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How New York City plans to end natural gas, oil use in buildings

New York City's path to limiting natural gas in buildings could look very different than the course that California towns and cities have charted — and, as a result, could go farther than other measures already in the works.

Mayor Bill de Blasio recently announced his administration will aim to end the use of natural gas and fuel oil in buildings by 2040, following a wave of gas bans and building electrification codes in California, the Boston area and Seattle. The announcement on Feb. 6 signaled that the nation's most populous city could soon set about electrifying a portion of its more than 1 million buildings.

"One of the reasons why the mayor is so strongly stating this kind of goal in the State of the City is that we have to take very comprehensive action," Mark Chambers, director of the mayor's Office of Sustainability, said. "And so I think that we are very committed to being more aggressive, more thoughtful and intentional ... and moving forward as quickly as possible because the urgency of the climate crisis demands it."

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"We have to be ready to commit ourselves to strand those fossil fuels in the Earth, in the ground, once and forever, where they belong," Mayor Bill de Blasio said during his annual State of the City address.
Source: New York City mayor's office

City officials do not envision a swift prohibition on gas hookups in new buildings as Berkeley, Calif., pioneered, and instead are considering building on previous legislation and existing city programs in ways that could create a new template for other cities. The transition would likely challenge Consolidated Edison Inc. and National Grid USA to accelerate plans to evolve their local gas distribution companies' New York operations.

New York City not just following the California model

The de Blasio plan is short on details for now as the administration embarks on the earliest stages of shaping the policy, Chambers told S&P Global Market Intelligence.

To date, the administration has said its goal is to stop using gas and other fossil fuels in "large building systems" by 2040. It also said it would start with government buildings and work with City Council to "ensure new permits for building systems are aligned with our goal of carbon neutrality by 2050."

That language would seem to indicate the city is at least contemplating the California model: deny building permits to new buildings or renovations that include gas hookups, or else use the permitting process to incentivize all-electric systems.

While Chambers said he would not take that approach off the table, he does not expect the process to play out like it did in Berkeley, where a gas ban ordinance passed in July 2019 was implemented in January.

New York experiences much colder winters than California, so moving away from gas is not as simple as importing the Berkeley model, he said. But also that model is not consistent with the reality of the New York City's energy supply, he added.

Natural gas-fired power plants generated nearly two-fifths of New York state's electric power in 2018, according to the U.S. Energy Information Administration. Chambers confirmed the administration does not want stop piping gas into buildings, only to burn it in power plants to feed electric heating systems.

Why target 2040

The administration's 2040 deadline aligns with the state's goal of moving to 100% emissions-free power by the same year. But more relevant in the near term, Chambers said, attaching a date to the policy sends a market signal to building owners. It tells them they should begin to plan their next capital cycle with the policy in mind.

That thinking also underpinned a proposal in Bellingham, Wash., where policymakers found the average heating system lasts 20 years. They proposed requiring homeowners and building managers to swap out fossil fuel boilers for electric systems by 2040.

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The New York mayor's proposed gas phase-out is also meant to work in tandem with a 2019 energy efficiency retrofit law championed by City Councilman Costa Constantinides and Speaker Corey Johnson. The law requires large buildings to meet new greenhouse gas emissions standards, but gives owners flexibility to reduce their emissions. As the compliance date nears, Chambers believes the law will force building owners to consider how internal systems like boilers can help them hit their targets.

Existing programs — such as NYC Retrofit Accelerator — can help speed the process by providing technical assistance to building owners and connecting them to incentives, he said. And the city has identified some regulatory levers, including city oversight of certain types of boilers, primarily in large buildings, Chambers added. Before pulling those levers, however, the mayor's office will have to marshal support in City Council.

Challenges abound

The energy proposals in de Blasio's State of the City address were a "wish list," according to Doug Muzzio, a professor of political science at Baruch College who specializes in city and state politics. He noted they are decadeslong policies and de Blasio is a lame duck mayor.

"The mayor's proposal, in fact, may be dead on arrival on the desk of the new mayor on Jan. 1, 2022. Many of these proposals will generate opposition from influential NYC political players" including the powerful real estate lobby, Muzzio said in an email. Some will also need state support, and de Blasio has a rocky relationship with Gov. Andrew Cuomo, Muzzio added.

The New York Department of Public Services, the state utility regulator, is looking into the plans.

On the policy front, requiring all-electric systems in new buildings may simply boil down to changing the building code, and that is well within the city's authority, according to Richard Berkley, executive director of the Public Utility Law Project, a consumer advocacy group.

However, a mandate to retrofit existing buildings could quickly become an expensive prospect, may also raise questions about state authority and would require an expanded commitment to keep rates affordable for low-income ratepayers, he said.

Managing the policy shift could require rebuilding significant portions of the grid, which is currently designed for peak use in the summer, he said. Regulators might have to approve higher rate increases to fund utility investments like geothermal projects and heat pump incentives. And utilities would still be allowed to continue depreciating the cost of gas distribution systems, even as they became less essential, Berkley added.

"Think of it all as an extremely complicated machine with thousands upon thousands of very expensive moving parts, all of which have to be adjusted towards the end goal, following very intricate project plans with all sorts of independent variables, and all kinds of stuff all lining up side by side — and having to be managed the whole way," he said.

Path from vision to reality must go through City Council

The next steps for turning the policy plan into action would be to collect expert testimony in hearings and engage stakeholders, including ratepayers, real estate developers and utilities, Chambers said, although he noted that the administration does not yet have a partner for the policy in the council. The council process would be geared toward identifying which parts of the city's building stock are most capable of shifting away from gas and where the most immediate benefits could be achieved through electrification.

The de Blasio plan did contain at least one specific policy priority: Start by getting gas out of city-owned buildings.

"City buildings have the ability to set an example and to showcase what's possible, so he was very serious when he said that municipal buildings will go first," Chambers said.

As for Constantinides, asked whether he would work with City Hall toward the goal, he said he is committed to engaging all stakeholders to reduce the city's reliance on "out-dated energy sources."

"The City Council has been strongly committed to creating a 100-percent renewable energy grid in New York City, because we are long overdue to rid the Big Apple of fossil fuels," he said. "We have spent the last six years working to eliminate our reliance on natural gas — whether through the renewable energy demands we created under the Climate Mobilization Act or blocking the Williams Pipeline — as soon as possible."