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9.A. - Page 23 of 34 ANALYSIS Staff have evaluated Reach Codes within the context of sustainability goals and constructability. Additionally, staff worked to develop Reach Codes appropriate for Redwood City. Over the past year, staff have navigated through cost, cost effectiveness, and energy efficiency considerations. As will be discussed below, cost and cost effectiveness, while related, are different. In terms of adoption of Reach Codes, the state only requires that the energy efficiency measure, or Reach Code requirement, be cost effective and not result in an increase in energy usage. Reach Codes go beyond the goal of energy efficiency and seek to reduce GHGs by eliminating reliance on natural gas in newly constructed buildings. This is done by requiring all new construction: 1) Be built to utilize only electric appliances. 2) Include some level of electrical vehicle charging capability. In certain instances, the availability of electric appliances is limited or implementation of all -electric infrastructure may be difficult. Examples include commercial restaurant equipment or central heat pump water heating for affordable housing developments. The staff recommended Reach Codes include possible exceptions to allow for mixed -fuel buildings in cases where the lack of available equipment or site infeasibility issues could make all -electric construction prohibitive. Staff reviewed the number of new construction applications over the past three years and found that up to 58 new buildings could be made all -electric annually. On average, the City receives 58 new building applications, including 37 applications for ADUs each year. At the January 13, 2020 meeting City Council reviewed nine exceptions to the Reach Codes. After conducting more outreach, staff developed two additional exceptions, for a total of 11, based on public feedback. The two new exceptions included an exception for 100% affordable housing developments and another for ADU's. After evaluating 11 Reach Code exceptions, staff now recommends eight exceptions, which will be further detailed under Reach Code Exceptions — Staff Recommendations. Cost and Cost Effectiveness In order to adopt the local code amendments, the additional requirements must be cost effective pursuant to Public Resources Code 25402. There is not a requirement that the upfront costs of an energy efficiency measure be less costly than the alternative. The CEC considers an energy efficiency measure cost effective if the total utility savings over the estimated useful life of the energy efficiency measure exceeds the difference of costs between the measure and the base line measure of mixed -fuel energy usage. For example, requiring all -electric space conditioning in single-family homes would be considered cost effective, if the total utility savings over 30 years exceeds the additional cost of the all -electric equipment when compared to the cost of a natural gas powered space conditioner. In developing the Reach Codes, staff relied on publically accessible cost effectiveness studies. The studies were prepared for the Southern California Edison Company in coordination with Pacific Gas & Electric and other California based utilities for utility users throughout the state. These studies have been cited by other local cities adopting Reach Codes. In addition to these studies, staff worked with PCE, members of the Statewide Codes & Standards Program, and the Bay Area Regional Energy Network (BayREN) to interpret the study results. The Statewide Codes & Standards Program is funded by California utilities such as Pacific Gas & Electric and Southern California Edison to develop recommendations for energy standards Page 3 of 14 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 125