HVACR Business May 2019 by HVACR Business

Shining Example of Commitment in the U.S. By Pete Grasso 5

An Oral History of Spot Cooling By Terry Tanker 10

Balance Sheets More Important than P&L By Ruth King 14

Six Marketing Tips for Contractors By Elaine Duraes 16

HVACRBUSINESS.COM MAY 2019 / VOL.14 / NO.5

ESTABLISH AND HOLD TRUE TO YOUR CORE VALUES Page 7

ALSO INSIDE Â» Product Focus ..............................................................17 20 Questions with Barton James President & CEO of ACCA ..............................................18 Special Industry Report on Refrigerants ..........................................................19

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CONTENTS

MAY 2019 / VOL.14 / NO.5

F E AT U R E S

D E PA R T M E N T S

Establish and Hold True to Your Core Values

Leadership is one of the most important components of a contracting business, setting the tone and culture of an entire organization from the top down. By James Leichter

Entrepreneurial Spirit: An Oral History of Spot Cooling Two industry entrepreneurs discuss how the spot cooling segment got started and how it has evolved. By Terry Tanker

C O LU M N S

14 16

Balance Sheets are More Important than Your P&L Balance sheets track profits and losses from the time the business started until the day it’s sold. By Ruth King

Editor’s Notebook “Never let yesterday use up too much of today.” – Will Rogers By Pete Grasso

Product Focus

20 Questions with Barton “Bart” James President & CEO of Air Conditioning Contractors of America (ACCA)

Six Marketing Tips for HVACR Contractors Don’t miss out on the potential to grow your business online. By Elaine Duraes

S P E C I A L I N D U S T RY R E P O R T O N R E F R I G E R A N T S

The State of Refrigerants

Industry Study: Transition to Low GWP Refrigerants Underway

Refrigerant Round-Up

Refrigerant transitions are happening now, and will have a big impact on both manufacturers and contractors. By Mark Menzer & Jeffrey Staub The industry is making the steady shift towards low GWP refrigerants. A Fact.MR Industry Study State governments have passed or proposed legislation to phase out HFC refrigerants. By Todd Washam

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EDITOR’S NOTEBOOK

BY PETE GRASSO THE HVACR MANAGEMENT MAGAZINE

TERRY Tanker Publisher ttanker@hvacrbusiness.com PETE Grasso Editor pgrasso@hvacrbusiness.com MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com BRUCE Sprague Circulation Manager bs200264@sbcglobal.net BARBARA Kerr Executive Assistant bkerr@hvacrbusiness.com

ADVERTISING STAFF EAST COAST/SOUTHEAST JIM Clifford Regional Sales Manager Tel 201-362-5561 Fax 201-334-9186 jclifford@hvacrbusiness.com MIDWEST ERIC Hagerman Regional Sales Manager Tel 216-409-3246 Fax 440-731-8750 ehagerman@hvacrbusiness.com WEST COAST TERRY Tanker Publisher Tel 440-731-8600 Fax 440-731-8750 ttanker@hvacrbusiness.com

HVACR Business, founded January 1981, is a monthly national trade magazine serving contractors, mechanical engineers, manufacturers, manufacturer representatives, wholesalers, distributors, trade associations, and others in the heating, ventilating, air conditioning and refrigeration (HVACR) industry primarily in the U.S. The editorial focus and mission of HVACR Business is to provide business owners and managers with the very best business management concepts available. Critical topics covered include leadership, management, strategy, finance, sales, marketing, training, education, staffing, operations, human resources, legal issues, customer service and more. We are dedicated to helping contractors master these key management skills and provide them with the resources necessary to build strong, profitable companies. Every effort is made to provide accurate information, however, the publisher assumes no responsibility for accuracy of submitted advertising and editorial information. Copyright©2019 by JFT Properties LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, or by recording, or by any information storage or retrieval system, without written permission from the publisher. Subscription Rates: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: U.S. and possessions: 1 year $48; 2 years $75; 3 years $96; Canadian and foreign, 1-year $108 U.S. funds only. Single copies $8. Subscriptions are prepaid, and check or money orders only. Subscriber Services: To order a subscription or change your address, write to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039 or call (440) 731-8600; or visit our Web site at www.hvacrbusiness.com. For questions regarding your subscription, please contact bkerr@hvacrbusiness.com. HVACR Business (ISSN 2153-2877) Published monthly by JFT Properties LLC., 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039. POSTMASTER: Send address changes to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039. Periodicals postage paid at Cleveland, OH and additional mailing offices. (USPS 025-431)

31674 Center Ridge Road, Suite 104 North Ridgeville, OH 44039 Tel: (440) 731-8600 Fax: (440) 731-8750 Web site: www.hvacrbusiness.com (ISSN: 2153-2877)

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Shining Example of Industry Commitment in the U.S.

just returned from a trip to Oklahoma. In all my years of traveling the country, meeting contractors, I’d never had the pleasure of visiting the Sooner State until now.

old. Vicki has been a part of the Johnson Controls family in Norman all her life and was an integral part of making this expansion happen.

What I knew about the state prior to this visit was limited. Sure, I’d gotten to know a couple of excellent contractors the past few years — Chris Hunter, owner of Hunter Super Techs, has become a valuable resource for me; and recently I met Darryl Robinson, owner of Robinson Air, who provided me with a lot of great insight into his business.

Three years ago, Liz Haggerty, vice president and general manager of global ducted systems, and Matthew Shaub, vice president and general manager of commercial ducted systems, identified a need for a new, larger testing and manufacturing facility for commercial rooftop units — and they wanted it in Norman.

Other than those two fine gentlemen, the best thing about Oklahoma in my mind was my Cleveland Browns’ starting quarterback Baker Mayfield — our first round draft pick last year who is poised to bring the Browns back to glory.

Johnson Controls is committed to the future of the industry in the U.S.

And, thanks to Mayfield, I learned there is now a strong Browns fan base in Oklahoma. I felt right at home during my short visit these past couple of days. As I drove down I-35 from Oklahoma City to Norman, Okla., I saw perched along the highway the massive structure that was the reason for my visit: Johnson Controls’ new, state-of-the-art Rooftop Center of Excellence. As the flagship location for industry research, manufacturing and testing of Johnson Controls HVAC rooftop units, the 900,000-square-foot facility includes nearly 400,000 square-feet of incremental laboratory and manufacturing space, as well as renovations to more than 150,000 square-feet of office and meeting space. Prior to the grand opening ceremonies and ribbon cutting, which included local and state dignitaries, as well as a visit from Oklahoma Governor Kevin Stitt, I had an opportunity to sit down with some of the leadership from Johnson Controls that made this expansion possible. For more than 50 years, Johnson Controls has been a part of the Norman, Okla. community and this new expansion ensures they’ll be there for at least another 50. The working partnership they have with both Oklahoma University and Oklahoma State University brings an unmatched level of engineering talent to the company. In addition, the expansion has created more than 350 new jobs right here in the U.S. Vicki Davis, plant manager, grew up at the facility. Her mother still works there on the line and she told me she’d first stepped foot in the plant when she was about 2 years

“We are planning for growth for the future,” Haggerty told me. “When we looked at our ability to service the customer, we felt we had an advantage here with regard to logistics as well as our engineering and manufacturing already in place.”

Together, they went to Bill Jackson, vice president of Johnson Controls and president of global products, with a plan. It was an aggressive plan — and an expensive one — but Jackson agreed there was a need and committed to making it happen. “This is a U.S. based product and we have a highly capable labor force here,” Jackson said. “In addition, this allows us to expand our training capabilities in this new, state-of-the-art facility.” Among the innovations I saw while I toured the facility is a two-story, 52-foot high lab that allows Johnson Controls engineers to test 150 ton rooftop units in a down flow configuration, in climates ranging from -30F to 130F. The technology they’ve put into this facility is impressive. Johnson Controls has added extensive laboratory, modeling and simulation tools to offer an environment to conduct complex development, regulatory compliance, performance, safety and reliability testing. “When you look at product development, we’ve expanded our testing capability here by about 250 percent,” Shaub said. “It really allows us to get our products to market much quicker.” Everything about this new center of excellence is focused on the future. The future of the industry, the future of testing, the future of the customer and the future of growth. As I waited for my flight out of Will Rogers World Airport, I thought of a famous quote by the famous Oklahoman that sums up exactly what Johnson Controls is doing: “Never let yesterday use up too much of today.” u

HVACR BUSINESS MAY 2019

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ESTABLISH AND HOLD TRUE TO

YOUR CORE VALUES

Leadership is one of the most important components of a contracting business, setting the tone and culture of an entire organization from the top down. BY JAMES LEICHTER

any of today’s business books talk about the importance of establishing core values in your company. In fact, many business consultants and authors strongly believe that establishing core values is one of the first steps in starting and managing a business. I am certainly one of those people. I believe that your company’s purpose statement and core values are the foundation on which everything else is built. Core values may be defined as a person’s or company’s fundamental beliefs. They are the foundation on which we conduct ourselves. We use core values to hire, manage, and fire employees. We use core values to guide how we handle people. You can think of them as your non-negotiable, do not cross boundaries of behavior.

CORE VALUES ARE DEEPLY PERSONAL It is the job of the founder or president www.hvacrbusiness.com

Your company’s purpose statement and core values are the foundation on which everything else is built. to establish core values. Core values should not be created by consensus. It could take a person an entire month or more to create a short list of core values. Typically, you will want to create four or five values. Core values are generally one to five words but there is no firm rule. The important thing about core values is this: they are deeply personal to you. They should reflect your own personal beliefs about what is important regarding personal and corporate behavior. It is never too late to implement core values in your company. Once implemented, core values should rarely, if ever, change.

TEST YOUR CORE VALUES When you build your core values, test them against these points: 1. A good set of core values is not industry specific. They could be transferred to

any business you own. 2. Your core values should be just as valid in twenty-five years as they are today. 3. If you woke up tomorrow super wealthy, your core values should still apply. 4. You would not hire or keep an employee if they did not adhere to each core value. 5. Your core values should reflect those of your best employees and best friends. They should be dissimilar to those people who you would not be close friends with and have previously fired. As an example, here are the core values of one of my companies. They also happen to be my personal core values as well.

DIFFERENT THAN GUIDING PRINCIPLES Guiding principles are sometimes made

synonymous with core values. As far as I am concerned, they are different. Guiding principles are more operational than personal. Guiding principles are more related to how you work and how you make decisions. Core values are more related to how you conduct yourself and deal with other people. “Recognize and reward employees based on their output” is a guiding principle. “Be polite, forthright and totally candid” is a core value. When you do not follow a company’s guiding principles, you don’t get promoted. If you don’t follow the company’s core values, you will be fired.

INTRODUCE CORE VALUES Have a company meeting where you introduce your core values. This meeting should be upbeat and positive. Let everyone know how you came up with your core values. Let them know what they mean to you personally and why they are continued on page 8

HVACR BUSINESS MAY 2019

continued from page 7

important to your company. Be sure to emphasize the fact that your core values are mandatory and that breaking them can get you fired. I recommend that you post your core values on the wall where everyone will see them throughout the day.

Reference your core values when reprimanding people. By contrast, reference your guiding principles when coaching and mentoring people.

A DOUBLE-EDGED SWORD

USING YOUR CORE VALUES

The problem with core values is that you must also abide by them to the very best of your ability. Your employees will be watching you and they will notice when you don’t.

If your core values are deeply personal, this part will be easy and intuitive. Be sure

You cannot value honesty and cheat on your taxes. You cannot value commitment

Aptora’s Core Values They influence who we hire, who we promote, and who we fire.

You cannot value honesty and cheat on your taxes. You cannot value commitment and break a promise. You cannot preach kindness and not be polite to everyone.

1. Don’t lie, cheat, or steal.

to reference them often so that your staff knows they are not just a fad. The idea is to demonstrate how you use your core values to make decisions on a regular basis.

4. Be polite, forthright, and totally candid.

Reference your core values when you are interviewing people. See if their core values line up with yours.

and break a promise. You cannot preach kindness and not be polite to everyone. That’s the hard part for core values — you must follow them. You might have a top performing employee who does not adhere to a core value. After a suitable warning, you must fire that employee

2. Make commitments and keep them.

3. Be passionate, determined, and hardworking.

5. Seek continuous improvement.

because it is obviously not a core value. You will need to remove that core value from your list and consider adding it to your list of guiding principles. I have been in this double-edged sword quandary. I have had to fire long term employees, even friends, over a core value violation. That was difficult, but having great core values and not following them is much worse than having no core values at all. Leadership is one of the most important components of a contracting business, setting the tone and culture of an entire organization from the top down. u

HVACR BUSINESS MAY 2019

Editor’s Note: To learn more about developing effective leadership skills, visit EGIA. org/HVACR-Leadership and download a free training package complete with online classes, core value development worksheet, industry research and much more.

James Leichter is a founding faculty member at EGIA Contractor University. He is a longtime HVAC contractor, consultant, and public speaker. Leichter is president and CEO at Aptora Corporation, a maker of contracting business management software. He is the editor of MrHVAC.com and BlackBeltContracting.com.

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ENTREPRENEURIAL SPIRIT AN ORAL HISTORY OF SPOT COOLING PART 1

PUBLISHER TERRY TANKER SAT DOWN WITH KEN SWANSON AND (THE LATE) GARTH TAGGE, TWO ENTREPRENEURS WHO STARTED AN INDUSTRY BY LAYING THE FOUNDATION FOR SPOT COOLING. THEY INTRODUCED A TECHNOLOGY AND CREATED DEMAND BY USING UNIQUE, CREATIVE AND UNORTHODOX METHODS. THE THREE MET ON SEVERAL OCCASION’S TO DISCUSS HOW IT ALL STARTED AND HOW IT HAS EVOLVED.

BY TERRY TANKER

en Swanson grew up in the HVACR industry. His grandmother was the third Copeland wholesaler in the country, and grew that business into six branches in Chicago. Swanson’s father urged him to go to college, but it was assumed that upon graduation he would join the family business. As a result, Swanson recalls his criteria for selecting a college relied more on “the amount of fun” rather than how much he could learn. In retrospect, he realized it was not his best decision, though it certainly made his college experience more interesting. True to the plan his father laid out, Swanson started at Chase Supply right after graduation and by the age of 24 he was running the day-to-day operations of the business as his father prepared for retirement. It was through his work at Chase Supply that Swanson first became aware of a new innovation: portable air conditioning.

HVACR BUSINESS MAY 2019

They knew they needed something to increase worker productivity. One of their productivity engineers came up with the idea of portable air conditioning. This is when he also met Garth Tagge. Together, the two ambitious entrepreneurs embarked on a journey to bring this new technology to the U.S. They didn’t have a game plan when they first started, but like any great entrepreneur, they tried new things and learned as they went along. Today, the portable air conditioning market continues to grow in importance. This is how it all got started.

THE BIRTH OF SPOT COOLING Swanson: In 1983, a company called Nippondenso created a spot-cooling product for “in house” use. They had about 40,000 production line employees in a half-dozen plants across Japan. During the summer months it was extremely hot and humid and, as a result, production

would drastically fall. They knew they needed something to increase worker productivity. One of their productivity engineers came up with the idea of portable air conditioning. Nippondenso had a relatively new division operating in Los Angeles and thought the product could be sold in the U.S. Garth was hired to set up a distribution network for the product. Seven states were identified as targets and he began calling on distributors to introduce the product and try to get them to carry this new product. Tagge: We just hit it off. There’s a funny story about our first meeting. Swanson: The first sales call, he comes in with his Japanese boss. It’s about 98 degrees in Chicago and they’re in wool suits

and a van that’s not air-conditioned with a spot cooler in the back for “show and tell.” They want to demo the spot cooler with the Japanese boss ... but he doesn’t speak English. I usually worked the counter and we were always busy. So, I invited them back to my office. The Japanese guy is trying to sell this product in Japanese with a Japanese brochure. The brochure has a blonde in a bikini displayed with the product. The brochure is in Japanese, and he’s speaking Japanese, so I’m polite and listen to the pitch then look at Garth and ask him, “What the hell did he just say?” At the end of the meeting I tell them “I’ll take 10, if I can have exclusive rights to distribute in the state of Illinois.” Tagge: It was a good day and we repeated it several more times. My boss called Ken “mustache man.” Whenever I’d tell him I was going on a sales trip, he’d ask where and I’d say, “to see the mustache man.” He’d give me a big smile. www.hvacrbusiness.com

At some point, we’d sold 40 units to Ken and he had exclusive rights to distribute in four states — Illinois, Georgia, Florida and Texas — as well as an 800-phone number.

CREATING A MARKET Swanson: There was a problem — there was no one to sell to at first. We had 40 units just sitting in the warehouse. We were trying to figure out who we could sell these to. I would work the counter with the service guys. I liked talking to people, and service guys would come in and we’d have donuts and coffee. I’d shoot the breeze with them to get a feel for what was going on. We always had a unit out on the floor, and they would say, “You’re nuts! Two thousand bucks a ton, (versus $400 for a standard unit) you’re out of your mind. No one is going to buy one of those. Where would we even use it? No ducting, no nothing. It just blows cold air.” I had the units for a while and Nippondenso wanted to be paid. I apologized to Garth and told him to take them back, because there wasn’t a market for them here. But Garth came up with a clever idea.

In the beginning, it was free product demonstration. We were simply trying to determine if there was a market. The things we did with the NFL proved there was. Then, over time we needed to create larger demand within specific markets, dominate those markets, compete and be the leader. He suggested to his boss that he should come to work for me for 10 days a month to help figure out the market. Tagge: Our challenge wasn’t building a business. The challenge was building an industry so that we could build a business around the industry we created.

sitting in the kitchen at the office, it was 1985, and it was really hot and really humid. Ken had season tickets for the Bears. I said, “Let’s call the (Chicago) Bears and see if we can get on the sideline with our “people cooler.” We get a hold of Tim LeFevour, the Bears equipment manager.

Swanson: Thinking back, we needed to create an industry around a product no one knew about or even considered they needed. It’s not like there were places you could go to rent an air conditioner for two days. There was nothing like that.

We tell him “We’ve got a product I think you’re going to like.” Obviously, he’s heard this pitch a thousand times and we can tell he’s not interested. So, we say the (Dallas) Cowboys just bought eight of them and he tells us to come on down.

A BEAR OF AN INSPIRATION

We put a unit in the back of one of the wholesale vans, and off we go to the stadium. We plug it in — it’s just one nozzle,

Tagge: I’ll never forget this. We were

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300 CFM — and the air that’s blowing out is 20F cooler than ambient. All of a sudden, Mike Ditka comes walking over with Walter Payton. Payton sits down to feel the air blowing on him and Ditka says, “What do you think?” Payton replies, “That feels nice; I like it.” Ditka says, “That unit is yours. Everybody else stay away from it.” LeFevour looks at us after the practice and says, “Okay, we’ll talk it over and let you guys know.” He calls us a couple days later and asks us to bring eight of them for Saturday night’s preseason game (the home team has to give the visitor the same thing they have). We put four on the visitor’s side, and four on the Bears side. From that point on, if it was 60 degrees or above we brought eight units — four for the Bears and four for the visitor. When the Bears went on the road we would meet them. All the outdoor stadiums were designed so the home team was in the shade and the visitor was in the sun. One Sunday, the Bears are in Miami continued on page 12

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playing the Dolphins. Kickoff is supposed to be 1 p.m. but its already1:05. Legendary Dolphin’s Coach Don Shula is on the phone with the NFL New York office, telling them the Bears brought in air conditioners for their sidelines, wanting to know if it was legal. The League office checked the rulebook and said, yes, it’s okay.

From that point on, if it was 60 degrees or above we brought eight units — four for the Bears and four for the visitor.

REACH BEYOND THE GOAL LINE

Swanson: I went to a convention in Boca Raton and I stayed at the Boca Hotel and loved it. I had exclusive rights to Florida, so I ended up renting a small warehouse to store 10 units. We started marketing the product to hospitals in Florida. I’d get a phone call and leave the wholesale business, go to Midway, get on a plane, fly to Fort Lauderdale, get a car, go to the warehouse, load the van, deliver the units to the hospital, put the van back in the warehouse, go back to the airport and get on a plane back to Chicago. Part of our marketing was promising 24 hour service. I was doing this 3 or 4 times a week – and learning each trip I made. Eventually, I bought a condo, which made things a lot easier. Midway Airlines knew me pretty well and they’d always upgrade me to first class. One day I get on the plane and I’m next to the window, and who sits next to me but Don Shula. He had been at Mike Ditka’s breast cancer fundraiser golf outing. The guy sitting across the aisle doesn’t give him a break and talks to him the whole flight. We’re getting close to landing

HVACR BUSINESS MAY 2019

We were young, carefree and having a great time going to all of those games and being on the sidelines. Don’t forget, we both had our “day jobs” too. But, we were getting exposure we literally couldn’t buy. Swanson: There was one Sunday night game where we were walking around looking up into the stands after setting up the units when we see Jim Belushi trying to get down onto the field, but the ushers won’t let him. Everyone knows he’s a Chicago guy and huge fan, but there’s no way he can get on the field because he doesn’t have a pass. We get his attention and tell him we have an extra sideline pass. His eyes light up. We slip him the pass, and now he’s as good as gold and gets on the field. We’ve got dozens of stories like that. It was just a lot of fun.

So, the game finally starts at 1:08 p.m. and the Bears have air conditioning, but the Dolphins do not. We got a lot of calls after that. It was really exciting, because from that point on we had credibility. We started working with the Cowboys, Oilers and, eventually, the Dolphins. Tagge: At first, the NFL is what we focused on. Remember, up until this point the only application for the product was an assembly line. Unfortunately, at that time, the cost of the product was $2000 per ton. It was an extremely expensive product so we didn’t have any success pushing that through to the end user. Managers in the U.S. didn’t want the added expense, largely due to union wages. We’d been at it almost two years and were thinking this might not work. Luckily, the NFL gave us the exposure we needed.

technology and about how the units were helping to keep the players cool.

Spot Coolers can be seen on either end of the Bears bench. Coach Mike Ditka talks with Walter Payton, Jim McMahon and Matt Suhey.

We did fun things back at the supply house too. We’d bring the units back from a game slap some mud and grass on them and put it on the show room floor. Guys would come in and say, “I saw that on TV yesterday.” We’d tell them “That’s the one ‘The Fridge’ (William Perry) or Walter Payton knocked into,” or, “That’s the one Richard Dent and Matt Suhey used.” We’d sell those units to guys who just wanted them in their garages to tell their friends and neighbors. Then we started taking pictures on the sidelines of the players next to the units — thousands of pictures. We’d use a magic marker and put W.P or R.D on the unit and say, “Yeah, that’s Payton’s unit,” or “That’s Dent’s unit.”

Garth Tagge (left) and Ken Swanson accepting an industry award. so I take out a brochure and have it in my lap. Finally, Shula gets a break and looks over at me and asks me what I do. I say, “Do you remember those air conditioners on the Bears’ sidelines last year where you stopped the game? Well, we’re the guys that sell them.” He asks for my card and I tell him I’ll even write my cell number down on the back. The funny thing is, I didn’t have a cell phone — you know those giant things they called a “brick.” Instead, I wrote down my home number. I’ll never forget … my wife and I had just moved down to Boca. It’s Saturday afternoon and the phone rings and my wife says, “Don Shula’s on the phone.” He wanted me to bring “some of those air conditioners” to the game the next day. I

told him I’d look into our schedule and see what we could do. We went all over the country for a couple of years providing air conditioning for all the teams — it was great. We didn’t have a competitor. If you wanted AC on the sideline, you had to call us. Tagge: Unfortunately, working with the NFL cost us money. We didn’t charge them anything. We were after the exposure and credibility. We didn’t care where the games were being played, we would ship the units to the stadiums. We knew the announcers were going to talk about how hot it was on the field and it never failed. A reporter would be on the sidelines next to one of our units in front of a national TV audience talking about the

Tagge: After a period of time, the exposure really paid off and units started to sell. We’d go on sales calls and show them the unit and say, it’s a portable air conditioner. All we had to do was ask if they’d seen the game last week and if they noticed the units on the sidelines. It was a story — a great one, because everyone we were calling on could relate to it. The next thing you know, we’re at the Super Bowl and then the Sugar Bowl … we were everywhere. u Publisher’s Note: To be continiued next month ... stay tuned to find out how spot cooling went from NFL novelty to mainstream industry solution.

Terry Tanker is publisher of HVACR Business. Email him at ttanker@hvacrbusiness.com.

www.hvacrbusiness.com

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FINANCE

BY RUTH KING

Balance Sheets are More Important than Your P&L

very month you look at your profit and loss statement. You’ve never thought about looking at your balance sheet because you’re most concerned about profit and loss. You discover that your balance sheet tells you a lot more than you think it does. Profit and loss statements only show profit or loss for a specific time period, usually a month or a year. Then, it starts again. In last month’s column I wrote about what to do in slower, usually less profitable months.

Balance sheets show continuous profitability. Balance sheets track profits and losses from the time the business started (or was bought) until the day it was sold.

Receivable days and inventory days tell whether the company is heading for problems in these two areas. Receivable days are, on average, the number of days from the day the invoice was sent to the day the money was received. Inventory days are, on average, the number of days from the day a part was bought to the day it was used.

Balance sheets show continuous profitability. Balance sheets track profits and losses from the time the business started (or was bought) until the day it was sold. How? Through the values shown in the retained earnings segment of the balance sheet.

Negative retained earnings mean that if an owner wanted to sell his business, he would have to dig into his pockets to pay off the company’s liabilities since there are not enough assets to cover the company’s liabilities. Balance sheets warn owners of impending problems. They answer the questions: 1. Is the company getting more or less profitable? 2. Is there enough money coming in the door to pay upcoming bills? 3. Is it getting easier or harder to pay my bills?

HVACR BUSINESS MAY 2019

Here’s an example when this occurred: Many years ago, a contractor had more than a million dollars in receivables but didn’t have the cash to pay the fuel bill for his trucks. His outstanding receivables averaged more than 75 days old. No one was paying attention to collecting money for work done. This was his wake-up call and he never had a receivable problem again since someone was calling on the 31st day when payments were not received per the terms of the work.

Most contractors celebrate when spring comes and business picks up. The bad months and bad P&Ls are over! They look forward to new, positive bottom lines on their profit and loss statements.

If a company’s retained earnings are negative, then the business has been unprofitable year after year. Or, in a few cases, the company bought out a partner’s share of the business. This event caused retained earnings to be negative.

company is headed for a cash flow problem due to collections.

If a company is COD, receivable days are very small. However, a five day increase in receivable days is significant. That means that it is taking a week longer to get paid. Find out why. 4. Is the company heading for a collection problem? 5. Is the company purchasing too much inventory? The company profit and loss statement cannot answer these questions. All it can tell is whether a month, a quarter, or a year had more revenue than expenses. Changes in retained earnings answer question No. 1 above. If retained earnings are increasing, profitability is increasing. Another way to answer this question is to look at the current ratio (current assets divided by current liabilities). Increasing current ratio generally means increasing profitability except in months with assets purchased for cash, large tax payments, or other unusual cash

inflows or outgoes. If the current ratio is less than one, then there is not enough cash to pay the company’s bills (question No. 2). This means, on a month-to-month basis, current liabilities or those bills which have to be paid within a year, are greater than current assets. If your company is in this situation, the only ways out are continuous profitable sales or cash infusions in the business either through investments, loans, or sale of long-term assets. To determine the answer to question No. 3, again look at the current ratio. If the company’s current ratio is increasing, in most cases, it should be easier to pay the bills. The only time it might not be easier is the answer to question No. 4 – the

Likewise, a five day increase in inventory days is also significant. Why does the company have an extra week’s worth of inventory on hand? The answer might be because of a seasonal stocking order. If this isn’t the case, find out why more materials were purchased than normally used. u

Ruth King has more than 25 years of experience in the HVACR industry and has worked with contractors, distributors and manufacturers to help grow their companies and become more profitable. Contact Ruth at ruthking@hvacchannel.tv or call 770-729-0258.

www.hvacrbusiness.com

COLD FEET?

MAYBE IT’S TIME TO FIND A BETTER PARTNER. Before you fully commit to an HVAC manufacturer, do your homework. Do they offer a full range of innovative products? Do they provide award-winning support programs? Are you representing a brand your customers already know and trust? Will they stand by your side, in good times and in bad? If you’re not feeling the love, then give us a ring. We’re Fujitsu...your lifetime partner. Visit fujitsugeneral.com

MARKETING

BY ELAINE DURAES

Six Marketing Tips for HVACR Contractors

mall installers and contractors can face an uphill battle when it comes to self-promotion – tight budgets, time constraints and

lack of dedicated marketing personnel and resources leave some wondering how and where to start. But like many things, marketing can

CONTRACTORS As an HVACR contractor, you need every competitive advantage possible. By employing NATE-certified technicians, you’re making a statement to your customers that you value quality and recognize best practices.

Step Up with NATE Certify Your Technicians Integrating NATE is a great way to set the bar for excellence within your organization. Not sure where to start? Check out the following tips:

➤ Use NATE’s four-step career path, in-person and online resources to set up a training program for your techs.

be as simple or as complex as you want it to be, and even the busiest professionals can use these six easy tips to boost their business. 1. Get free support for being a great installer. Just like credit card companies and airlines, manufacturers often offer free programs where, after going through a selection process, star installers can be rewarded for their work with access to business or website support tools, or local advertising paid for by the manufacturer. Other benefits of joining these programs include support with financing options and networking and quarterly events, helping smaller businesses take advantage of tips and resources from seasoned professionals.

Positive reviews can be incredibly beneficial for smaller businesses looking to make a name for themselves, so encourage your customers to leave reviews about their experiences on social media sites. You can do this by sending a follow-up email after installations or projects that asks them to review you on your Google Business or Facebook page. 5. Stay current on your training. One thing a contractor can never get enough of is training – and yet one thing contractors don‘t have enough of is time. With digital methods like webinars and e-academies becoming increasingly popular, you can watch and learn the latest trainings and techniques at your own convenience. Check out training resources

Don’t miss out on the potential to grow your business online – create a Facebook business page showcasing all of your services and expertise.

➤ Check with manufacturers to see if they offer compensation for technician testing and training.

➤ Find a testing organization online.

Get Listed on NATE’s Contractor Locator As a qualifying member of the NATE Consumer Contractor Connection (C3) program, you are connected with consumers seeking contractors who employ NATE-certified technicians.

Boost your NATE Marketing ➤ Use the NATE logo in all your advertising—website, literature, business cards, quotes, ads, direct mail, clothing, and more.

➤ Brand your vans and even your shop. Find patches, promotional items, and more online!

HVACR BUSINESS MAY 2019

Don’t miss out on the potential to grow your business online – create a Facebook business page showcasing all of your services and expertise. 3. Keep up with the industry. Looking to get insight from others in your industry? Many manufacturer loyalty programs offer access to an exclusive Facebook group where installers and contractors nationwide can connect to gain insight on technologies, training and trends from others in the industry.

asknate@natex.org 877-420-6283 natex.org

2. Grow your business with Facebook. More customers are hopping online to search for quality services, and Facebook is one of the leading channels they’re using.

4. Manage your reviews. We all know word of mouth helps drive business, and in the digital era, that comes in the form of online reviews.

from manufacturers’ webinars. 6. Use existing resources. Have no idea where to start when it comes to an online business strategy? Google recently released step-by-step instructions and tips on how to expand your digital presence with its Digital Workshop. It’s a great starting point for an overview on how to get online with your business. u

Elaine Duraes is marketing manager at Bosch Thermotechnology Corporation, responsible for overseeing the company’s North American marketing, communications and customer programs. Over her 13-year tenure with Bosch, Elaine has worked in the company’s Automotive Aftermarket and Thermotechnology divisions. Visit bosch-climate.us for additional information.

www.hvacrbusiness.com

PRODUCT FOCUS »

THE FACTS

ABOUT R-22 IN THE U.S. FACT 1: R-22 is readily available.

BALTIMORE AIRCOIL COMPANY

JOHNSON CONTROLS

The Nexus Modular Hybrid Cooler is the world’s first intelligent, plug-andplay, modular, hybrid fluid cooling system. The Nexus is engineered to simplify system design and optimize water and energy savings, while providing the lowest installation, operating and maintenance costs.

NexusPremier 25-50 ton commercial rooftop units from Johnson Controls deliver superior standard efficiency while reducing operational costs over the life of the unit. NexusPremier includes class-leading standard efficiency models that already comply with stringent Department of Energy (DOE) 2023 energy efficiency standards.

The Nexus Modular Hybrid Cooler simplifies both the design and installation of fluid cooling systems. The units are up to eight feet shorter in height, have a 40 percent smaller footprint and are 35 percent lighter than traditional fluid coolers.

NexusPremier rooftop units streamline the design process with integrated system selection tools, easily accessible building information modeling (BIM) files, improved submittals and simplified specifications.

>> baltimoreaircoil.com

>> johnsoncontrols.com/nexuspremier

MITSUBISHI ELECTRIC TRANE

RIDGID

Mitsubishi Electric Trane HVAC US LLC (METUS) has launched its line of MSZ/MUZ-WR Model 16 Seasonal Energy Efficiency Ratio (SEER) Heat Pumps.

Professional contractors can now eliminate a cutter from their toolbox with the new RIDGID C-Style Close Quarters Copper Tubing Cutters.

The new heat pumps are part of the M-Series product line, including indoor units, outdoor units and controller options for residential and light commercial applications. With rated capacities of 9, 12, 18 and 24 kBtu/h, the four WR Model heat pumps’ efficiencies can reach up to 16 SEER. >> mitsubishicomfort.com

Perfect for cutting tubing in tight spaces, the cutters cut three sizes with only two tools. The ½-inch and ¾-inch combined tubing cutter has a quick-change feature that allows easy switching between the two sizes, with the second cutter designed for 1-inch tubing. Each comes with a spring-loaded cutter wheel that provides constant pressure on the tubing and features the RIDGID X-CEL Wheel Pin for quick wheel replacement without tools.

FACT 2: R-22 will be available for years to come. FACT 3: R-22 pricing has decreased, so consider the high cost of replacement. FACT 4: R-22 is still the best choice for R-22 equipment. FACT 5: Forane® 427A is a leading R-22 alternative for retrofit. To learn more about all our offerings, go to our website: www.forane.com

forane.com

>> ridgid.com www.hvacrbusiness.com

HVACR BUSINESS MAY 2019

20QUESTIONS

>> with BARTON JAMES

We sat down with Barton “Bart” James, newly appointed president and CEO of the Air Conditioning Contractors of America (ACCA). James, who previously served as ACCA’s senior vice president of government relations, discussed his personal ties to the industry, his background in politics, industry consolidation and how ACCA is committed to serving the contractor. 1. What did you do before you came to ACCA? I was running a small trade association that had 100 large member companies. Prior to that, I was the National Rifle Association’s lead for sportsman’s policy and with another association called the Land Trust Alliance. I built their advocacy programs.

9. What is ACCA’s new strategic plan about? It really is about us not only growing our members, but it’s them being happy. It’s a higher rate of retention for us, growth. That’s really at the heart of it. It’s viewed as a pathway, but everything there is happening at one time.

2. What’s your political background? I served as a political appointee in the President George W. Bush’s administration at two different times. In between there, I was running political operations in Broward County, Fla. for the Republican Party, working for former U.S. Senator George Lemieux, as well as spending time as a political operative and opposition researcher of the Republican National Committee.

10. What is ACCA’s main focus going forward? We’re not changing a lot of what we’re doing; we’re just focused now. It’s the clarity and it’s the members, so I think working with the states could be an important part to do that. At the heart of it, it’s about focusing on our members. We got distracted before.

3. How did you get your start in politics? I grew up with my grandfather involved at the local level with campaigns. As a political science major, that interest turned into an internship for my home district Congressman, and that quickly lead to a full-time job doing a little bit of everything, flipping back and forth between the congressional office and the campaign. I went to college two days a week while working full time for the Congressman. 4. Could you describe your management style? It is evolving, but I’ve always been a believer of letting people set their own path. My management style is to let people go, lead and make change happen. 5. How do you motivate your team? I’m a big believer in leading by example. That’s always been my style. I want to know as much about the office as possible and what everyone does because I believe that we’re stronger by knowing and learning. 6. What’s the biggest challenge in the industry? There’s the ever changing, evolving consolidation in the industry. Across the industry, the impact that has is exciting to see but that definitely makes our work here challenging because we constantly need to grow our base to keep up with those losses. 7. What’s your personal connection to HVACR? My wife grew up in her father’s contracting business that he started 40 years ago. My brother-in-law is a part of it, and also building his own in this industry. 8. How does that help you make decisions? My father-in-law still talks about the equipment, not the work that he does. We need to remind manufacturers that it truly is all about the contractor.

HVACR BUSINESS MAY 2019

11. What are some of the changes? We’ve done away with the for-profit IE3 name of our conference and magazine. Pretty much everything you’re going to see from us will be about ACCA and connecting. Our magazine is now going back just to members … if you want a hard copy of the magazine, you have to be a member of ACCA. But, we’re mindful that we do have a role to do things for the entire industry. 12. What’s the long-term goal? We want every contractor out there to be part of ACCA and have the people that are committed to supporting those contractors to be part of ACCA. That includes manufacturers and distributors as well. We need to make life easier for people not harder, and there’s far too many efforts in this industry that just make things more complicated than they need to be. 13. What might contractors not know about ACCA? I don’t think a lot of them, sadly, understand what a pillar we are in their business. The whole idea of putting products in correctly and having a way to do that we refer to as Manual J. Whether they’re paying in ACCA or not, they’re benefiting from it when they can look a customer in the eye and know they did it correctly. Every time they get a competent person out of trade school or someone’s looking to improve, it’s probably ACCA’s materials that they’re using.

14. What are the current legislative issues? Right now, refrigerant changes around the country, protecting tax reform with the Democrat majority in the House — they were not involved with the tax reform package that passed that was signed into law in 2017, so are they going to try to put their mark on that and repeal some of the businessfriendly provisions? So, how do we protect that? The overtime rule that the Secretary of Labor released on March 7th … are the Democrats in the house going to try to fight that? 15. How can members get the most out of ACCA? Read and engage. We have a weekly newsletter, we have a magazine and a lot of online resources. It truly is about engagement that’s the starting point and making that commitment. 16. Can you tell us about the online resources? We have our contractor forum, and I find it unbelievable the discussions that happen there. We try not to jump in too much as staff, let those go and people ... because we have an opinion. We don’t allow vendors in there to see what contractors are talking about, it’s strictly peer-to-peer … it’s an unbelievable resource for contractors. 17. What are your personal goals at ACCA? I want to blow our goals that we’ve set for ourselves through our strategic planning out of the water. I’m not going to do that alone, but that’s what victory looks like to me, and I want to have those yearover-year where it’s not always about growth, it’s about having happy members telling those stories about how ACCA is better. 18. What’s your most important job? Empowering those around me. At the end of the day, I’m just one person, so the team of staff, the team of volunteers, the board committees, I want to get them engaged and excited. Then, when they leave because they made the time commitment, they’re excited to pass that torch on to the next person. 19. What do you like to do for fun? I’ve got twin boys who are close to 7 … I love spending time with them and, obviously, my wife. And I love the outdoors hunting, fishing, and just being outside. 20. What kind of hunting do you do? I love to bird hunt. It’s hard to beat a day out in the field. I’ll trade a lobbying down the Hill any day for a morning in the duck line where we know the names of dogs, and kids, what truck you drive and stuff like that. I can work that for years for the advantage of ACCA’s members. www.hvacrbusiness.com

THE STATE OF REFRIGERANTS Refrigerant transitions are happening now, and these transitions will have a big impact on both equipment manufacturers and contractors.

BY MARK MENZER & JEFFREY STAUB

he transition became reality when EPA, through their Significant New Alternatives Program (SNAP), banned manufacturers from selling many types of HFC refrigeration systems. Refrigerants like 404A and 134a, which have high Global Warming Potentials (GWPs), were suddenly illegal in some new equipment. You may have heard that the regulatory push for new refrigerants has, for now, slowed down. Contractors can be misled by this temporary pause in federal regulations. If you slow down your preparation to install and service these new systems, you could be playing catchup later — trying to catch up to your competition! www.hvacrbusiness.com

You may have heard that the regulatory push for new refrigerants has, for now, slowed down. Contractors can be misled by this temporary pause in federal regulations. A LITTLE BACKGROUND Beginning in 2016, EPA put rules into effect that banned the sale and installation of many types of commercial refrigeration systems — including supermarkets and commercial food service equipment — using high global warming refrigerants. That left low-GWP refrigerants like R-448A and R-449A and very low GWP

refrigerants like CO2 and R-290 for new installations. The hiccup here was that, after litigation, EPA was told that it lacked the authority to tell manufacturers that had already moved from HCFCs to HFCs (that is, all of them!) that they now had to move away from HFCs. However, although EPA had to withdraw its rules, the

die had been cast and most refrigeration equipment manufacturers have already moved on and are almost exclusively offering low-GWP options. EPA is re-writing those regulations and likely later in 2019 we will see how they have changed. Meanwhile, the regulatory action has moved to the states. After President Trump announced that the US would withdraw from the Paris Climate Agreement (which, ironically, takes effect the day after Election Day 2020), several states announced that ‘we are still in’ and that they would be controlling greenhouse gas emissions on a state level. As of this writing, that group includes 22 states, representing over 50 percent of the US population. The continued on page 20

HVACR BUSINESS MAY 2019

continued from page 19

If Time Is Money, Meet Your Newest Money Maker.

list is growing by the month, so it is likely that some of your customers are in areas that will have their own statewide refrigerant phasedown rules. California, as is usual with environmental regulations, is the furthest advanced, with several other states being just in the early stages of developing their regulations. In California, the former EPA SNAP rules on commercial refrigeration are currently in effect and restrictions on high-GWP refrigerants for air-conditioning systems are being drafted. HVACR equipment manufacturers are asking those states to work together for consistent regulations, but it is likely that the regulations would not all be identical.

The ASHRAE safety group classification is important to understand as each classification affects the implications of applying a given refrigerant to a system. When working with classifications of refrigerants that are flammable or toxic, safety is of the utmost concern. There is a lot to consider; designers, installers and owners need to balance the safety and sustainability, the desired system performance, costs and the refrigerant properties. The optimal point for design will also vary based on several factors such as the application, operating temperatures, regulations and standards. The various operating conditions will change based on regional use or on design use such as air conditioning, refrigeration or freezing.

40%

D E S I G N

FASTER*

TO INSTALL

45%

FASTER* TO CLEAN

50%

higher flammability lower flammability no flame propagation

A3 A2 A2L* A1

B3 B2 B2L* B1

lower toxicity higher toxicity increasing toxicity »

TO SERVICE

Friedrich FastPro design makes installation easier and gives you the fastest access to the parts and components that typically require cleaning and service. *Faster than similar installation, cleaning and service performed on standard ductless wall-mounted units.

In the future, the industry will be dealing with different types of refrigerants than in the past. Most of the refrigerants that have lower global warming properties are also flammable, although some just slightly so. Others, such as propane (R290), can be quite flammable. The chart below, taken from an ASHRAE standard, shows how refrigerants can be classified as toxic (B) or non-toxic (A) and non-flammable (1), lower flammability (2 and 2L) and higher flammability (3). So, for example, R-410A, which is non-toxic and non-flammable, is classified as A1, whereas R-32 is an A2L, since it has very low flammability. Type 2L refrigerants have sometimes been described as easy to ignite, but hard to keep ignited.

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SAFETY GROUP

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Another consideration is whether the system will be in occupied spaces or more isolated, such as a machine room. Due to the various factors for consideration, it is easy to see that there will be no single refrigerant, but rather a patchwork of multiple refrigerants based on different applications. Figure 3 provides a guide on some of the most common refrigerants based on the global warming potential, flammability and the refrigerant density. We have classified the refrigerants as they relate to some commonly used refrigerants of today (R-123, R-134a, R-22, R-404A and R-410A). We have also categorized the refrigerants by density since they can be applied to different applications and different compression www.hvacrbusiness.com

HVACR BUSINESS MAY 2019

Friedrich_HVACR Business_March._FINAL.indd 1

FLAMMABILITY

FRIEDRICH, THE EASIEST DUCTLESS TO INSTALL, CLEAN AND SERVICE

increasing flammability »

Today we can already see rapid adoption of some of the lowest GWP refrigerants including the use of R-290 for smaller self-contained equipment.

2/26/2019 12:12:15 PM

technologies. Each section has options for replacement refrigerants with lower GWPs toward the bottom of the chart. Take note that most of the lower portion of the chart contains mildly flammable or highly flammable refrigerants. Which refrigerants are being considered for refrigeration applications? First, we need to consider some sub-categories of refrigeration applications. Supermarkets, condensing units and split systems and self-contained refrigerators and freezers all have very different capacities and footprints, thereby allowing us to apply different refrigerants to hit the optimum point for safety, system performance and cost. Today we can already see rapid adoption of some of the lowest GWP refrigerants including the use of R-290 for smaller self-contained equipment. The condensing unit and split system market is not as clear cut. There has been a transition to R-407A/F and some locations are starting to work with R-448/R-449A and concerns remain prior to moving to flammable refrigerants for larger charge split systems. We can also see transitions in supermarkets to CO2 and some trials with R290 with semi-plug ins.

SELECTING A REFRIGERANT: Balance of Properties Safety and Sustainability (ODP, GWP, Flammability, Toxicity)

Optimal point varies based on application, operating conditions, regulations, and standards

Cost (First, Total and End of Life)

System Performance (Capability and Efficiency)

Refigerant Properties (pressure, density, thermal capacity, compatibility)

Most of the refrigerants that have lower global warming properties are also flammable, although some just slightly so.

Globally there is wider adoption of CO2 as there are over 10,000 systems installed in supermarkets that are operating safely at higher trans-critical pressures. Which refrigerants are being considered for air-conditioning applications? Sub-categories of air conditioning are unitary, commercial rooftops and commercial chillers which typically use scroll compressors with high density R-410A. Larger capacity commercial chillers using dynamic compressors such as screw or centrifugal use low density refrigerants such as R-134a, R-513a or R-123. As you can see from the chart, the primary refrigerants being evaluated as a replacement for R-410A are R-32, R-452B and R-454B. Each refrigerant has some positive and negative effects on the system. The chart on the next page shows a side-by-side comparison of some of the design properties for R-410A and lower GWP substitutes.

REFRIGERANTS REQUIRE HOLISTIC EVALUATION Aside from evaluating the refrigerant for flammability and toxicity classification, the refrigerant must be evaluated holistically as applied to an application to ensure proper system performance and reliability. www.hvacrbusiness.com

Compression technology is a major consideration for refrigerant selection. It can take a year or more of development work to qualify a known compressor technology for a new refrigerant. The refrigerant properties will greatly dictate which compressors can be paired with specific refrigerants. Compression and volume ratio, discharge temperatures and bearing loads are just some of the compressor design considerations. In air-conditioning applications, many scroll compressors are used with R-410A. To evaluate a lower GWP refrigerant, such as R-32, a complete change in design is necessary. The high discharge temperatures might require the addition of liquid or vapor injection to keep the temperature within an acceptable level. R-32 has a higher density than that of R-410A, which allows a designer to reduce the piping sizes and charge to keep acceptable velocities. Along with the compressor selection, an evaluation on the compatibility with the type of oil is required. Compressors are designed with minimum oil circulation rates to prevent too much oil from being pumped out into the system. High OCR rates reduce overall system performance by coating the heat exchangers and reducing capacity. When the oil is pumped out, the design of the system must ensure that this oil is returned to the compressor sump for proper lubrication. There needs to be appropriate refrigerant and oil miscibility for the refrigerant to carry the oil back to the compressor sump and this will only happen if the piping is correctly sized to provide a proper refrigerant velocity.

A significant amount of work is necessary to design and qualify both equipment and subcomponents that will use the newer refrigerants. The refrigerant properties (thermal capacity, operating pressures, density, discharge line temperature, glide, operating map, oil miscibility, saturation temperature-pressure relationship) need to be evaluated across the individual system sub components such as the compressor, heat exchangers, valves, piping and even controllers. Pressure is one refrigerant characteristic that has been evaluated. For many years

systems were designed for use with R-22 and or R-404A with a maximum working pressure of 500 psi. To achieve a safe working system, equipment must withstand three to five times that maximum working pressure. In the 1990s, designers had to overcome the hurdle of increasing the working pressure to 650 psi to accommodate the higher working pressures of R-410A. More recently, in the last decade designers have been working to build safe systems for the wider adoption of CO2, which, when operating in the transcritical region, can operate at pressures upwards of 1800 psi.

Understanding the refrigerant density and pressure is critical to properly sizing pipe diameter. This is a critical aspect of system design with new refrigerants, as we can see a much higher percentage of failed compressors in systems where a refrigerant field retrofit has taken place due to lack of oil return and low suction velocities. Heat exchangers need to be evaluated based on the operating pressures, the density of refrigerant at operating conditions, the thermal capacity and if the refrigerant is zeotropic and has glide. If the refrigerant is flammable, such as R-290, considerations are made to reduce the internal volume as much as possible to meet charge restrictions. continued on page 22

HVACR BUSINESS MAY 2019

continued from page 21

For all components, a complete material compatibility evaluation is currently happening across the various refrigerants. There are 40+ replacement and lower GWP refrigerants. A list of all materials used, from steel, to copper, aluminum, to neoprene O-rings, polymer seals, gaskets and other plastics and coatings, needs to be tested for material compatibility. If a new refrigerant is slightly flammable, the O-rings must be compatible to ensure there are no leaks or a product needs to be redesigned to eliminate the seals.

HOW SHOULD CONTRACTORS PREPARE? Considering all these changes, what’s an HVACR contractor to do? Big changes are looming ahead, but there is a temporary lull in federal regulations. Nevertheless, there are several reasons to start executing a plan. First, several states are developing their own phaseout plans — and more states

REFRIGERANT PROPERTIES vs R410A

R32

R452B

Glide

 NA

 1K

DTL

 +15K

 +2K

EER

 +1%

 -1%

Capacity

 +2%

 -2%

Operating map

 Similar to R410A

Oil

Higher viscosity

Safety

 A2L

GWP

 675

 680

are likely to do so soon. Second, manufacturers are moving ahead with design and development of equipment with higher efficiency and new refrigerants. There are flammable refrigerants in today’s refrigeration equipment and will be in tomorrow’s comfort conditioning equipment as well. Third, beyond the installation and maintenance of systems, wholesalers and contractors will have to learn what will be required to transport and store units containing flammable refrigerants. As Yogi might have said, “The future ain’t what it used to be!” u

Mark Menzer is director of public affairs for Danfoss. Jeffrey Staub is director of application engineering for Danfoss. For additional information, visit danfoss.com/en-us/.

Examples of performance comparisons with different refrigerants Source Danfoss test lab

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HVACR BUSINESS MAY 2019

12/27/18 10:16 AM

www.hvacrbusiness.com

I N DUS TRY S TUDY

TRANSITION TO LOW GWP REFRIGERANTS UNDERWAY DESPITE PERSISTENT CHALLENGES

he HVACR industry is making the steady shift towards low GWP refrigerants, with decisions influenced by an evolving regulatory climate. Fact.MR’s new study, which estimates the low GWP refrigerants market at $18 billion, remains bullish on impressive growth of the low GWP refrigerants market.

KEY INFLUENCING FACTORS According to Fact.MR’s study, penetration of hydrofluorocarbons (HFCs) continues to remain high despite growing research on its harmful impact on the environment. Taking into consideration the environmental impact of HFCs, regulations on its use have become stringent over the years. According to Fact.MR’s study, these factors are likely to provide an impetus to the growth of low GWP refrigerants market in the near future. An increasing number of developed as well as developing countries are implementing a regulatory framework that puts a check on the production and use of HCFs. Initiatives such as the Montreal Protocol, European Union’s F-gas regulations and the US Significant New Alternatives Policy (SNAP) program www.hvacrbusiness.com

The exponentially growing HVACR industry are promoting the adoption of environmentally sound practices with phase-out of some high GWP refrigerants. have been successful in curtailing the use of HCFs in a range of applications. The ripple effect of these initiatives and regulations has bolstered the case for low GWP refrigerants, according to Fact.MR.

INDUSTRIAL APPLICATIONS Refrigerants are the workhorse of the HVACR industry and leading industry players are promoting the adoption of environmentally sound practices with the phase-out of some high GWP refrigerants. The exponentially growing HVACR industry is expected to remain the bedrock for the low GWP refrigerants market with a substantially high demand in refrigeration applications. The Fact.MR study finds that the refrigeration applications of low GWP refrigerants accounted for a massive 63 percent share in the low GWP refrigerants market revenue, equaling over

$11.4 billion in 2018. As the adoption of environment-friendly alternatives to high GWP refrigerants is burgeoning in refrigeration applications, the Fact.MR study predicts that demand for low GWP refrigerants will continue to remain high in the foreseeable future. Leading manufacturers in the low GWP refrigerants market are increasing their focus on burgeoning demand for low GWP refrigerants in various other applications including chillers. Top-tiered stakeholders in the low GWP refrigerants market, such as The Chemours Company and Daikin Industries Ltd., recently declared their strategies to capitalize on rapidly growing needs for low GWP refrigerants in chillers along with air conditioning applications.

PHASE DOWN TO CREATE LUCRATIVE OPPORTUNITIES The European Union has stringent

environmental policies, and it is manifested in the rapidly plummeting availability of high CWG HFCs in the European region. According to the summary of HFC phase down in Europe release by the Environmental Protection Agency, the HFC phase down was modest during 2015-2017, however, very steep decline was observed in 2018 as the average volume of HFC available on the European market reduced to 63 percent of the 2015 amount. Thereby, with the sharp decrease in HFC supply in 2018, there is potential for a significant refrigerant shortage in European markets. Leading players in the low GWP refrigerants market in Europe are aiming to capitalize on lucrative sales opportunities in the European Union by bolstering the production of low as well as ultra-low GWP refrigerants. u The Fact.MR study also provides futuristic overview of growth of the low GWP refrigerants market for the forecast period 2019-2027, by thoroughly assessing the salient market dynamics. The study projects that the low GWP refrigerants market will grow two times larger in terms of revenue to exceed $38 billion by the end of the assessment period.

HVACR BUSINESS MAY 2019

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REFRIGERANT ROUND-UP

Because of inaction at the federal level for the past two years, state governments have passed or proposed legislation to phase out HFC refrigerants. BY TODD WASHAM

or the past few months there has been significant action from state governments to address greenhouse gas emissions, and there is more action coming from the states and the Democrat-led House of Representatives. Environmental groups, climate activists, and the elected officials who support their causes are working to reduce/phase down/eliminate greenhouse gases and one of their top targets are hydrofluorocarbon (HFC) refrigerants, like R410a. R-22 is being eliminated because it is an ozone-depleting substance and, since the U.S. Senate ratified the Montreal Protocol on Substance that Deplete the Ozone Layer, the U.S. is obligated to follow an international phaseout schedule. The R-22 phaseout began in 2010, and although it is still being phased-out of the market, there are efforts underway to eliminate the use of R410a, which has a high global warming potential (GWP). The phaseout of high GWP refrigerants began as an Obama Administration www.hvacrbusiness.com

The R-22 phaseout began in 2010, and although it is still being phased-out of the market, there are efforts underway to eliminate the use of R410a, which has a high global warming potential (GWP). effort but was not (and is not likely) a priority for the Trump Administration. The Obama Administrationâ&#x20AC;&#x2122;s goal was to adopt the Kigali Amendment to the Montreal Protocol, an international treaty that set the phasedown schedule of HFC refrigerants. While the Kigali Amendment was a priority for former-President Obama, it was not a priority for the Republican-led Senate, which, constitutionally, ratifies treaties. In the current political environment, there is little appetite in the Trump Administration and the Senate to consider the Kigali Amendment, which is widely viewed as a climate change treaty.

While it is widely viewed, in political terms, as a climate change issue, there is some support from policy makers because of the positive economic impact a national phase down schedule would have. Having the federal government create an HFC phase down schedule would ensure the phase down schedules are not done on a state-by-state basis (i.e. 50 different timelines), which could create a logistical nightmare for the industry, especially for contractors who work across state lines. Because of inaction at the federal level for the past two years, state governments have passed or proposed legislation to phase out HFC refrigerants. And, when itâ&#x20AC;&#x2122;s related to climate issues, California takes the lead.

Indeed, California did just that. In August 2018, California Governor Jerry Brown signed the California Cooling Act which sets California on a course to cut HFC emissions by 40 percent by 2030. Shortly after California enacted the California Cooling Act, New York, Connecticut, and Maryland followed with similar commitments. A number of other states, including Washington, Michigan, Wisconsin, Illinois, and others are following suit.

WHATâ&#x20AC;&#x2122;S NEXT? As we transition from HFCs, the next generation of refrigerants will include flammable or mildly-flammable products (ASHRAE Standard 34 designated A2L and A3 refrigerants). ACCA is concerned about this because there is little to no focus on flammable refrigerant training, transportation and safety protocols, consumer education, or quality installation practices. continued on page 26

HVACR BUSINESS MAY 2019

All of these issues need to be addressed before we bring the next generation of refrigerants into the market.

support from Arkema, Inc. — an ACCA corporate sponsor — but the rest of the industry needs to support these efforts to ensure the whole industry is moving forward together.

ACCA is developing flammable refrigerant training programs, with generous

These refrigerant changes are several years away, but ACCA is concerned about

continued from page 25

THE FACTS ABOUT R-22

IN THE U.S. FACT 1: R-22 is readily available now and after 2020. FACT 2: R-22 will be available for years to come. FACT 3: R-22 pricing has decreased, so consider the high cost of replacement. FACT 4: R-22 is still the best choice for R-22 equipment. FACT 5: Forane® 427A is a leading R-22 alternative for retrofit. To learn more about all our offerings, visit our website: ark.ma/fc-hvacr-r22-myths

them today because the codes, standards, and training must be in place before flammable refrigerants become the norm. These issues can take 3-5 years to advance through the codes process and penetrate the market, and we need a whole-of-industry focus to ensure the

training and consumer awareness are fully in the marketplace. ACCA is educating policy makers about these issues, at the state and federal levels, and our efforts are more important than ever. Climate issues are going to be a priority for the next two years as scores of Democrats enter the race to be the 46th President of the United States. The democratic platform in Congress and for presidential candidates will include efforts to rid the United States of greenhouse gas emissions, and our industry will be a prime target. In fact, the Democrat-led House has even created a Select Committee on the Climate Crisis which we expect to examine greenhouse issues.

Policy makers must understand the concerns about the next generation of refrigerants and that their efforts to phaseout HFC must not be done hastily. Policy makers must understand the concerns about the next generation of refrigerants and that their efforts to phaseout HFC must not be done hastily. ACCA is advocating for a slow and methodical approach to these phaseouts so everyone is moving together and preparing consumers and contractors for these changes. ACCA’s efforts are focused on a federal legislation that would give the EPA the authority to regulate the sale of new refrigerants. Currently, it’s unclear if the EPA has the authority to prohibit the sale of refrigerants that are non-ozone depleting. This could lead to the open-sale of refrigerants that are considered flammable.

The above statements are based on current information and are not an offer for sale, a warranty or a contract. Forane is a registered trademark of Arkema. © 2019 Arkema Inc. All rights reserved. UL® is a registered trademark of Underwriters Laboratories, Inc.

forane.com

800-245-5858

HVACR BUSINESS MAY 2019

If the industry and policy makers do not properly address these changes then there could be some serious injuries. We’ve already seen technicians killed from mixing refrigerants in Australia! u

Todd Washam is director, industry relations for the Air Conditioning Contractors of America (ACCA). Visit acca.org for additional information.

www.hvacrbusiness.com

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