The future of land development in California is NOT business as usual
by Judi Schweitzer
The good news is there are tremendous opportunities up and down the supply chain of land development; the bad news is there are significant “knowledge gaps” throughout the life-cycle of land development today. With the California Energy Commission (CEC) announcement on May 9, 2018 that all new residential dwellings will be required to include an installed solar photovoltaic (PV) electric system starting January 1, 2020, the current “knowledge gaps” will be illuminated.
There is a lack of awareness and technical expertise with respect to creating cost-effective net zero energy communities. This knowledge gap was reinforced by a recent assignment Schweitzer & Associates did for Pacific Gas and Electric Company (PG&E) to explore Long-Range Services for Zero Net Energy (ZNE) Developments.
Schweitzer & Associates was hired to engage and facilitate a multi-stakeholder discussion to better understand what the IOU (Investor Owned Utility: PG&E, SCE, SDG&E, SCG) can do to assist new residential developments achieve California’s “Big Bold” ZNE Goals by 2020. We facilitated a daylong workshop, wherein we discussed: the current state of Land Development Today (June 27, 2016); Opportunities & Challenges Getting Ready for ZNE; and solutions for a “Preferred Future 2020.”
The conclusions and recommendations that resulted were palpable. The lack of understanding, and misunderstandings, of the costs and pathway to ZNE are real barriers. Common themes of these barriers to achieving cost-effective ZNE developments included: the lack of market recognition of the short- and long-term “value” of ZNE, such as in appraisals and property valuation; perceived associated higher costs; uncertainty and risks; and the current disconnect between ZNE and low carbon communities.
The top priorities identified in the workshop and through discussions with other industry experts included: Education, Carbon as Currency, Early Intervention, Partnerships, Alternative Financing, and more.
Internal (within PG&E/IOU) and external (Public and Private Sector) stakeholder education is a significant gap and opportunity throughout the life cycle of land development with key stakeholders. The lack of understanding, and misunderstandings, of the costs and pathway to ZNE are real barriers.
Common themes of these barriers to achieving cost-effective ZNE developments include the lack of market recognition of the short- and long-term “value” of ZNE (such as in appraisals and property valuation), perceived associated higher costs, uncertainty and risks (which are deterrents for investors and developers), and the current disconnect between ZNE and low carbon communities.
Net Zero — Carbon as “Currency”
It would be advantageous to shift the conversation from just ZNE to carbon (CO2) neutrality in order to have a common metric that also ties “Net Zero” to AB32, SB375 and other Executive Orders, keeping consistent with the California Climate Change Scoping Plan.
Early Intervention, Technical Assistance
Early intervention of performance-based technical assistance is desirable, utilizing ZNE/Net Zero toolkits, best practice checklists, and “good, better, best” design guidelines and development standards for various types of communities (infill, greenfield, mixed-use) and building typologies (low-rise residential, high-rise residential, non-residential, community centers) for new construction and retrofits. These solution sets could include options and design feature recommendations build upon prior guidelines, such as the Liberty Lighting Guideline for Zero-Net Energy Communities.
Partnering with public sector, private sector, and NGO sector stakeholders are a means to effectively reach numerous land development stakeholder groups and reduce program costs to the IOU.
In order to bridge the “split incentive dilemma”, the PG&E has an opportunity to advance ZNE/Net Zero developments by providing alternative financing solutions and expanding on-bill financing as part of its long-range services.
PG&E could also play a role in “climate financing” by functioning as a financing entity with attractive on-bill financing and/or working with financial institutions to develop new climate financing instruments to help stimulate investment in ZNE and carbon neutrality.
In order to refine program implementation plan specifics, a series of follow up “deep dive roundtables” are recommended to flush out specific needs, desired approaches for implementation, and identification for performance targets for measuring success with a minimum of the following stakeholder groups:
• Financial institutions, investors & equity lenders
• Community developers & property managers
• Regional & local public works and planning department representatives
The results of these roundtable workshops could then be incorporated into a program implementation plan (PIP) for a longer-term IOU program, preferably as a multi-cycle program with an integrated design approach which will engage stakeholders early in the entitlement and land planning processes. We have developed multiple strategies that can now be implemented on behalf of our clients in order to navigate the challenges faced in California.
Back to Today
In order to remain cost effective, California’s new mandates were developed using Life Cycle Cost (LCC) Methodology, which included discounted cash flows for costs and benefits (30 years for residential measures, 15 years for nonresidential measures) using a Time Dependent Valuation (TDV) definition of ZNE. Simply put, the value of gas and electricity is based on time of day and season, favoring reduced energy use during high demand periods.
As with prior Title 24, Part 6 Energy Codes, there will be Performance and Prescriptive Paths for compliance. However, the CEC has moved away from the prior Home Energy Rating Score (HERS) to a more flexible Energy Design Rating (EDR) for compliance.
The energy budget for newly constructed residential low-rise dwellings is based on their EDR, which is based on TDV energy. EDR has two components: Energy Efficiency Design Rating, and Solar Electric Generation and Demand Flexibility Design Rating. The Solar Electric Generation and Demand Flexibility Design rating is subtracted from the Energy Efficiency Design rating to determine the EDR.
The size of the required solar PV system, then, will depend on the location of your project and its relative climate zone. This new compliance tool also includes credit for solar PV, battery storage, plug load management, and includes a calibration for CO2 emissions.
However, California’s 2019 Residential Building Energy Efficiency lists exceptions for, “community shared solar electric generation system, or other renewable electric generation system, and/or community shared battery storage system, which provides dedicated power, utility energy reduction credits, or payments for energy bill reductions, to the permitted building and is approved by the Energy Commission as specified in Title 24, Part 1, Section 10-115, may offset part or all of the solar electric generation system Energy Design Rating required to comply with the Standards, as calculated according to methods established by the Commission in the Residential ACM.”
Schweitzer & Associates has developed the tools and expertise that clearly determine the opportunities and constraints that challenge land developments in California, and has developed specific strategies to maximize the triple bottom line for ZNE challenges that may be industry “pain points.”
Judi G. Schweitzer MRED, AMDP, CALGreen CAC, is a four-time Governor Appointee to the California Green Building Standards Code Advisory Committee. Ms. Schweitzer represents landowners, Cities/ Counties, Universities, investors, and builders as Founder and Chief Sustainability Advisor at Schweitzer & Associates. She is Vice-Chair of the Sustainable Development Council of Urban Land Institute, and currently teaches Sustainability II at UC Irvine. She can be reached at email@example.com
For more information you can also visit www.schweitzer-associates.com