New Jersey's plan to phase out fossil fuel use in buildings is coming into focus more than three years after the state's climate policy blueprint identified electrification as the chief pathway for decarbonizing buildings.

Gov. Phil Murphy on Feb. 15 set a goal of electrifying 10% of the state's new and existing homes and commercial buildings by 2030. In a pair of executive orders, Murphy initiated several processes to facilitate that goal, and while the specific mechanisms to achieve it remained unclear, the governor offered some hints about the future policy framework for Garden State electric and gas utilities.

One thing appeared clear: Murphy agreed with New Jersey's 2019 Energy Master Plan, or EMP, which found electrification is the best, least-cost option to decarbonize the state's buildings.

"Homes and businesses are the second-largest producers of greenhouse gas emissions in our state," Murphy said in a Feb. 15 speech at Rutgers University in New Brunswick, N.J. "And it is little wonder why, when nearly 90% of homes and more than 80% of businesses are heated by fossil fuels."

Mandates remain uncertain

The announcement drew support from environmental groups that had previously lamented New Jersey's relative lack of progress in advancing policies to more deeply decarbonize the building sector.

Of the state's three largest emissions sources — transportation, buildings and electric generation — the state has given the least attention to decarbonizing its buildings, the Sierra Club's New Jersey chapter said in January. In March 2022, a report commissioned by the New Jersey Conservation Foundation warned that New Jersey was falling behind other Northeast states in the push to electrify buildings.

Since 2019, dozens of West Coast and Northeast municipalities have adopted building electrification mandates and natural gas bans. Washington state, California, New York, Maryland and Washington, D.C., have either passed or are progressing toward state-level or districtwide restrictions on gas use in new construction.

By comparison, New Jersey has only considered one such regulation. In December 2021, the New Jersey Department of Environmental Protection proposed a rule that would restrict new fossil fuel boiler installations and replacements in schools, apartment complexes, and retail and industrial spaces. The department withdrew the proposal in December 2022, but a spokesperson said the agency intends to revisit the boiler issue during a March 7 public engagement session, announced in tandem with Murphy's executive orders.

Murphy tasked the state's Office of Climate Action and the Green Economy with developing policies, legislation, regulation and funding strategies to achieve the building electrification goal. That strategic roadmap is due by March 2024, giving the state just under seven years to implement policies and produce results. It could be difficult to meet that goal — electrifying 400,000 homes and 20,000 businesses and making 10% of low-to-moderate income households electrification-ready — without some kind of mandate.

In a related move, Murphy accelerated the state's 100% clean electric power goal by 15 years, which would bolster the benefits of building electrification.

Plan targets voluntary building standards

Murphy signaled that he would also tap an increasingly popular mechanism, and one recommended in the EMP: updating state building codes.

The governor directed the New Jersey Department of Community Affairs to develop guidance for builders to help meet the electrification goal, including "voluntary enhanced building standards." Murphy also directed state agencies to develop and offer incentives that will encourage builders to follow those voluntary standards.

That could telegraph that New Jersey will not explicitly require all-electric heating in its statewide building code, a strategy pioneered in Washington. However, a well-designed voluntary code with sufficient program support, including incentives, can drive building decarbonization, according to climate-focused code developers. They often point to a widely used stretch energy code in Massachusetts — recently updated to favor electrification — as a strong example.

Murphy said he expected to use proceeds from the Regional Greenhouse Gas Initiative, paired with new federal incentives for building retrofits and electric appliances, to make the transition affordable for residents. The governor additionally directed agencies to implement existing energy efficiency, benchmarking, customer assistance and loan programs "to provide maximum support for building electrification."

The state has already started code work. In February 2021, the New Jersey Board of Public Utilities, or BPU, partnered with the Rutgers Center for Green Building and the Northeast Energy Efficiency Partnerships to form the New Jersey Energy Code Collaborative. The group sought to develop options for building up government and market capacity, which would help New Jersey implement an increasingly energy-efficient building energy code aligned with its climate policies. The collaborative will help the Community Affairs department develop the voluntary standards, according to Murphy's executive order.

Order floats clean heat standard

There was one other clue in Murphy's separate but related executive order, which directed the BPU to investigate the future of gas utilities in the state. Murphy tasked the BPU with identifying the lowest-cost "competitive market mechanisms" to reduce the sector's emissions.

The governor mentioned only one potential mechanism: a clean heat standard. The policy establishes emissions reduction targets for gas utilities but gives them several options for hitting those targets. In addition to electrification, those could include energy efficiency, peak demand reduction and leak minimization, Murphy said.

Notably, the executive order did not include alternative fuels like renewable natural gas and hydrogen as examples of options, though it did not rule them out. The EMP detailed these low-carbon fuels playing only a supporting role in building decarbonization, which Murphy noted in his executive order.

Meanwhile, gas utility operators, such as New Jersey Resources Corp. and South Jersey Industries Inc., have put the fuels front and center in sustainability plans.

Gas utility sees 'overly aggressive plan'

In a Feb. 16 email, South Jersey Industries said maintaining affordability and reliability will be the biggest challenge as the state shifts to renewables. The existing gas distribution system is an "incredible vehicle" backed by ratepayer investment to deliver low-carbon fuels, the company said.

"Embracing an overly aggressive plan that relies on the mass electrification of our building sector will put the reliability and affordability of our state's energy systems at risk by requiring the massive build-out of new electric generation and transmission, and the retrofitting of 75% of New Jersey homes," the company said.

New Jersey multi-utility Public Service Enterprise Group Inc. commended Murphy for his "vision for a clean energy future." "Clean energy, electrification of transportation and the continued modernization of infrastructure can expand economic growth, foster the diverse workforce of tomorrow and provide equal access for all to these benefits — regardless of geography or economic circumstances," PSEG Chair, President and CEO Ralph LaRossa said in Murphy's Feb. 15 press release.

To be sure, Murphy directed the BPU to ensure the state maintains reliable gas service and the long-term viability of gas utilities under revised business models. The governor said the companies "provide a critical service to residents and businesses and provide numerous well-paying jobs."

However, Murphy also directed the BPU to minimize new investments in gas infrastructure and noted that if the state follows the EMP, retail gas sales will fall 25% by 2030.

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