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Real Estate Industry Urges D.C. To Slow Down On Requiring All-Electric Buildings

Washington, D.C., has been recognized for several years as one of the most forward-looking cities for green building standards in the United States, but it’s also got a dirty secret: The gas lines that fuel D.C. buildings’ power and cooking elements are leaking more than any state in the nation.

Those conflicting realities have helped fuel a pair of moves by the D.C. Council and a behind-the-scenes agency to bring an end to the use of natural gas in new commercial buildings. But the real estate industry is encouraging the District to pump the brakes.

Solar panels on the rooftop of Lerner Enterprises' 20 M St. SE in Washington, D.C.

Organizations representing D.C. property owners and businesses are urging officials to work with them by carving out exemptions from a requirement mandating new buildings be developed with all-electric infrastructure. They argue the costs would be too burdensome and strict regulations would dissuade developers and tenants from doing business in the District.

"Our voice will be heard because we won't shut up," said Eric Jones, a vice president of government affairs at the Apartment & Office Building Association of Metropolitan Washington. "As far as [our concerns] being addressed, it's a wait-and-see process, because we really haven't seen much shift."

The change that has drawn the ire of AOBA, the D.C. Building Industry Association, the Restaurant Association of Metropolitan Washington and others is part of a suite of updates to the building energy code set to be finalized Oct. 20 and adopted next year as part of D.C.’s three-year code cycle. AOBA said it has repeatedly sought to clarify that no changes would apply to building renovations, but hasn't received the assurances it is seeking.

The modifications, which would also require electric vehicle charging capabilities and on-site renewable energy capacity, come after the D.C. Council passed a law this summer that similarly mandates new commercial construction to be all-electric by 2026.

Exemptions for certain medical facilities and commercial kitchens are expected. Advisers to the Construction Codes Coordinating Board, which is overseeing the change, are also considering exemptions for certain university buildings and firehouses.

D.C. officials have passed laws pushing the city to switch to 100% renewable energy by 2032 and achieve carbon neutrality by 2045. Those deadlines put pressure on the District to phase out natural gas to buildings, which accounted for about 72% of D.C.’s greenhouse gas emissions in 2020.

The technical advisory group working on the clean energy plan, which includes members of the public and private sectors, has seen a surprising level of engagement for a process that normally takes place out of the public eye, said Anica Landreneau, global director of sustainable design at HOK Architecture and an adviser working on the code changes. 

That scrutiny has forced advisers to tread carefully as they look to incentivize D.C.’s green transition without leaving certain buildings or tenants behind.

HOK's Anica Landreneau speaks during a panel at a Bisnow event on Aug. 18, 2022.

“People get into their lane, they get into the way they've always done things, and it's very hard to deviate from typical practices,” Landreneau said. “What we don't want to do is position building owners to have stranded assets in just a few years.”

On Aug. 17, a letter sent from concerned organizations to the CCCB shared with Bisnow laid out the challenges private industry members said they would face with an all-electric building code. They raise fears about higher costs to build affordable housing or office-to-residential conversions, challenges for commercial kitchens to adopt induction stoves, and the loss of multifamily amenities like grills and fire pits among their chief concerns.

“The net effect of a ban on natural gas will undoubtedly stifle new construction, raise energy costs for existing homes and businesses, and make the District less economically competitive,” the letter read. 

Katalin Peter, also a vice president of government affairs with AOBA, said her organization had been working for months to get its requested exemptions included in the new code language.

“We're really trying very hard to actually be involved in the part of the process where we can make a difference, and where we can get our comments considered,” Peter said. “We've had so many bad experiences where when you wait until the public comment period, at that point, the cake is just already baked in … So we're trying to be as proactive as we can.”

But proponents of the code changes say D.C.’s buildings have quietly been inching closer to electrification for some time, and they worry that allowing too many exemptions could render the code useless at facilitating an energy transition.

“If you poke too many holes in it, it’s not really a code anymore,” Landreneau said. “We’re trying not to open the gate too wide.”

The District’s building energy performance standards require existing buildings to become more efficient over time, and D.C. regulations that have been phased in over the past few years have increasingly incentivized solar adoption, creating one of the strongest incentive programs for solar panel installation in the country.

Meanwhile, gas power is expected to become more expensive as forward-thinking building owners electrify on their own, Landreneau said. That’s likely to incentivize others to switch to cheaper, all-electric renewable energy or risk becoming the kind of “stranded asset” with too-high energy costs that Landreneau alluded to.

At the same time, a pair of studies conducted first by environmental organizations and subsequently verified by a study commissioned by the D.C. Department of Energy & Environment, found that the District’s natural gas infrastructure was leaking methane, a greenhouse gas that is 25 times more potent than carbon dioxide at trapping heat, according to the Environmental Protection Agency.

A heat map showing measured fugitive methane emissions from a study commissioned by the D.C. Department of Energy & Environment.

Natural gas lines lost about 6.2% of all natural gas running underneath the District in 2019, costing gas customers $24M while also reducing air quality and undermining the District’s decarbonization efforts, according to the report commissioned by DOEE. The report found that D.C. had a higher percentage of gas loss than any U.S. state. 

The report emphasized that rather than spend $3B to $4.5B over the next three decades to shore up D.C.’s natural gas lines, the District and Washington Gas should instead save their money and move on from the fossil fuel. 

“As we get into the commercial core of the city, which is what this code will impact predominantly, what we're hoping is not to be building new gas lines to new construction,” Landreneau said. “Hopefully we'll start to really reduce the network and start to decommission a lot of that network over time.”

Those tailwinds have propelled commercial construction to adopt the kind of technology a building would need to be all-electric. That fits with Landreneau’s code-making philosophy: She believes the changes should be forward-thinking enough to push the industry forward while savvy enough to not require a change for which there’s no economical option. 

Landreneau and other sustainable energy advocates believe the code language under consideration threads that needle.

Theresa Backhus, director of the Building Innovation Hub — which helps building owners adopt efficiency upgrades to meet D.C.’s rising building energy performance standards — views the policy as similar to D.C.’s decision to require LEED certification for public and private buildings in 2006.

“There was a lot of discussion and debate and questions as to whether this was something that was really going to be worth it,” Backhus said. “Now look where we are.”

That likely won’t be enough to soothe the real estate industry’s heartburn. While this code cycle only mandates all-electric systems for new construction, the law separately passed by the D.C. Council may still require major renovations of existing buildings to include electrification. 

The latest changes to the code also encourage commercial buildings to consider energy storage technology, which many say is too new, expensive and inefficient to be feasible in many commercial buildings, let alone a historic building undergoing a retrofit.

“We have a situation where we have a really strong environmental community that is pushing environmental standards at all costs, sometimes without thinking about the practical real estate implications,” Jones said.

AKF Group's Shannon Kapla, HOK's Anica Landreneau, Quinn Evans' Julia Siple, High Concrete's Jamie Sweigart, Hickok Cole's Yolanda Cole and SmithGroup's Dayton Schroeter speak during a panel at Bisnow's Architecture & Design Summit on Aug. 18, 2022.

Locally, Montgomery County is also considering a bill requiring electrification for all new construction and substantial renovations. That movement should assuage some concerns that D.C. will lose business to its neighbors, said Dayton Schroeter, vice president and design director at SmithGroup.

Schroeter, who has not been involved in the code-making process but has explored all-electric projects in the D.C. area, points out that Virginia also recently greenlighted the largest offshore wind farm in the country, paving the way for a greater renewable energy market in the state. 

As renewable energy sources become cheaper, he expects Virginia and other states will be right behind D.C. in switching off the gas.

“D.C. has really been on the progressive edge of pushing these standards that I think are really going to permeate outward and have an impact,” Schroeter said. “We know the storm is coming and we have to be ready.”