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Bryan Orr, host of the popular HVAC School podcast, moderated a panel discussion at the AHR Expo in Atlanta, Georgia, last month about the current and future state of affairs in the HVACR industry. Experts on the panel included Stephen Yurek, president and CEO of AHRI; Talbot Gee, CEO of HARDI; Dominick Guarino, CEO of National Comfort Institute (NCI); Farooq Mehboob, president of ASHRAE; and Chuck White, vice president of regulatory affairs at PHCC-NA.

A wide variety of topics were discussed during the session, including the refrigerant transition and supply chain issues, as well as the labor shortage and the new efficiency standard.

Refrigerant Transition

On the refrigerant transition, Orr asked the panelists to weigh in on the HFC phasedown, including what contractors need to do to prepare for the additional 30% cut in HFC production that takes place next year. White responded that the biggest issue will be stepping up the recovery and reclamation of HFC refrigerants, so that they will be available for legacy equipment.

“There’s a cliff coming in 2024 and there will be significantly less R-410A available, so there will be more competition for that material,” said White. “With EPA’s proposed GWP limit of 700 for air conditioning equipment in 2025 and little product available with the alternative refrigerants, that means there's going to be a big hole in the boat in 2024. Until we have new products in the market, we need to have more refrigerant in the recovery and reclamation chain.”

Yurek agreed, noting that contractors not only need to recover and reclaim more refrigerant, but that they should also be encouraging customers to retrofit to lower-GWP refrigerant when possible. This is especially true in the commercial refrigeration market, where R-404A can usually be replaced with lower-GWP alternatives such as R-448A/R-449A.

“Next year will be a transition year, so there will be a mismatch as well as tight supplies,” said Yurek. “The only way we're going to meet the demand is by reclaiming more and retrofitting where we can to lower-GWP alternatives.”

GOOD YEAR: Talbot Gee predicted that the HVAC industry will do well this year, even if it’s not at the level of the last two years. (Staff photo)

The good news for contractors is that the economic model for recovering and reclaiming refrigerant may be more favorable this year due to supply issues, said Gee. He strongly recommended that contractors be proactive with their suppliers and wholesalers to learn about their recovery programs, which could be very different from the ones they participated in just two years ago.

Gee added that residential equipment containing A2L refrigerant is already available in some states and that it will become widely available in 2024. As such, contractors should be training their technicians on how to safely handle these mildly flammable refrigerants so they can install the systems once they’re available.

“Unlike previous transitions, it’s very unlikely that we’ll be saved by some kind of a drop-in refrigerant that will help smooth the transition,” said Gee. “Contractors are risking their credibility when they convince customers to install large charge sizes of a refrigerant that's about to be retired, because the first time the system needs to be serviced, owners will be pretty annoyed.”

Efficiency Standards

Another change in the HVAC industry took place January 1, 2023, when the Department of Energy’s (DOE’s) minimum energy efficiency requirements went into effect for all newly manufactured residential and commercial air conditioners and heat pumps. As part of the new energy efficiency ratings, a revised testing procedure (M1) went into effect for residential and 3- to 5-ton light commercial, single-phase products, resulting in the new metrics, SEER2, EER2, and HSPF2.

As Yurek explained, this new test procedure was necessary to match the products being manufactured today, which often include variable-speed and multistage options, rather than the single-speed products of yore. This new testing procedure will more accurately account for field conditions by increasing external static pressure (ESP) from 0.3 to 0.5, which Yurek said offers a better representation of what homeowners will actually experience when using the equipment.

But the new efficiency standard also resulted in a complete change in model numbers and product offerings from the manufacturers, which caught some off guard, said Yurek. Contractors and distributors should be aware that another complete change in manufacturer listings will occur in 2025, as a result of the expected ban on high-GWP refrigerants.

“The standards change and the new test procedure were a heavy lift for manufacturers because they had to change their entire platform,” said Gee. “Then you add on to that the sales ban in the southern regions, so even if you had product in stock at the end of 2022, you could not install it in 2023. That added complexity made it even worse. Then throw on top the supply chain challenges we've had over the last two years, and everything all stacked up to make this about as hard as it was going to get. That being said, we're blessed with a pretty robust market, so as long as demand keeps moving, and product is moving through the channel, we’re going to get through this.”

Guarino had a different take on the new efficiency standard, noting that the new equipment has to be installed in near-perfect conditions in order to achieve the SEER2 rating and operate properly.

“The band of forgiveness, if you will, of SEER2 equipment is almost nonexistent now,” he said. “As a contractor installing or replacing a piece of equipment with SEER2, you have to hit a sweet spot, and it’s very difficult to achieve.”

Guarino said that NCI has been testing SEER equipment in the field that is now considered to be SEER2, and they have found that if the airflow or refrigerant charge is just a little bit off, it can have a significant impact on the system.

“We were already hearing from some of the manufacturers in 2022 that the inverter systems were suffering from bad installations,” he said. “We're already getting the feedback that SEER2 is going to be in the same boat, if not even more pronounced. So what does that mean? It means loss in comfort and a huge loss in efficiency.”

Guarino added that the increased static pressure used in the M1 test procedure may also cause some to believe that SEER2 equipment can overcome any duct problems, which could result in even more bad installations.

“Some contractors are going to slap that sucker in and think everything's going to work great, but guess what? It’s just the opposite,” he said. “Because those problems will be pronounced. The increased velocities will result in filters whistling, and there’s going to be blowoff from coils halfway down the ductwork. Talk about perfect storm — it's a perfect storm for bad installations.”

Challenges

While the Inflation Reduction Act (IRA) will eventually help HVAC contractors keep busy installing heat pumps, the ongoing issues of the supply chain and the labor shortage may hamper growth. On the supply chain, Gee said it will continue to be an issue, although it is getting better.

“The supply chain is still not fixed, and it's not going to be 100% fixed,” said Gee. “There are a lot of reasons why it’s not going to be 100% fixed across the economy for the foreseeable future, but it is slowly continuing to get better. But product availability, product mix are going to be challenges, so we're a long ways away.”

That’s why contractors are having to work with more suppliers than they have in the past, said Gee. He added that the best thing contractors can do right now is communicate their needs to their wholesaler/distributor.

“There's a bad habit in this industry of everybody keeping everything so close to their chest, so there's no communication,” said Gee. “That makes forecasting — which was already bad — even worse. So if you as a contractor deal with three suppliers on a regular basis, be extremely transparent with them about your sales plan and what level of the market you're trying to grow in. Then they can forecast what class of product you need and work the hardest to get it for you. If they don't have that, they're kind of guessing.”

The labor shortage will also continue to be a challenge, which is why HVAC contractors should look beyond the traditional methods of recruiting workers.

“In the United States, women account for about 3% of the workforce in HVAC,” said Mehboob. “But if you take American industry as a whole, women account for 47%, so clearly, we are not attracting women to this workforce. We also need to attract the younger generation of people into our industry. But the younger generation is looking for something different. They have an idealism about what they want to do, so the industry needs to speak to their needs.”

Mehboob said the industry needs use inspiration and idealism to attract younger workers, and that could include talking about the environment and new technologies.

“We have to point out the fact that we're in an era of great climate change,” he said. “If our message is that our industry is helping save the planet, that brings that idealism, that inspiration to it. We're also beginning to use artificial intelligence, and it won’t be long before a technician can walk up to a chiller and ask what’s wrong with it. That world is coming, and we’ll need a different kind of workforce, and AI may attract the younger generation to the industry. We want to sell them on the inspiration of a world that needs the younger generation to help save it. It's not about overalls and grime, it's about brain power.”

Even with these challenges, Gee predicts that the HVAC industry should do well this year, even if it’s not at the level of the last two years.

“There will probably be some pullbacks and receding in 2023, but honestly, the sky is not falling,” he said. “Even if we do get into the classical definition of recession, this market has its own unique dynamics, which keeps it outperforming most of the macro economy. The best advice I can give to contractors is that your number of opportunities are going to shrink compared to the previous two years, so your execution needs to be better so you hit on more of those opportunities as a percentage. That goes back to training, sales, awareness, and knowledge.”