A communication transmitted from Yi-An Huang, City Manager, relative to Awaiting Report Item Number 24-16, regarding a report on developing ways to fund support of decarbonization and clean energy projects and technical assistance for property owners of all types especially those with limited resources, with an initial focus on work associated with BEUDO emissions reduction requirements

C I T Y O F C A M B R I D G E Community Development Department IRAM FAROOQ Assistant City Manager for Community Development SANDRA CLARKE Deputy Director Chief of Administration 344 Broadway Cambridge, MA 02139 Voice: [phone removed] Fax: [phone removed] TTY: [phone removed] www.cambridgema.gov Date: May 8, 2024 To: Yi-An Huang, City Manager From: Iram Farooq, Assistant City Manager for Community Development Re: Awaiting Report Item AR-24-16: Report on developing ways to fund support of decarbonization and clean energy projects and technical assistance for property owners of all types especially those with limited resources, with an initial focus on work associated with BEUDO emissions reduction requirements. I am writing in response to Awaiting Report Item AR-24-16 to provide an update on current and future programs and services in support of decarbonization of private property offered through the city or other funding sources. BEUDO Building Performance Standards and Supporting Programs The amendment to the BEUDO ordinance adopted in June 2023 requires non- residential properties to reduce their greenhouse gas emissions in accordance with the following schedule: • Large non-residential properties (100,000 square feet or larger) o 2026 – 2029: greenhouse gas emissions cannot exceed 80% of the building’s baseline emissions o 2030 – 2034: building emissions cannot exceed 40% of the baseline o 2035: buildings must reach net zero emissions • Medium-sized non-residential properties (25,000-99,999 square feet) o 2026 – 2029: greenhouse gas emissions cannot be above the building’s baseline emissions o 2030 – 2034: greenhouse gas emissions cannot exceed 60% of the building’s baseline emissions o 2035 – 2050: buildings’ emissions must be reduced each five years and reach net zero by 2050 We expect that most large properties, which are required to demonstrate emissions reductions starting spring of 2026, will have access to both technical advisors and capital without needing significant city resources. Medium-sized properties are likely to need support and an annual $2M decarbonization program to support these properties is planned to launch in the fall of 2025. Additionally, the Office of Sustainability (OOS) will provide guidance and connect all property owners to resources to help them plan their path to decarbonization and BEUDO compliance. We expect that these resources will include a BEUDO Resource Hub, connections to appropriate MassSave offerings, decarbonization planning assistance, and the examination of federal funding opportunities and broader financing strategies for decarbonization.

Page 2 of 3 BEUDO Resource Hub: The BEUDO Resource Hub will connect BEUDO properties to resources and technical assistance to support their decarbonization work, including connections to state, utility, and federal incentives; MassSave and Massachusetts Clean Energy Center (MACEC) technical assistance; and retrofit financing options. Over the past year, City staff have been exploring options for creating an online resource hub that would provide such guidance to property owners and project managers who own or control buildings subject to BEUDO emission reduction requirements. The proposed FY25 budget would support the planning and first-year implementation of a Cambridge BEUDO Resource Hub. As part of this work, staff will utilize Cambridge’s proprietary BEUDO data management platform, BEAM, to engage property owners in their emissions reductions. U.S. Department of Energy funding for building performance standards (applied for): Jointly with the City of Boston and the Commonwealth, Cambridge is pursuing a $10 million dollar grant through the U.S. DOE’s Inflation Reduction Act program to support net zero building codes and building performance standards, to be deployed over a five- year period. If successful, the grant would enable the Massachusetts Clean Energy Center to create a new technical assistance program for large buildings, focused on providing customized decarbonization plans; the program would focus largely on supporting Boston and Cambridge properties that are subject to emissions reduction requirements. The grant would also fund additional staff capacity in Cambridge to conduct property owner engagement, and it would fund regional, decarbonization- focused workforce training. Eversource decarbonization programs: City staff are meeting regularly with Eversource to coordinate BEUDO implementation with Eversource’s retrofit incentives and technical support programs. Eversource currently offers a Deep Energy Retrofit program focused on GHG emissions reduction. The utility is also proposing a further expansion of decarbonization-focused services in their next three-year efficiency plan and has specifically mentioned supporting compliance with Cambridge’s BEUDO and Boston’s BERDO emissions requirements as a focus area. City staff are providing input on these planned programs and how they will support BEUDO-covered properties. Other Federal Funding: The City is planning to deploy ARPA funding for decarbonization in eligible small businesses and affordable housing through 2026. City staff will continue to identify and pursue other federal funding opportunities to support building decarbonization. The U.S. Treasury’s Direct Pay program provides nonprofits with direct funding for clean energy investments, equivalent to what the tax credit would be; this may also be a valuable funding program for some of the large nonprofits covered by BEUDO, and OOS will work to connect property owners to this program. Cambridge Community Electricity/Renewable Electricity Procurement: OOS will oversee Cambridge Community Electricity, the City’s electricity aggregation program which supplies energy to more than 40,000 primarily residential and small business

Page 3 of 3 accounts. As of January 2024, the program offers consumers 50% renewable electricity as a default, with the ability to opt up to 100% green at rates below standard utility rates. Efforts are currently underway to secure direct investments in renewable energy generating facilities to increase the amount of renewable energy available and lower the cost for consumers. In FY25, staff will work to investigate options for medium-sized and large BEUDO properties to enroll in the Aggregation for the purpose of complying with the building performance standards. The use of renewable electricity will be a key strategy for BEUDO properties to reduce their emissions, especially in the first few compliance periods. This work will examine the electric loads that the aggregation would need to support and the procurement pathways that could help BEUDO property owners access the renewable energy they need. Decarbonization financing strategy for all building types: In August 2023, the City adopted Property Assessed Clean Energy (PACE) for commercial buildings, providing a mechanism for financing comprehensive, long-term building upgrades. PACE is administered by the state’s development finance agency, MassDevelopment, and allows building owners to finance energy and decarbonization measures and enables the financing to remain with the building even in the event of sale. Proposed Annual $2M Decarbonization Program for medium-sized BEUDO properties: BEUDO properties under 100,000 square feet are required to demonstrate emissions reductions starting in 2030. In advance of this deadline, the City is intending to create a new program that would provide detailed decarbonization planning support, including a comprehensive assessment of energy use and decarbonization strategies and contracting advice. This would enable each building to receive a custom pathway to reaching its BEUDO targets. OOS will draw on its experience with the decarbonization planning and advising that Electrify Cambridge offers to help develop this program. This support will help BEUDO properties leverage state, federal, and utility incentives, such as federal tax credits or MassSave incentives, to support project implementation. In addition, in FY25, the City will also begin examining longer-term funding mechanisms to scale building decarbonization in Cambridge. This work will seek to center equity and climate justice in the development of local decarbonization financing approaches, studying mechanisms that could allow for greater community ownership of and/or access to clean energy. The ability to provide direct funding of building decarbonization using municipal operating funds is limited by state law and may be financially limited compared to the communitywide need, and this work will seek to better understand those limitations and identify the role that other funding mechanisms could play. This strategy planning will align with the development of building performance standards for residential buildings and small commercial buildings, which will be conducted with a significant focus on equity and providing access to technical and financial resources.