Report: Leading the way in San José

It was my honor to serve alongside experts from around the United States to deliver this ULI Advisory Services report for the City of San José, which was just released.

As the report writer and confessed electrification wonk, I may be biased, but I think this document is rich with valuable recommendations for any city wanting to support the electrification of existing multifamily buildings and the uptake of solar and batteries as we transition to a clean energy economy.

This report looks specifically at multifamily housing. With the entire region facing an acute housing supply and affordability crisis, the recommendations center equitable outcomes and action. That said, the key recommendations below are applicable to most building types.

California is on the forefront of the building electrification movement to get off fossil gas to protect our climate and our health. San José was one of the first cities in the US to ban the use of gas in new buildings by requiring them to go all-electric. Now the City is poised to take on the even bigger challenge of electrifying existing buildings.

As the 10th largest city in the US, San José has a huge opportunity to influence other cities as they look at how to get this done. This is an emerging policy area and there are some innovative recommendations in the report that I have yet to see in other places.

This list was hard to narrow down, but here are my top takeaways from the report on what California cities can do to directly support the building and construction industry in electrifying existing buildings:

-       Allow projects to meet the new statewide solar and battery requirements by subsidizing solar and batteries offsite in existing low-income multifamily buildings. This would give more people access to benefits of solar and batteries, like lower energy bills, sooner.

-       Offer noncash incentives like density bonuses and expedited permits for full electrification retrofits. Time is money and more space is money.

-       Allow flexibility in permitting for electrification retrofits around design features such as height requirements, roof screens, and setbacks. This whole electrification thing is new and requires new solutions – we have no time to waste and need to be creative.

-       Collaborate with PG&E (the utility) to accelerate the upgrading of transformers to support increased electrification. We heard from stakeholders that delays in transformer upgrades were delaying projects by several months.

-       Offer grants and financing for pre-development engineering costs for affordable housing developers as this work is often hard to finance. We are in uncharted territory and in this early stage, financial support to solve tricky design issues will benefit the entire industry.

San José has its own electricity retailer, known in California as a Community Choice Aggregator (CCA), with ambitious goals to decarbonize the city’s electricity supply. Solar and batteries throughout our built environment will critical to meeting our climate goals and making our cities and electricity grid more resilient.

This report has recommendations for San José that should be considered by any city with its own municipal utility or CCA:

-       Consider operating a virtual power plant (VPP) to unlock opportunities for building owners of all sizes to participate in the financial benefits of batteries. San José Clean Energy has the opportunity to be a first mover and swoop in before private VPPs do and take the financial opportunity with them.

-       Foster the uptake of microgrids at the neighborhood scale to improve the city’s resilience. There are both operational and ownership models that can be used to encourage the private sector to fund the capital costs for microgrids in their development projects.

-       Buy power from buildings with batteries through a micro PPA model, allowing developers and owners to include this contracted revenue on their pro formas. This guaranteed income can improve cap rates and help get a project over the line financially.

The report also has numerous recommendations that don’t directly benefit the building industry but which are critical to equitable electrification. For instance, San José could subsidize public EV charging stations in lower income neighborhoods that currently don’t have any public chargers.

Of course, I recommend you read the full report, which you can find on the ULI San Francisco website.

You can also contact me with me with your questions or bits of wisdom.