Equitable Decarbonization of the Building Sector: CEE's 2040 Vision

Equitable decarbonization of the building sector is needed to meet the urgent climate challenge, requiring the transformation of energy systems, consumer options, and trades workforce — a transition akin to the massive mobilization of capital in the post-war period in the U.S.

What is Equitable Decarbonization?

We define “equitable decarbonization” as the just and equitable transition from the carbon-intensive energy services that our economy currently relies on (for transportation, heating, industrial processes, and more) to decarbonized technologies and fuels in planned, managed steps, so that the benefits and costs of that transition are equitably distributed across society. If successful, all groups — across class, race, geography, and gender — will have parity in outcomes and fully realize the economic and health benefits of this new energy system.

To develop our roadmap to equitable decarbonization for the building sector, we brought together experts from across CEE’s areas of expertise — research, program implementation, finance, policy, and community engagement — and asked: What will equitable decarbonization of the building sector look like in 2040?
 

Why Do We Need a 2040 Vision?

Equitable decarbonization of the building sector is necessary to meet the urgent climate challenge. It will require a wholesale transformation of our energy systems, consumer options, and trades workforce — a transition on a scale similar to the massive mobilization of capital in the post-war period in the United States.

Systemic changes are required for this transformation, disrupting utility business models and regulatory frameworks, altering the use of incumbent energy infrastructure, and impacting costs to energy consumers. It is important to connect what might feel like small, incremental changes in the near term to the numerous moving parts needed to realize an efficient, equitable, environmentally beneficial future in the longer term. We chose the year 2040 because it is both near enough to evaluate the impact of choices we make today and far enough away to allow thoughtful management of the impacts of this transformation.
 

Our 2040 Vision

Tipping Point. By 2040, we are well beyond the tipping point of a full transition to a decarbonized economy, confident that an economy powered by a decarbonized electric system and decarbonized gaseous fuels is within our grasp. Very efficient electric systems are increasingly the primary source of heat in homes and businesses, and the technicians necessary to work on them are well trained and available statewide.

The indoor spaces where people spend most of their time — homes, businesses, schools — are quieter, healthier, and more comfortable, and indoor air quality has improved significantly. We have increased access to efficient home cooling to mitigate the burden of extreme heat events on low-income communities, which includes many communities of color.

Energy Workforce. By 2040, the energy workforce is thriving. Companies that did not exist in 2020 have flourished to serve the high-tech needs of electrified buildings and a predominantly renewable grid. A generation of diverse, savvy workers has been attracted to the trades by high wages, excellent worker training, and new opportunities in system controls and network infrastructure.

There has been a surge in demand for home insulation over the past two decades, helping offset the switch from low-cost natural gas to higher-cost electricity by reducing home energy use for heating and cooling. By 2040, this demand is waning, as most homes are well-insulated, but the workers who helped create this legacy of healthy homes are continuing to build net-zero buildings and serve niche opportunities in the commercial sector. Business ownership by people of color, indigenous people, and women is common and representative.

Flexible, Efficient Load as a Resource. By 2040, as more end uses have transitioned to electricity, our electric utilities have harnessed the flexibility inherent in building energy systems, coupled with grid modernization investments, to improve the reliability of the electricity grid and quickly isolate disruptions. Buildings are tighter and readily adjust their heating and cooling demand to support the grid.

Vehicles act as backup electric systems, and EV loads are managed. Energy savings and demand flexibility are metered, measured, and reliable, trusted by utilities to meet system needs in equal measure with supply-side resources. We have hardened the electricity grid to adapt to extreme climate events and have significantly decreased both the number and duration of electricity outages. Through smart operations, load management, and new technologies, the electric system is more reliable and stable.

Transition to Decarbonized Heat and Other End Uses. By 2040, new construction is very energy efficient and is heated by either highly efficient electric technologies powered by low-carbon electricity or by fuels or technologies that do not contribute to greenhouse gases. The practice of serving new residential buildings with natural gas ended a number of years ago due to a combination of consumer preferences and climate policy. Many industrial facilities continue to be served by natural gas infrastructure, but more pipelines now deliver low-carbon gaseous fuels from renewable feedstocks to those and other customers.

Large parts of the pipeline system are being repurposed and modernized. Traditional gas utilities are more specialized, delivering back-up heating services, as well as transportation fuel, efficiency services, and low-carbon gaseous fuels from high-value renewable industrial feedstocks. In some densely populated areas, the local natural gas distribution network has been converted to district heating and cooling systems. This has increased the opportunities for thermal energy storage, lowered heating costs for customers, and made neighborhoods more resilient.

Equitable and Effective Utility Regulation. By 2040, our utility regulatory bodies have expanded to oversee the electrification of the transportation system and ensure that utility infrastructure investments related to electric transport are prudent and universally beneficial. By expanding electricity sales to new sectors, consumers are enjoying these increased benefits at low cost. Electric and natural gas utilities are thought of as service providers, not fuel providers.

The utility regulatory compact, once limited to just and reasonable rates in return for reliable, non-discriminatory service, has evolved to encompass broader aspects of energy service. New voices have been introduced to the regulatory system to ensure: the equitable allocation of direct and indirect system costs and benefits; the aggressive avoidance of environmental and public health damage from greenhouse gas emissions and other pollutants; the provision of exceptional customer service and expanded customer opportunities for all customers; development of a utility workforce representative of the communities they serve; and a commitment to support those communities in achieving their energy-related economic and environmental goals.

This expansion is coupled with a continued and trusted commitment by utility regulators to the financial health of the utility, which is necessary to deliver on these expanded obligations. A utility’s performance on these and other topics is measured and easily available to the public. Financial incentives are used judiciously to spur exceptional outcomes.

Commitment to the Public Good. This transition has happened because of coordination, foresight, market innovation, and commitment to the public good. It has generated trillions of dollars of investment in buildings and infrastructure and reduced energy imports, all of which has built local industry and made communities healthier and safer.
 

A Call to Action

CEE is committed to advancing our 2040 vision for equitable decarbonization in every aspect of our work and know our partners will join us on this path. In addition to insisting on the continued decarbonization of electricity supply, we will focus our attention on the following:

  • Minimizing the potential for stranded gas assets. This is especially important for low-income populations that may have fewer options for heating.

  • Shoring up society’s energy resilience during extreme weather events that disproportionately affect low-income communities and people of color.

  • Pursuing advanced building shell retrofits of existing buildings to achieve deep weatherization across the entire building stock, leveraging all possible sources of funding.

  • Managing the costs and resulting energy burden of this transition especially for low and moderate-income consumers.

  • Encouraging and supporting proposals for innovative decarbonization pilots, projects and policies by Minnesota’s natural gas and electric utilities.

  • Delivering on the promise of utility performance metrics that evaluate a host of critical items including the equitable distribution of cost and benefits of utility service.

  • Deepening and expanding our engagement with equipment manufacturers and the supply chain workforce to accelerate the manufacture and installation of increasingly efficient equipment that is well-suited to the Minnesota climate.

  • Creating and growing funding and financing options for this transition through public policy and public–private partnerships, recognizing the need not just for equal access to funding but also for equitable financial outcomes from these investments.

  • Integrating diverse workforce training and job pipelines into utility customer offerings like energy efficiency programs.

  • Engaging with equity advocates to develop and implement a forward-thinking set of principles for an equitable and effective utility system, to amplify these voices in the continued evolution of the utility regulatory compact.

  • Supporting an economic transition for power plant host communities and workers as our power plants retire.