US Deputy Assistant Secretary for Buildings and Industry Carolyn Snyder met with partners in the US Department of Energy's Better Buildings Initiative and Better Climate Challenge in Washington, DC. Source: US Department of Energy.

The US Energy Department will rely heavily on market-based solutions and public-private partnerships as it pursues an ambitious goal to slash US building sector emissions 90% from 2005 levels by 2050, according to senior officials.

The DOE announced that goal April 2 alongside a national blueprint to decarbonize the nation's building stock. The blueprint outlines a plan to bolster building sector energy efficiency, slash on-site greenhouse gas emissions and triple electric demand flexibility by mid-century.

In an interview with S&P Global Commodity Insights, top DOE building officials explained how a market transformation program — the Better Climate Challenge — was integral to the blueprint's creation. They also explained why that program will be critical to achieving the 2050 targets.

Announced in 2021, the Better Climate Challenge committed companies, local governments and educational institutions to reducing emissions 50% over 10 years across their portfolios of commercial, multifamily and industrial buildings.

Critically, participants would also report their emission data and share how they achieved reductions.

It was feedback from participants that made the DOE confident that it could achieve the targets established in the blueprint, according to Maria Vargas, director of the DOE's Better Buildings Initiative, a public-private energy efficiency partnership that launched the Better Climate Challenge.

"This is the way we engage with the market and understand what is working for organizations, where they are getting stuck, how they think about making broad portfolio-wide changes at organizations," she told Commodity Insights.

Those learnings are now guiding the DOE's building decarbonization policy "at the highest level," US Deputy Assistant Secretary for Buildings and Industry Carolyn Snyder said.

The Better Climate Challenge reflects a growing role for market transformation initiatives after state and local restrictions on natural gas use largely defined building decarbonization policy in recent years.

"The conversation is so different than it was 10 years ago," Snyder told Commodity Insights. "It's around 'How do we collaborate and get ahead of regulation so that we don't need regulations to be what's pushing us?'"

Shared solutions through collaboration

Since launch, more than 200 building operators and financial partners have joined the Better Climate Challenge to plot viable, market-based pathways to building decarbonization. So far, they have achieved average GHG emissions savings of 21% and have reported emissions across a combined 850 million square feet of building space and 2,100 industrial facilities.

Technology hurdles, access to financing, the cost of electric grid upgrades and securing buy-in from building managers were among the challenges that DOE officials and partners identified at the agency's Better Buildings, Better Plants Summit in Washington, DC, from April 2–4.

"If everyone has to figure that out on their own, we're never going to get there," Vargas said. "That's the other benefit to the work we do with partners."

Dozens of the partners have participated in DOE working groups to develop actionable plans for reducing emissions across their portfolios of buildings and industrial plants. That work has produced frameworks for achieving emission reduction, which the DOE makes available through its Decarbonization Resource Hub.

The DOE has also convened several other working groups to address issues such as building electrification, on-site renewable energy and storage, and low global warming potential refrigerants. Those groups are helping to set priorities for the DOE's research and development and its support programs for state and local governments, Snyder said.

DOE aims to move the market with technical assistance

In addition to facilitating this coordination, the DOE provides technical assistance to partners, often drawing on the research capacity of the agency's network of 17 national laboratories.

Those activities include technology campaigns to accelerate adoption of efficient building technologies, as well as short-term accelerator programs to address barriers to efficiency and decarbonization.

The DOE announced its latest accelerator on April 3 to promote adoption of electric heat pumps in commercial buildings as soon as 2027. The equipment would replace conventional packaged rooftop units that rely on gas heating. According to the DOE, commercial heat pumps stand to "slash both emissions and energy costs in half" when compared to another emerging technology: gas-fueled heat pumps.

The accelerator will pair heating and air-conditioning equipment manufacturers with organizations that operate vast commercial building portfolios, such as Amazon.com Inc., Target Corp. and IKEA USA Retail LLC.

Snyder said she was surprised at how quickly the accelerator gathered partners and by the companies' willingness to collaborate with competitors. "Not driven by a regulatory stick, not driven by policy, but driven by the market demand from those companies and the market opportunities seen by the manufacturers," she said.

Focus on electrification draws fire

The focus on building electrification in the Better Climate Challenge and DOE's national blueprint has drawn the ire of the gas industry. By prioritizing electrification, the blueprint would jeopardize US energy security and reliability and raise costs for families and businesses, while delivering minimal environmental benefits, the American Gas Association said in a statement.

Snyder stressed that electrification is just one of several solutions for decarbonizing the US building sector, particularly in complex commercial buildings.

"To decarbonize buildings, it's going to take a whole portfolio of solutions that meet not just different building types but different regional needs and different market and regulatory frameworks," she said.

Asked about the role for low-carbon fuels like renewable natural gas and hydrogen — a priority for the gas industry — Snyder said she views those resources through the perspective of "triage" given their limited supply.

"Those are going to be incredibly important solutions, but we need to make sure they're going to the hardest problems, and buildings have some of those [problems]," she said.

Still, the DOE blueprint identified efficient electrification as a primary technical solution for addressing one of four strategic objectives: reducing on-site building emissions 25% by 2035 and 75% by 2050, compared to 2005 levels.

On-site emissions, chiefly from burning gas and other fossil fuels, account for 24% of US building sector GHG emissions, according to the blueprint. Power generation for building use is the only larger source, accounting for 52% of building sector emissions. However, the DOE expects electricity use to account for a declining share of building sector emissions as the US continues a shift towards zero-carbon power generation.

States divided over building policy

While the blueprint largely focuses the federal government on improving technology through R&D; developing markets for those solutions; and providing the rebates, tax credits and financing to support their adoption, the plan does include a regulatory component.

The blueprint said strong federal appliance efficiency standards will help lock in cost-effective building performance gains. The agency also planned to support state and local adoption of construction codes, building standards and other policies that facilitate energy efficiency and electrification.

Those policies have proven divisive. At least 25 states have passed laws prohibiting electrification mandates, while a growing number of cities and states are pursuing policies to phase out fossil fuel combustion in homes and businesses.

In Snyder's view, the DOE's role is not to dictate policy goals to state and local governments, but to help them achieve their goals. Some states may be focused chiefly on emission reduction, but others will pursue building performance improvements as a matter of affordability, energy independence or economic development — or to minimize needed investments in the electric grid amid rising demand, she said.

Still, the reality of climate change means that it will be critical to build momentum towards economywide building decarbonization, including by identifying a variety of viable pathways, Vargas said. That is why the Better Climate Challenge set a 10-year goal, rather than committing partners to 2040 or 2050 targets, she said.

"There's a lot to do and not a lot of time to do it in if we really want to make our goals," Vargas said. "People have to be investing now."