REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Manager, or Designee, to Execute the Reimbursement Agreement Between Silicon Valley Clean Energy and City of Sunnyvale for the Heat Pump Rebate Topper Program
Report
BACKGROUND
The City’s Climate Action Playbook Game Plan 2028 details specific actions for the City to take to achieve its 2030 greenhouse gas emissions reduction target. Under Strategy 2 “Decarbonizing Buildings”, the City has Moves 2.D “develop an engagement and incentive program to accelerate the adoption of all-electric appliances,” and 2.G “Adopt an electrification ordinance for existing residential buildings by 2026.” With the adoption of the 2025 California Building Code (RTC 25-0998), Sunnyvale included requirements and guidelines for transitioning to heat pump HVAC (heating, ventilation, and air conditioning) and wiring for future electric appliances (Reach Codes for existing single-family residential). Move 2.D is meant to complement Move 2.G. With the adoption of the Reach Codes for existing single-family residential, the City will launch an education and engagement campaign, coupled with an additional rebate for residents who replace gas furnaces with heat pump HVAC units.
EXISTING POLICY
CLIMATE ACTION PLAYBOOK AND GAME PLAN 2028
Strategy 2: Decarbonizing Buildings
• Play 2.1 Reduce energy consumption in existing buildings
• Play 2.2 Support electrification of existing buildings
GENERAL PLAN
Chapter 2 - Community Vision
Environmental Justice
GOAL EJ-1: Prioritize the needs of designated low-income communities within Sunnyvale that bear high pollution burden according to CalEnviroScreen 3.0, to ensure equitable outcomes.
• Policy EJ1.2: Encourage the phasing out of non-conforming land uses from residential communities, especially for communities that are low-income and/or bear a high pollution burden, as identified in the Environmental Justice Analysis.
Chapter 3 - Land Use and Transportation
GOAL LT-1: Protect the quality of life, the natural environment, property investment, preserve home rule, secure fair share of funding, and provide leadership in the region.
• Policy LT-1.10: Participate in federal, state, and regional programs and processes in order to protect the natural and human environment in Sunnyvale and the region.
• Policy LT-1.11: Prepare for risks and hazardous related to climate change prior to their occurrence.
GOAL LT-2: Environmentally sustainable land use and transportation planning and development.
• Policy LT-2.1: Enhance the public’s health and welfare by promoting the City’s environmental and economic health through sustainable practices for the design, construction, maintenance, operation, and deconstruction of buildings, including measures in the Climate Action Plan.
• Policy LT-2.2: Reduce greenhouse gas emissions that affect climate and the environment through land use and transportation planning and development
ENVIRONMENTAL REVIEW
N/A
DISCUSSION
Council adopted updates to the 2022 California Building Code (RTC 25-0762) on August 12, 2025, and incorporated those updates in the 2025 California Building Code, adopted September 30, 2025. The 2022 code updates included requirements to install a heat pump air conditioner upon replacement of an existing air conditioner and for electric readiness upgrades. These updates are considered Reach Codes for existing buildings. During public comment and Council discussion, concerns about the cost impacts of the air conditioner to heat pump air conditioner requirements were raised. Council directed staff to prepare an education and outreach campaign about these updates and the resources and rebates available to community members. Staff are preparing to launch the Existing Building Electrification Outreach Campaign in February of 2026, with a focus on heat pump HVAC (heating, ventilation, and air conditioning) units and the new Reach Codes.
To complement this education and engagement campaign, staff are proposing an additional rebate for Sunnyvale residents who swap out their gas furnaces for heat pump units. This additional rebate will be added to the rebates that residents qualify for through Silicon Valley Clean Energy (SVCE). The Sunnyvale “rebate topper” will be administered by SVCE staff through their current rebate program for swapping out gas furnaces for heat pumps. Offering the rebate through the current SVCE rebate program saves the City administrative costs and allows the funding to be passed through directly to the community. Sunnyvale is proposing $350,000 offered over a 15-month period. The following table breaks down the current SVCE rebates and the “rebate topper” that Sunnyvale is proposing to add. The percentage in the incremental cost column shows how much of the difference between the costs of a heat pump air conditioner unit or a central air conditioner and a furnace the rebate covers.
|
Customer Category |
Appliance Type |
Value of Sunnyvale Rebate |
Value of SVCE Rebate |
Total |
% of Incremental Cost Covered by Rebates |
|
Market-rate customers |
Heat Pump HVAC (replacing gas furnace) |
$1,000 |
$2,500 |
$3,500 |
65% |
|
Income-qualified customer |
Heat Pump HVAC (replacing gas furnace) |
$1,500 |
$3,500 |
$5,000 |
93% |
The program is estimated to support funding approximately 350 heat pump installations over the 15 months it is scheduled to run. The Sunnyvale rebate topper will be available on a first-come, first-served basis and until funding runs out.
FISCAL IMPACT
Budget to fund Climate Action Playbook moves is available in the General Fund under Project 831290 - Climate Action Plan Implementation. The funding became available as funding allocated for other projects related to building electrification was no longer required. The City has evaluated and applied for grant and other funding sources for a similar program without success.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the City Hall reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
RECOMMENDATION
Recommendation
Authorize the City Manager to execute the Reimbursement Agreement between Silicon Valley Clean Energy and City of Sunnyvale for the heat pump rebate topper program.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $500 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
___ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract*
___ Labor or personal employment contract
___ Contract under $50,000 or non-fiscal
_X_ Contract between public agencies
___ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: Madeline Khair, Environmental Programs Manager
Reviewed by: Ramana Chinnakotla, Director, Environmental Services
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. Sunnyvale City Rebate Agreement