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New rules to phase out gas appliances stoke excitement, anxiety on the Peninsula

May 07, 2023

When Palo Alto and Menlo Park launched their respective efforts to wean residents off natural gas appliances and promote electrification, both cities treated the switch as a valuable but risky proposition.

In each case, city officials view electrification as a key step on their road to sustainability. Both have adopted rules that require new developments to feature all-electric water heaters and space heaters. At the same time, both opted not to require residents to convert from gas to electric, citing the high costs of replacing equipment and an unreliable electric grid.

These risks took on a new sense of urgency for the region last week, when the Bay Area Air Quality Management District adopted new regulations that will make the region the first in the nation to ban sales and installation of new gas appliances. After a debate that featured hundreds of written and oral comments, the district's board of directors voted 20-0, with one abstention, to amend its regulations so that gas-fueled appliances will be phased out in the district's jurisdictions, which includes Alameda, Contra Costa, Marin, San Francisco, San Mateo, Santa Clara and Napa counties as well as portions of southwestern Solano and southern Sonoma counties.

The new policy takes aim at oxides of nitrogen (NOx), pollutants that are a byproduct of combustion and that according to district officials cause harm to both air quality and health. They also react with other airborne chemicals to form fine particulate matter (PM 2.5) and ozone, according to air district staff. Both of these pollutants are harmful when inhaled, a report from the air district states. Staff estimate that the policy could reduce NOx emissions reductions by 3,236 tons per year.

Phil Martien, director of the district's assessment inventory and modeling division, said that reducing emissions of fine particulate matter would bring significant health benefits, particularly to areas like east San Francisco, cities in the east bay and parts of San Jose. He noted that these areas also have highest concentrations of people of color and that these populations would benefit most from the proposed policy.

"We're talking about particles here that are smaller than 2.5 micrometers in diameter," Martien told the board at the March 15 meeting. "They can penetrate deeply into lungs and even cross the air-blood boundary to cause a long list of health impacts, including premature mortality."

For supporters of the new policy, the health benefits are paramount. The air district estimates that reductions in secondary PM2.5, which result from chemical reactions with other NOx, would avoid an estimated 23 to 52 deaths per year and about 71 new cases of asthma per year, according to a report from Executive Officer Philip Fine. When one includes primary PM2.5, which are directly emitted by the appliances, the policy is projected to avoid an estimated 37 to 85 premature deaths per year and about 110 new cases of asthma each year and save between $400 million and $890 million in health care costs.

Palo Alto City Council member Vicki Veenker, who represents Santa Clara County on the air district's board, said in an interview that she was excited to vote for the new policy, citing its health and environmental benefits. She said she was particularly persuaded by the physicians and middle-school students who testified about the health impacts of pollution.

"Being able to reduce the costs on the system is huge," Veenker told this news organization. "But to also have the co-benefit of reducing greenhouse gas emissions and aligning with our climate goals is a win-win. There are countervailing concerns, but those concerns aren't reasons not to do it. Those are reasons to make sure we do it well."

San Mateo County Supervisor Ray Mueller, a former Menlo Park City Council member, had a different outlook. As the only member of the air district board who abstained, Mueller cited the high impact that the new rules would have on consumers, particularly those who do not qualify for financial assistance when they need to replace a furnace or a water heater.

"We're going to be first in the nation, but this agency has never done that to the consumer before," Mueller said at the hearing. "And that's something we have to go ahead and be honest about too."

Like Veenker, Mueller said he wants to see the transition to electric appliances happen. But he argued that the proposed timeline is too ambitious and that the air district policy fails to consider the cost of the conversion, the current lack of financing and the current shortage of electric appliances.

"Candidly, what I think is missing from this discussion is the fact that there is a middle class out there right now that is really hurting. Inflation is killing them," Mueller said. "There are people who make a decent income, who are mortgaged, who are trying to figure out how to put their kids through college and I don't hear a discussion about them here."

For supporters and critics alike, a major wild card in the new policy is PG&E. Everyone agrees that without a reliable grid, any conversion to electrification would be a risky proposition, and PG&E's track record in recent months has given residents few reasons to feel confident. Mueller said he would support new laws that would require PG&E to improve reliability of its electric infrastructure.

Mueller noted that PG&E has made it clear that it will not prioritize the Bay Area for moving electric lines underground. In a region where trees topple on power lines with regular frequency, the idea of making people more reliant on electricity is "very concerning," he said.

Numerous residents also told the board that they were worried that the rule change would increase their risk of losing power and having no access to heat or hot water for extended periods of time. Los Altos resident Mabry Tyson, who lost power during last week's storms, said the new policy would make life difficult during the winter months, when power outages occur with greater frequency.

"Don't force us to jump onto a new horse unless you know that horse doesn't have brittle legs," Tyson said.

While air district staff believe that more equipment will become available by 2027, Mueller and other critics of the rule change maintained that the timeline remains too ambitious. Under the newly adopted regulations, water heaters and boilers with capacity under 75,000 British Thermal Unit (BTU)/hour, which are typical in single-family residences, will be the first to go. As of Jan. 1, 2027, they will no longer be sold in the Bay Area under the new regulations. The ban would extend to natural-gas furnaces starting on Jan. 1, 2029. And in 2031, it would encompass all water heaters and boilers with more than 75,000 BTU/hour, which are typical in multifamily complexes and commercial buildings.

For comparison, Mueller pointed to Tesla, which he noted was founded in 2002 and produced its first car in 2008.

"We still haven't seen full saturation of the market and we still don't have the infrastructure to support all those cars," Mueller said at the hearing.

Others shared his concern. The Air-Conditioning, Heating, and Refrigeration Institute (AHRI), an industry group that represents manufacturers, took issue with the cost estimates that the air district provided for new heat pump equipment and noted the switch could be far more expensive if it requires upgrades to electric panels. The group pegged the average price for a water heater replacement in the Bay Area at $8,577 and for heat pumps at $22,745. The group recommended that the air district adopt an alternative that move the compliance date for all appliances until 2035.

Kyle Bergeron, the group's senior regulatory engineer, noted in a letter that upgrades usually occur when an existing appliance fails. If the house needs a panel upgrade to accommodate a zero-NOx solution, it could go without space- or water heating for several days if not weeks, he wrote.

"If such an event were to happen during a cold snap, there could be significant concern for the health and safety of the occupant(s)," Bergeron wrote. "The District needs to consider solutions to the emergency replacement issue, including proactive replacement programs, such that the impact of proposed Rules 9-1 and 9-6 does not compromise safe and reliable access to services."

The district, for its part, plans to address the issue of grid uncertainty by creating an Implementation Working Group composed of 35 stakeholders, including PG&E, that will provide regular updates to the air district board about market availability and technical aspects of the transition.

Air district staff acknowledged in their report that zero-NOx space and water heating technologies are currently limited in availability and could be expensive to install in existing buildings. The district projects that availability will increase and costs will drop in the coming years, and it plans to perform interim reports before the policy kicks in to evaluate the availability of such equipment. As part of the reporting process, the district will consider "relevant market changes and ensure equitable outcomes in the implementation of the proposed standards," the report from district staff states.

Some proponents have suggested that the new rule change could boost the supply of zero-emission equipment by making it clear to manufacturers that there will be a market for the new technology. Debbie Mytels, a Palo Alto resident who serves as chair of Peninsula Interfaith Climate Action, a coalition of 35 congregations with "green teams," urged the air board last week to move ahead with the new rules.

"It would be wonderful if you give a signal to the manufacturing community that we should go ahead and start creating many more opportunities for people to change their heating system and create the clean air that we all need to breathe," Mytels said.

Even before the rule change, Peninsula cities have been carefully tracking the development of zero-emission technologies. Menlo Park already requires electric space heaters and hot water heaters in new construction, a law that took effect in January 2020. To date, however, the council has not mandated electrification in existing buildings, opting to instead rely on outreach, education and financial assistance for low-income residents.

Palo Alto has also adopted an electric-only requirement for water and space heating in new developments. The city also launched a new program this year that aims to convert 1,000 customers to heat pump water heaters this year through a streamlined approval process and on-bill financing that allows them to spread out payments for the new appliance. The program is off to a promising start, with 421 customers opting into it as of Tuesday, according to city staff.

These local efforts, Veenker said, will help local cities prepare for the air district's new rules once they start taking effect in 2027. She said in an interview that believes the air district's approach already takes into consideration the many challenges of electrification by incorporating interim reports, the implementation group and a timeline that prioritizes technologies that are more readily available and require less power.

"By the time these rules kick in regionally, our residents will be able to have a smooth transition and hopefully we'll be a model for other cities too," Veenker said.