTES Page 1 of 7 Special Meeting October 17, 2025 The Climate Action & Sustainability Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 2:01 PM Present In-Person: Veenker (Chair), Burt, Lu Present Remotely: None Absent: None Call to Order Chair Veenker called the meeting to order. The clerk called roll and declared a quorum. Public Comments No Public Comments Standing Verbal Reports A. Staff Comments Brad Eggleston, Director Public Works, reported the City launched new permit fee rebates on October 13. Development Services launched an instant permit process for heat pump space conditioning systems the week before. Staff is planning the first heat pump happy hour on Thursday, October 23, from 4:30 to 6:30 PM in the breezeway between the Mitchell Park Library and the Community Center. Acterra's annual Green@Home tour will be Saturday, November 8, from 11 AM to 4 PM. Registration is at acterra.org. The draft plan for the 2026 Bicycle and Pedestrian Transportation Plan update is out and available for public comment through November 14 at paloalto.gov/bikepedplan. Councilmember Burt asked Staff to look into the solar permitting fees for solar installations outside of Solar Plus and wanted to make sure the group is engaged with the Staff and consultants coming up with regulations regarding radiant heating rather than propane heating for semi-permanent outdoor structures. Director Eggleston indicated both items would be looked into. SUMMARY MINUTES Page 2 of 7 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 10/17/2025 B. Committee Member Comments and Announcements Chair Veenker lifted up single use utensils in restaurants in the City for potential future discussion. Communication was received from a group that works on this type of issue who were under the impression that it had been a prior plan of the CASC and needed more progress. Director Eggleston had seen that communication and it could be discussed in the context of the next work plan. Chair Veenker mentioned the next week would be the monthly commission meeting and executive committee meeting. The agendas are online and available. The Air District was invited by the director of the Port of Redwood City to take a tour the day before. The Blue Whales and Blue Skies Act passed the state legislature. The Policy Committee recommended to the Board to relax some of the cost efficiency standards for the Transportation Fund for Clean Air. There will be a report about possible amendments revisions to the appliance rules by the end of the month. There will be opportunity for public input. The chair will accompany a delegation from the Air District to the C40 Conference and the United Nations Climate Conference in Belem, Brazil. Agenda Items 1. Recommendation to the City Council to Approve the Advanced Commercial Heat Pump HVAC Program Design Guidelines; CEQA Status – Categorically Exempt Under CEQA Guidelines Section 153021 (Replacement of Existing Facilities), Replacement of Existing Rooftop HVAC Units with Heat Pumps is Categorically Exempt Shelby Sinkler, Sustainability Programs Administrator, provided a slide presentation including an agenda, Commercial Heat Pump HVAC Pilot results, Advanced Heat Pump HVAC program, customer engagement, electrification technical assistance, potential contractor resources, streamline permitting process, possible financing and incentive options, Working Group feedback, and Staff recommendations. Councilmember Lu wanted to know about existing users. Ms. Sinkler responded there is one daycare preschool center and two small office buildings completed projects. There is a larger office building project, a few bank-based facilities, and other small office buildings in the pipeline. Hiromi Kelty, Manager of Utility Program Services, added the equipment tends to be for smaller buildings so they are not seen at commercial and industrial sites or at hospitals. Councilmember Lu asked if that is intentional. Ms. Kelty answered larger buildings tend to have different types of equipment. These heat pump HVAC systems are usually five-ton systems. Public Works is working on a program with the new community center on Bryant. Director Eggleston added there are seven rooftop units of five to seven-ton capacity each. The larger buildings and campuses tend to have chillers, chilled water loops, boilers, and hot water loops that send hot and cold liquids to units that do the heat and cold transfer. Councilmember Lu had questions about types of users. Ms. Sinkler gave a customer example where the quotes were relatively the same because they already had the infrastructure. It was not a rooftop unit and there were already enclosures on the ground. It was just a unit swap out so the cost differential was not as great. An opposite situation where it was much higher was the daycare center where they had to do quite a bit. The cost is unique to each project. Jonathan Abendschein, Assistant Director Sustainability Climate Action, added there were situations where there might need to be some remediation of the gas system or additional work that replacing the unit like for like would incur that would make electrical easier. SUMMARY MINUTES Page 3 of 7 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 10/17/2025 Councilmember Lu asked about threats so far in permit streamlining and simplifying or skipping some of the permits. Ms. Sinkler responded the permits are all in place for a reason and cannot be skipped. Efforts made to streamline the process were described. Assistant Director Abendschein stated added there are trade-offs the community makes between different policy needs. There might be policy questions to be brought forward. A lot of progress has been made on educational materials for this. Councilmember Lu had thoughts about noise level studies and fire department permits. Assistant Director Abendschein said noise changes were made for residential scale but the swound studies are still required for the commercial scale. Those are the types of ideas that will be discussed with the Planning and Development Services team. Councilmember Lu asked how different the commercial scale would be from a totally energy consumption perspective compared to a 5000 square foot single family home. Ms. Sinkler replied these units are larger with a loud humming noise. In terms of the noise analysis, customers in other cities can submit the spec sheets with the decimal levels and distance from edge of the property but in Palo Alto it is ambient noise levels that have to be tested. There are different scenarios that create different levels when the system is running altogether. The tests require 24 to 48 hours of engineers' time which is the reason for adding costs for customers. Director Eggleston added from the perspective of managing facilities, oftentimes the HVAC equipment has requirements to be running more often to have fresh air circulation and changeout in ways a single family home system typically does not. Ms. Kelty pointed out the rules for permitting are the same whether swapping out gas for gas or gas to electric. A lot of properties do not get a permit when they are going gas for gas. That is why there is so much attention to permitting when it comes to going electric. Chair Veenker asked how much the heat pump HVACs add on. Ms. Sinkler replied it depends on the contractor and their capabilities. Ms. Kelty added the more businesses want to install heat pump HVAC, the contractors and customers will be more educated to know the correct price range. Chair Veenker asked if more standard pricing is beginning to settle in. Assistant Director Abendschein replied a lot of clustering in pricing is being seen with the rebate program and more water heaters are coming in through the rebate program. Chair Veenker wanted to know about the development of a courtesy contractor list and the challenges. Assistant Director Abendschein stated courtesy lists are provided of contractors who have done work in Palo Alto. The list has been managed to some extent if they have done unpermitted work or things like that. Another form of contractor onboarding is when they become trained to work with a particular financing program. Staff might be able to provide additional training and information on permitting and services where contractors can have a contact if they run into regular issues with one particular part of the permitting process. Those contacts will give the opportunity to iron out those issues as they come up. Planning and Development Services has a point of contact on projects. It is a single point of contact for contractors more broadly across various projects. Chair Veenker queried if a contractor who installs both heat pump and non-heat pump HVACs tend to make more money if it is a heat pump. Ms. Sinkler answered overall they make more money because the labor and material is higher. Chair Veenker wondered how to build in incentives to steer someone away from heat pumps or at least make them aware of the benefits. Ms. Sinkler indicated when the small and medium business programs first launched, outreach to contractors was attempted to get feedback on incentives for contractors but it was difficult to reach them. Assistant Director Abendschein said the model has been used where the incentive for the equipment is directly paid to the contractor under certain circumstances. It is possible to pay the rebate to the contractor so it shows up on the SUMMARY MINUTES Page 4 of 7 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 10/17/2025 invoice. There is also another model paying an incentive for the contract that just goes to the contractor for bringing in business. It can be considered as an option as the program is finalized. Chair Veenker asked if there is any sense of what proportion of commercial buildings might use the program. Ms. Sinkler replied it would be a vast majority. In the small and medium building sector, most have package units or something like a mini-split. Larger hotels and hospitals tend to have boilers and chillers. Assistant Director Abendschein added there has been preliminary information from the building sector studies estimating it to be 60 to 70 percent. It does not necessarily mean it is 60 to 70 percent of gas use because it is typically on smaller buildings. Councilmember Burt asked if Staff is actively scouting for people to learn from or share information with. Ms. Sinkler has met with people from Sacramento Municipal Utility District. They had an increase in commercial heat pump HVAC installations in the last couple years due to having a training program for contractors. The contractors tend to promote it more. There is a DOE study on nationwide commercial heat pump HVAC through Pacific Northwest National Lab. Councilmember Burt wanted to learn more about incentivizing the contractors. Councilmember Burt recalled an assertion that the incentives were not being passed on from the contractors. Assistant Director Abendschein said this comes up in the context of incentives, especially those that are generally available. Rises in prices are seen during times when there are hedge incentives coming from the state. Staff is looking for other designs other than incentives. Councilmember Burt inquired if information is collected through discussions with adopters or a particular survey filled out in exchange for the subsidy. Ms. Sinkler responded everything has been through multiple interviews with adopters. When a certain pain point comes up, a list of questions is created to ask all of them. Ms. Kelty added it is made clear on enrollment in the program that the program is a pilot so there are a lot of requirements and questions asked. Councilmember Burt asked about cost trend data. Ms. Kelty responded pricing from a pilot Peninsula Clean Energy had was reviewed. Across the board, prices have gone up for equipment as well as installation but those numbers were from two or three years ago. Councilmember Burt was interested in increasing fines for violating requirements to have permits as a way to get compliance, suggested looking at ways to reduce the ambient noise issues and incentivize the program more, and asked how word was getting out to everybody. Ms. Sinkler replied a bill insert was sent out though that is hard to reach some of the commercial customers because oftentimes those go to a third party billing agency. There is a small business newsletter that goes out to about 4000 people every other month. It has been posted on social media. Most of the enrollments in the pilot have come through the business electrification technical assistance program. The vendor has helped with marketing to those customers who had heat pump HVAC as a measure on their assessment report. Assistant Director Abendschein added they are in the midst of an RFP to update the commercial program operators looking for people to provide them with contact lists using available public data and looking at what public data is available and seeing what can be done with that in house. Councilmember Burt talked about the cost differential between building owners and the occupants. Assistant Director Abendschein said that is where the contact info issue comes in. The contact info had is for the tenants, a bill pay service, or a manager. Pulling from other data sources to get owner information is an important next step. As far as the landlord tenant split incentive, Staff is trying to look SUMMARY MINUTES Page 5 of 7 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 10/17/2025 at designs that will be more scalable but also may enable the owner to pass on the longer term cost of repaying the financing through to the tenants with the right agreements. Councilmember Burt talked about the Business System Sustainability Advisory Council. Chair Veenker echoed Councilmember Burt's comments. Ms. Kelty will be attending a chamber happy hour and will present on the commercial programs. In the past, there was not a sense that the people in attendance were very sustainability focused or green minded. Chair Veenker thought it would be interesting to pool collective interaction with businesses. Councilmember Burt agreed bringing people together for discussions would be advantageous. Ms. Kelty wanted to see that kind of thing grow in the City. Chair Veenker suggested looking at incorporating some of that into the work plans for the next couple years. Chair Veenker asked if Staff is in touch with San Jose. Assistant Director Abendschein answered they do talk with San Jose. Chair Veenker was intrigued with increasing fines to get compliance but wanted to know how to deal with it now. Assistant Director Abendschein said typically fees are set up to apply on a daily basis and can accumulate quickly for a long-term violation. That gives enforcement officers leeway to set the fine that gets action on what is being enforced. Item 1 Public Comment No Public Comment MOTION: Council Member Lu moved, seconded by Council Member Burt that the Climate Action and Sustainability Committee (CASC) recommend the City Council adopt Design Guidelines for the Advanced Commercial Heat Pump HVAC Program. MOTION PASSED: 3-0 2. Discussion of Preliminary Analysis of the Infrastructure Impacts Associated with Gas Decommissioning; CEQA Status - Not a Project Assistant Director Abendschein provided a slide presentation including a background, study goals, study outputs, overview of study progress, electrification scenarios to model, preliminary result: estimated equipment population, preliminary result: cost categories and drivers, preliminary result: mains eligible for abandonment, working group feedback, and next steps. Item 2 Public Comment 1. David C. spoke about transferring from the utilities to the general fund and block level and individual transition. He indicated permitting is too complex and that is why people do not do it. 2. Stephen R. indicated making electricity more abundant and cheaper would catalyze the elimination of gas. SUMMARY MINUTES Page 6 of 7 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 10/17/2025 Councilmember Burt agreed the cost increases are not proportionate to the use reductions because of the minority of the cost being the fixed cost of the system and was interested if there would be a tipping point as the costs of gas go up in relation to electricity. Assistant Director Abendschein stated this is not something the study is addressing. As programs are designed, they look at the extent to which gas savings from installing electric equipment will exceed the additional costs of electricity incurred from putting in electric equipment. It depends on the type of equipment and usage patterns. There are cases where significant savings is seen. Savings is seen with most equipment. It is a question of whether the savings outweigh the amortized cost up from incremental upfront cost of the equipment. Councilmember Burt talked about rising gas costs accelerating electrification. Assistant Director Abendschein thought if gas prices rise faster than electric prices then electrification would become more cost effective. This study is to identify what revenue would be needed to operate the gas utility safely and affordably for gas rates that are following the general trajectory they have now without large levels of electrification model. The extent to which a source is found to bring revenue into the gas utility, there will be different dynamics on changes in gas rates related to electrification depending on how much revenue is brought into the gas utility to keep it running. Councilmember Burt was interested in geo mapping and if there are opportunities for capping off lines in multifamily. Assistant Director Abendschein indicated the amount of electric equipment seen in multifamily now mostly comes from the economics of building multifamily housing where it made more sense to put electricity in. If there are areas where there is a lot of electric heating and one central gas boiler, those may be locations where it is easier to fully electrify the building and that could result in potential disconnection. Those are the sorts of opportunities to look for. Councilmember Burt observed the transformation will be tougher than assumed. Councilmember Lu asked about the gap in units in the data sets. Assistant Director Abendschein responded a lot of it has to do with sites where there was trouble matching the utility usage data to an assessor parcel. More involved data cleaning is needed to get a better match. Councilmember Lu asked if there was any reason for the other units to be biased or off. Assistant Director Abendschein said there is no reason to believe that but it cannot be ruled out. Councilmember Lu was curious about the 40 percent fixed cost, different rate designs, how it affects bottom line prices for gas users, and suggested an analysis. Assistant Director Abendschein replied the fixed cost gets deep into cost allocation and rate design. It can be taken as a comment or question and kept in mind as the study continues. Councilmember Lu wanted comment about the different ways to decommission or disconnect someone from a past line. Alan Kurotori, Director Utilities, explained there are gas services that go to individual homes. In terms of having a gas line capped at the home, it would be brought back to the main and capped there. There would be no gas service going through to a parcel not being served. The finding in this gas transition study meant looking at the most effective way of transitioning not only in a cost effective manner but looking at mains for neighborhoods. That has come up on several occasions with the S/CAP group and UAC. It was noted that this is a financial model and does not have every piece in SUMMARY MINUTES Page 7 of 7 Climate Action & Sustainability Committee Special Meeting Summary Minutes: 10/17/2025 there. The gas distribution model has been updated. One of the next phases will be taking a look at some of that analysis and running through the engineering analysis. There will be looks at the rate design in terms of how those fixed costs are attributed. The safety reason for capping at the main is to not have an active line. There are funds available for residents that electrify the homes. That cost would be borne by some of the other restrictive reserves and would not be a cost to the resident as part of their site and commitment to electrify the home. Assistant Director Abendschein a large statistic is that a large fraction of gaslets come from dig-ins on peoples' property. Director Kurotori added if the gas meter is gone, they would have to have sniffers to determine if there are leaks. Chair Veenker asked if it is not unusual in other cities to cap it at the main. Director Kurotori confirmed that is typical for gas and water lines. Chair Veenker wanted to confirm the cost is not greater to cap it at the main which Director Kurotori confirmed. Chair Veenker asked if the single family and multifamily percent electric means they are at scenario one. Assistant Director Abendschein answered they are not at scenario one. Those buildings have had electricity for decades. The gas they are trying to reduce is the gas from 50 to 60 percent gas penetration in multifamily buildings. Chair Veenker asked if it would make sense more heavily subsidize the holdouts when they have sufficiently achieved diminished gas use amongst residents. Assistant Director Abendschein thought generally approaching things from a voluntary and incentive-based approach is better received. MOTION: No Action Taken Future Meetings and Agendas Director Eggleston stated there is a regular meeting scheduled for November 14. Staff is looking for potential times to reschedule that to the following week if possible. That is still to be determined. Topics for that meeting are reliability and resiliency strategic plan, cost benefit results, and program ideas which will also go to City Council as an action item in December. A status update on S/CAP mobility goals and key actions as well as some review and feedback on the tentative mobility items for the 2026 through 2027 work plan are being planned. In addition to the regularly scheduled December 12 meeting, there is a December 13 special meeting being planned that will also serve as a community workshop on residential electrification progress and strategies. The goal of that is to have some in-depth discussions as the next two-year work plan is finalized. The agenda and activities are still under development. Adjournment: The meeting was adjourned at 4:03 PM