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Transitioning to Electricity Could Cost Property Owners Up to $1 Billion

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By Jorge Casuso

March 6, 2023 -- Given the age of Santa Monica's building stock, it will likely cost property owners between $500 million and $1 billion to electrify all existing buildings, according to a cost analysis by the City.

Titled "Equitable Building Electrification," the analysis calculates the cost of transitioning all existing buildings from gas to electric by 2045 under a "roadmap" released by the City last week ("Santa Monica Releases 'Roadmap' for Existing Buildings to Go All Electric," February 27, 2023).

Thee "Electrification Roadmap," which has not yet been approved, proposes a plan to reduce carbon emissions by requiring property owners to transition from gas to electric before they can rent, sell or make major renovations.

The plan would impact 70 percent of Santa Monica's 13,138 single and multi-family residential buildings, which "use natural gas as their primary fuel type."

The transition will be costly, with the average national price of fully electrifying a residence estimated at $12,000 under today's dollar value.

The average national cost of electrifying an HVAC system would be $7,101 per unit, replacing a water heater would cost $3,500 and replacing an electric range would cost $1,000.

The cost, however, is higher for older residential buildings, which account for most of the existing buildings in Santa Monica, and for transitioning a building in the high-priced city.

The average costs based on national figures, City officials contend, would likely be offset in the long run by energy savings.

"Although this is a significant expense, annual bill savings over 30 years results in lifetime savings of $4,625," according to the analysis.

"Over 30 years, these bill savings recover up-front installation, equipment, and labor costs added by making the switch to all-electric.”

The analysis, however, factors in replacing an aging gas system but not an electric one. It also factors in a 22 percent increase in the cost of gas by 2030 but not in the cost of electricity.

According to an analysis by the green website “Shrink That Footprint,” electric heat in California in 2023 cost $74.71 per MMBTU, compared to $45.79 for gas.

The City's analysis -- based solely on national averages -- estimates that electrifying all of Santa Monica's 13,134 residential buildings at an average cost of $12,000 each would result in a total cost of $158 million.

That doesn't include existing commercial buildings, which would significantly boost the cost.

“The scale of cost to electrify every existing building in Santa Monica is much larger due to the presence of many commercial buildings," the City report said.

"The total City-wide cost of electrifying all existing buildings is likely closer to $0.5 - $1 billion due to added complexity of electrifying older homes and larger commercial buildings.”

As a result, the City cannot rely on property owners to voluntarily help reach the goals outlined in the $800 million Climate Action & Adaptation Plan approved by the City Council in 2019 ("Santa Monica Adopts $800 Million Plan to Fight Climate Change," May 29, 20219).

"Due to several factors, including cost and time, the voluntary action of building owners will not be sufficient to reach building electrification," according to the analysis.

"It is necessary that Santa Monica strategically create new laws that require the electrification of existing buildings over time."

The transition to electric energy is necessary in order to decrease Santa Monica's greenhouse gases and help address "the existential threat of climate change,” said Chief Sustainability Officer Shannon Parry.

According to the cost analysis, "water heating and space heating account for approximately 38 percent of total greenhouse gas emissions from buildings.

"If these major gas-using appliances are replaced with all-electric ones, Santa Monica’s annual carbon footprint would decrease by 47,805 MTCO2e" by 2045, the report states.

"This is equivalent to taking 10,301 gas-powered vehicles off the road for a year."

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