latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/san-jose-calif-adopts-citywide-building-gas-ban-61758315 content esgSubNav
In This List

San Jose, Calif., adopts citywide building gas ban


The Big Picture: 2024 Energy Transition Industry Outlook

Case Study

An Oil and Gas Company's Roadmap for Strategic Insights in a Quickly Evolving Regulatory Landscape


Essential IR Insights Newsletter Fall - 2023


Cleantech Edge: Private energy transition capital stages subdued summer rebound

San Jose, Calif., adopts citywide building gas ban

San Jose, Calif., will ban natural gas use in most new construction, becoming the largest U.S. municipality to adopt a citywide building electrification requirement to combat climate change.

The San Jose City Council voted unanimously on Dec. 15 to expand a 2019 ordinance prohibiting gas infrastructure in new single-family homes and low-rise residences to all construction. The vote followed substantial debate over trade-offs that seek to safeguard the local economy and labor force as the region grapples with a business downturn spurred by the COVID-19 pandemic and periodic, widespread power outages.

As California's third-most populous city and a building electrification leader, San Jose stands to influence other local governments as they adopt or expand building gas bans. Roughly 40 Golden State communities have adopted building gas use restrictions. The San Jose ordinance follows the Berkeley, Calif., model, which prohibits city building officials from permitting construction that includes gas piping in order to protect public health and safety.

SNL Image

It includes carve-outs that have become standard: a hardship exemption for cases in which developers can prove that all-electric construction is infeasible, a blanket exception for hospitals and limited exemptions for restaurants and industrial facilities through the end of 2022.

Exemption draws backlash

A last-minute exemption for facilities that use natural gas-powered fuel cells sparked backlash from environmentalists and forced a two-week delay to the ordinance's approval. The conflict spoke to the challenge of relying on electrification to reduce long-term greenhouse gas emissions at a time when PG&E Corp. is expected to continue suspending electricity service to prevent wildfires.

"I think it's important that whatever we do, we recognize that we are pushing folks toward an electric grid that is not reliable and not dependable," Mayor Sam Liccardo said during a Dec. 1 city council meeting. "We hope all that changes in the years ahead, but PG&E is many years and tens of billions of dollars away from fixing its problems."

City staff introduced the exemption on Nov. 16 after San Jose-based fuel cell maker Bloom Energy Corp. raised concerns just before the scheduled Nov. 17 vote. Bloom said the ordinance could prevent the company from selling its fuel cells, which allow customers to generate baseload power on site.

Environmentalists urged lawmakers to reject the fuel cell exemption, arguing that city staff should take more time to analyze its climate impact. Bloom fuel cells run continuously, unlike backup diesel generators that run during blackouts, so companies that use the fuel cells would have a higher emissions profile than those that draw power from the grid, opponents noted. They also raised doubts over claims by Bloom and its supporters that the gas grid can eventually be converted to transport low-carbon alternatives such as renewable natural gas and green hydrogen.

An analysis by city staff estimated that the fuel cells would emit 6.5 times more greenhouse gas pollution versus utilizing diesel generators during outages over a five-year period. However, diesel generators create local criteria pollutants like nitrogen oxides and particulates, according to San Jose Director of Environmental Services Kerrie Romanow. Moreover, battery storage and diesel generators do not provide viable long-term backup, she said.

Bigger picture impact

Romanow noted that achieving San Jose's climate goals depends not just on reducing emissions, but creating a denser city with larger buildings where fewer people drive. Developers and businesses could be wary of building in San Jose if options like fuel cells are not available, she said.

The final ordinance allows new facilities that use distributed energy generation to include gas infrastructure through Dec. 31, 2024. The city will determine whether gas substitutes are available by that time and decide whether to leave the blanket exception in place or modify it.

The exemption drew support from labor unions, who also asked the council to delay the ordinance's effective date from Aug. 1, 2021, to Dec. 1, 2021. Lawmakers left the date unchanged, but agreed to convene a workshop to study ways to limit its impact on plumbers and pipefitters.

Ahead of the Dec. 1 meeting, the unions proposed that San Jose adopt advanced water system requirements for new construction subject to the gas ban. Requiring plumbing for systems like rainwater treatment would address California's chronic water shortages and offset the loss of union work that will result from banning gas infrastructure, Steve Flores, business manager for the United Association and Local Union 393, told lawmakers in a letter.