NEWS: Energy and environmental policy
Bay Area Air Quality Management District Approves Historic Zero-NOx Appliance Rules

Featured Image

March 24, 2023

On March 15, the Bay Area Air Quality Management District (Air District) approved new rule amendments to phase out the sale and installation of natural gas furnaces and water heaters that emit nitrogen oxides (NOx). With compliance dates ranging from 2027 to 2031 for different types of devices, these rules will mandate that only zero-NOx furnaces and water heaters can be sold or installed in the Air District’s jurisdiction, which covers most of the nine Bay Area counties. The Air District estimates that the reduction in NOx and particulate matter emissions from these rules will avoid up to 85 premature deaths per year and generate annual health benefits up to $890 million.

Today, the only zero-NOx space and water heating devices are electric devices. Thus, these rules may ultimately reflect the most significant policy enacted to date that will result in electrification of existing buildings in any United States jurisdiction. During the hearing, some Board members commented that they understood the historic significance of this ruling and highlighted the need to provide a clear signal that gives adequate time for the building trades and the electric appliances industry to prepare for the changes. In addition, Air District staff plan to convene an implementation working group to support the rule amendments leading up to the compliance dates, and Board members noted that implementation dates may be adapted over time depending on feedback from the working group.

E3 supported the Air District by analyzing the electric infrastructure impacts associated with the rule amendments. A widespread shift to electric heat pumps for residential and commercial space and water heating would result in electric load growth, potentially requiring new infrastructure to support these loads.

There were two key findings from E3’s analysis.

  1. The potential electric grid impacts of the zero NOx standards are highly dependent on the other policies California enacts around building electrification to meet the state’s climate goals.
    • Relative to a Low Policy Reference that assumes no major state policy changes in support of building electrification, the zero NOx standards would result in incremental load impacts, capacity impacts, and infrastructure needs by 2050.
    • However, relative to a High Policy Reference that assumes major state policy support for building electrification aligned with the California Air Resource Board 2022 Scoping Plan, the zero NOx standards would result in electric grid impacts occurring earlier than would otherwise be expected, but there would be very small net impacts by 2050.
  2. The largest potential impacts of the proposed standards would be from increased electric loads and the associated need for additional zero-carbon generation to meet these loads. Relative to the Low Policy Reference, the zero NOx standards could result in 6.2 terawatt-hours per year of additional electric load by 2050, which represents 2.2% of 2020 statewide electric loads. While there would also be potential impacts on generation capacity, transmission capacity, and distribution capacity, these capacity-related impacts would be small relative to potential impacts on electric generation.

E3’s analysis helped support Air District staff and board member understanding of the impacts associated with the rule amendments and factored into an environmental impact review of the amendments. E3’s Ari Gold-Parker, John de Villier, and Amber Mahone contributed to the analysis of electric infrastructure impacts.

filed under: Energy and environmental policy