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Washington D.C.’s Latest Energy Mandate Will Change the Future of Buildings, Energy Supply and Transportation in the District

  • January 29th, 2019

As federal government action on climate change has stalled with the current administration, many cities and local governments are embarking on their own initiative to combat the change.  Washington D.C. is the latest in a growing list of around 100 cities in the country committed to reducing emissions.  The Clean Energy DC Omnibus Amendment Act of 2018 was unanimously approved by the city council in late December, mandating the district be 100% dependent on renewable energy by 2032.  One part of the goal is to reduce greenhouse gas emissions by 50% below 2006 levels by 2032 and achieve carbon neutrality by 2050.  As of today, D.C. has the most ambitious renewable energy timeframe than any other state.  New York recently announced their renewable energy plan as well and more details can be found here: https://energywatch-inc.com/2%E2%82%B5-kwh-increase-expected-in-ny-wholesale-markets-from-proposed-carbon-pricing/

This bill has identified three main contributing sources of greenhouse emission within the district:

  1. Buildings
  2. Energy Supply
  3. Transportation

New construction building codes will be enacted, requiring upcoming buildings to produce enough energy to be sustainable off the grid through renewable onsite generation.  New single family or multifamily buildings must be at net-zero energy consumption starting in 2020.  All commercial or large multifamily buildings must be at net-zero energy consumption by 2026.  Residential and commercial buildings may also be required to create submeters for each of their tenants.  These changes are expected to net around a 5% decrease in emissions by 2032. 

To cut another 10% in emissions, existing buildings will have to be renovated for increased energy efficiency, though exact benchmarks have not been fully determined yet.  There will be a “green bank” established to help fund the efficiency projects for those that may require it.  No later than January 1, 2021 and every 5 years after, the DOEE or Department of Energy and Environment, will implement a performance standard or Energy Star equivalent, establishing a baseline in which all existing buildings will be evaluated upon.  On that date, all privately owned building over 50,000 square feet and all district owned building over 10,000 square feet will need to comply.  2 years later, all privately owned building over 25,000 will need to comply.  Any private building over 10,000 square feet will have to conform by 2026.  All building below the performance standard or Energy Star score will have 5 years from the date of the last requirements published to comply.  Buildings that fail to meet these conditions set will be subject to penalties, fines and fees. 

One of the new mandates on the energy supply side will be increasing the amount of renewable energy supplied into the District.  By changing the design of the current Renewable Portfolio Standard (RPS), electric suppliers will have to increase the amount of renewable energy delivered to the end users.  For those customers still with the utility, Pepco, the Standard Offer Service (SOS) could be replaced with a product that includes a higher mix of energy from renewable sources.  Through a new SOS from the utility, a 19% reduction in emissions is expected.   

Due to the Clean Energy DC bill, changes to the supply costs took place starting January 1, 2019.  Any contract that was signed prior to January 1st was grandfathered into the existing RPS percentages for the remainder of the contract, up to 3 years.  For example, a 36-month contract with a January 2019 start date, that was signed in 2018 or earlier, this new regulatory change would not be applied for the entirety of the contract.  Current 2019 RPS Tier I percentages are currently at 17.5%, 0.5% for Tier II and 1.85% solar energy.  Tier II renewable energy sources are expected to be phased out by 2020.  Depending on the term and start date of a contract, prices are expected to increase around 2-2.5₵/kWh effective immediately.  Early estimates suggest price increases of over 3.5₵/kWh by 2024. 

These percentages are expected to increase annually until 2032, when Tier I resources will be at 100%.  The biggest change coming in 2021 when Tier I resource requirements will jump from 20% to 26.25%, increasing around 6%-7% every year after.  A 5.5% solar carve-out will be established by 2032 and expected to reach 10% by the end of 2040.  Given the small territory that makes up D.C. and lack of physical generation within its borders, the district relies heavily on Renewable Energy Credits (RECs) to comply with its green initiatives.  

Changes will also be made on how residents and visitors move about the city.  Transportation methods that do not use fossil fuels, such as electric buses, will help reduce emissions.  By 2030, at least 50% of all public buses and any privately-owned fleets with a capacity of 50 or more passengers that are licensed to operate within the district will be emissions free.  Parking lots and garages will all be required to have EV charging stations.  Along existing federal fuel economy standards, there is an expected 12% emissions reduction by 2032.  The district will also encourage residents to increase electric vehicle purchasing and sharing, further reducing emissions approximately 4%.

The CleanEnergy DC Omnibus Amendment Act of 2018 will transform D.C into one of the leaders in combatting climate change the U.S. within the next 13 years.  The District will be reducing greenhouse emissions by updating buildings, increased use of renewable energy, and the conversion to more electric powered transportation.  More states and cities are expected to follow in Washington D.C.’s lead in reducing their carbon footprint. 

To ensure your portfolio is meeting the new RPS percentages and avoiding any penalties, it is important to understand the complex energy market and manage your energy risk.  Proper structure and timing of electricity supply contracts can result in hundreds of thousands of dollars in additional supply-side savings / or cost avoidance.  Contact us to see how EnergyWatch helps by providing market expertise and ensuring supply contract decisions are optimized for future portfolio operations.