Executive Roundtable: Residential Cooling

Todd Nolte Carrier

Bryan Davenport Oxbox

Steve Scarbrough Mitsubishi Electric Trane Quan Nguyen Lennox Residential

Chris Day Rheem Randy Roberts Rheem

We’re living in an entirely new landscape, with safety of the utmost importance. As an essential service, HVACR contractors play a vital role in the well-being and comfort of everyone. As temperatures heat up, during a time when many are staying in their homes, you will need to assure your customers that you’re taking proper precautions to protect their safety during cooling season.

I recently spoke with a handful of manufacturer executives to get their thoughts on the residential cooling market and what challenges that lie ahead.

This Executive Roundtable panel included Todd Nolte, senior director of product and brand marketing at Carrier; Bryan Davenport, general manager of Oxbox; Steve Scarbrough, vice president of residential business for Mitsubishi Electric Trane (METUS); Quan Nguyen, vice president and general manager for Lennox Residential; and Randy Roberts, vice president of sales and marketing and Chris Day, vice president of product strategy and engineering at Rheem. BY PETE GRASSO

How has residential cooling category evolved? Davenport: It certainly has changed with regards to efficiency and refrigerant, and over the past, really, 10 years. Certainly, as efficiencies creep up and the thoughts about comfort change, we see many consumers are opting for more affordable solutions. And that’s why we introduced Oxbox in February of 2019, to make sure we’re providing customers who are looking for affordable HVACR solutions that they can get from a brand that they know and trust. Day: It continues to evolve quite a bit with multi-stage and variable speed products, and much more of a system approach. New technologies are being used quite a bit more, and communicating systems are becoming more and more popular. It’s definitely ideal, where the indoor unit and the outdoor unit are talking and communicating with each other, for not only maximum efficiency, but homeowner comfort. We see that continually growing. Nguyen: What we’re seeing with the residential cooling category is equipment just getting smarter and more efficient and delivering greater air. And it’s broader than just cooling … customers are more conscientious about the quality of the air in their homes. Our goal, within all of our products, is to deliver perfect air. We’re seeing a lot of innovation in the cooling category. Greater capabilities on control over humidity is one example. And all this is contributing to the growth of the smart home technology sector. Nolte: Two things immediately come to mind. The first is the introduction of — Chris Day

the ductless and ducted hybrid combination, which consists of a ducted indoor unit paired with a ductless outdoor unit. We have a proprietary kit for this combination that allows the homeowner to use a conventional 24V thermostat to operate the system, while also accommodating variable speed operation.

The second is digital connectivity. A number of digital features recently introduced in HVAC equipment provide homeowners with enhanced features and benefits.

Scarbrough: Residential cooling has become much more focused on energy-efficiency and personalized comfort in recent years. It’s no longer enough for cooling units to be durable and high performing, but they must offer smart comfort that matches how homeowners use each zone in their home. They should also operate in a way that has a positive, lasting impact on the environment and homeowners’ pockets. Across the board, we’ve seen a shift in the types of products that are developed to meet consumer demand and environmental need.

What regulations should contractors be aware of? Davenport: We’ve known refrigerant change is on the horizon in the years to come. At Oxbox, we’re focused on evaluat- ing the options that are out there and making sure we’re providing our contractors with options that are really designed for a sustainable future. That’s very import- ant to us, and so we’re working with our experts internally and with other indus- try associations to weigh all the options available and make good decisions for our customers. Day: The regulations that are already on the books — coming at the beginning of 2023 — that’s the most significant reg- ulatory change to happen in the industry in decades. Not only is it an efficiency increase of about 10 percent across the board, it’s also a change in the key metrics. How the industry talks about products, and how contractors are going to spec products and sell the homeowners … all of that nomenclature changes. So, CR moving to CR2, HSPF moving to HSPF2. That’s a big thing. Not only will products change, but all of the way that we talk about it. Nguyen: We had a lot of heating reg- ulation over the last 12 to 24 months. On the cooling side, we don’t see any major regulations until 2023. And when those regulations come, we’ll have a full cooling lineup to support that. But for the bal- ance of 2020 going into 2021, not a lot of changes on cooling regulation. Nolte: We have the minimum efficien- cy changes that go into effect in the U.S. on January 1, 2023, which will increase the baseline efficiencies of outdoor equip- ment. The North will go from 13 to 14 SEER, and the Southeast and Southwest will go from 14 to 15 SEER*. In addi- tion, heat pumps will go to 15 SEER na- tionwide. Another regulation is from the California Air Resource Board and it will limit the GWP of refrigerant to 750 or be- low, which will require a new refrigerant for stationary HVAC equipment. Scarbrough: While not specific to residential cooling, contractors should pay attention to legislation, codes and in- centives geared toward reducing the use of fossil fuels. This trend is part of the stra- tegic electrification and decarbonization movement, which is encouraging more homeowners to consider all-electric heat pumps as their sole system for both cool- ing and heating.

What are some new solutions in this space? Davenport: We have a very focused portfolio of products designed for the residential heating and cooling market. We want to make sure we provide our dis- tributors and our contractors solutions, really, for the consumers and customers who are looking for affordable options. With Oxbox, you’ll find a complete line of 13, 14 and 16 SEER heat pumps and air conditioners where appropriate, to make sure we’re serving the largest segment of the marketplace at, really, those entry level and move up efficiencies. Nguyen: There is a high correlation between efficiency and quality of air. We continue to launch new products in that space. We have more products that are available at two-stage and variable speed than we’ve had in the past. And we also have our smart home thermostat, the iComfort S30, which allows customers to control that system perfectly. Consumers are able to manage that system with the thermostat, and the thermostat has the ability to monitor system performance, detect errors, communicate those er- rors to not only them but their HVACR contractor. Nolte: This spring, we’re introducing a new Infinity Series air conditioner and heat pump with Greenspeed Intelligence, which will achieve industry-leading effi- ciencies, dehumidification and sound lev- els. These new units will boast a number of innovative diagnostic capabilities. The en- hancements showcased in these products will also introduce several features to ease serviceability and the installation process. Roberts: Consumers are demanding and asking for their HVACR systems to have some of the same features they’re seeing with other products in their homes, and we’re bringing that to them, and really looking at expanding that to where it’s not only operationally, but it’s also just con- venience features … to where they know their system’s operating properly, and they can be able to control it from any hand- held device, or remotely, or whatever they need to do.

Scarbrough: Contractors can offer indoor units with innovative sensors for more responsive and personalized com- fort. Also, manufacturers like METUS are offering products and supporting exper- tise, so contractors can offer hybrid systems

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to customers. As homeowners continue to show interest in zoning solutions, hybrid systems that use both ductless and ducted units allow for greater flexibility and specific targeting to provide customizable comfort in each zone of a home.

What impact has connected homes had in this space? Davenport: A smart home is part of many people’s lives today. We’re focused on making sure we’ve got solutions that provide really affordable heating and cooling options. We don’t have connected options in our portfolio today. Instead, we know there are many solutions available, and our Oxbox product — they are a 24- volt solution — will work with many of the connected thermostat options in the marketplace today. Nguyen: Homeowners’ equipment is smarter and more reliable and we’ve led that push. Of those that have recently purchased an HVACR system, we’re seeing that 25 percent of them have home thermostats that are smart, Internet enabled and programmable. That’s up from just 14 percent in 2016. There’s a conscientious effort by the consumer to want more and more connected systems and they see the value of that smart technology.

We continue to invest in those areas and develop a suite of products like our iComfort. Our leading iComfort thermostats, they’re compatible with Amazon’s Alexa, Google Home, Apple HomeKit and If This Then That, so the ITTT, which means they can command it by voice. They can command it remotely. Nolte: The impact has been that controls now need to work with various platforms and connected products throughout the home. For Carrier, we will continue to focus on making our products compatible with other connected systems and products. Roberts: The real value in connectivity isn’t the homeowner being able to see their unit or control their unit, it’s the use of data throughout the upstream part of the channel. The unique position Rheem is in with our contractors, is we have the ability for air and water to be a part of it. If you start looking at energy usage in a home, and you take the water heating and the air conditioning, you’re looking at 65-70 percent of the total energy in that home is coming through those products.

Scarbrough: Connected homes aren’t connected just so homeowners can have another device or piece of equipment with internet-connectivity. Useful connectivity improves the performance of equipment and gives homeowners more options for control and personalization. To keep pace with homeowner expectations, our industry needs to enable cooling products, and residential HVAC systems more generally, to be more responsive to occupants. This can be achieved through the use of variable-speed equipment and innovative sensors, like our 3D i-see Sensor. At METUS, we’ve worked to develop a series of home controls to make automation of our residential cooling and heating systems seamless for both contractors and homeowners alike. Our kumo cloud software offers Apple, Amazon and Google integration plus it allows users to manage indoor comfort levels even when they’re not home. How do you see this category changing? Davenport: It’ll certainly be a dynamic time. As the economy changes this year, which we certainly don’t know what will happen, and with the impact of the coronavirus there could be the potential for the economy to soften. And what we know is in economic times of hardship or a recession that consumers opt for more affordable HVACR. And that’s where I think Oxbox really provides a great opportunity for our distributors and our contractor partners to offer those consumers with an affordable solution from a name they know and trust.

In addition, having ways for consumers to be able to pay for those products through financing options will be critically important.

Nguyen: Consumers are increasingly more informed than ever before and they’re also incredibly environmentally conscientious, so they’re doing their research on our products more and more online. It’s critically important that contractors are more informed, better trained and are able to talk about what those different products can bring to the market. There’s a change on the consumer side in terms of their knowledge. We’re getting to Millennials as homeowners, so it’s critically important that folks are aware of the online channel and how to operate in that online channel with regard to cooling products and HVACR as a whole. Nolte: First off, I think we’ll see a continued movement towards electrification that will drive more heat pump usage. Another trend that will be important to consider is that with the evolution of cooling and testing standards, the size of condensing units will increase unless new technologies are introduced to offset that need. Therefore, we expect new innovations to proliferate the industry that will help combat the need to increase the size of the units. Roberts: We’re launching some really neat products around the world of ductless versus ducted … and blending them together. We have a full line of ductless solution products, but we’re also launching ducted air handlers going into ductless applications, to where they work together, and they’re communicating together.

Integration of ducted and ductless solutions is definitely the future. Also, connectivity in the base efficiency products is coming sooner than later. New technology that’s out there, for these applications as well, is on the horizon. It’s an exciting time.

Scarbrough: Consumers will demand more hybrid options for their cooling needs. Zoning with hybrid type multizone systems will grow in popularity. Energy efficiency, health and comfort will continue to drive their cooling solution decisions. Home automation will become more mainstream along with the integration of cloud-based controls functionality with ITTT capabilities. There will be more attention to sustainable options, like high-performance heat pumps that work well powered by renewable energy. What do contractors say is their greatest challenge? Davenport: I’ve seen two things … the first is that they need more leads and — Quan Nguyen

the second is finding qualified help. Those seem to be the most critical items for most contractors I’ve talked to in my recent years in my experience in the industry.

How can we help educate the industry, and train the industry, and make it attractive, knowing that there’s many jobs available in the HVACR industry? I think there’s some awareness that’s out there to ensure that people that are coming out of high school or trade schools know that HVACR is a great industry to be a part of. Nguyen: It’s the age-old challenge of recruiting talent. The economic environment today may change that situation, but overall, the folks that have done well on the talent side are the companies that become a preferred employer of choice. Our goal is, as they recruit that talent, to provide the right programs, the right products to help train them, as well as innovating on products to make them easier to install, ease of service and much more reliable. Nolte: Lead generation is always a challenge for contractors. As a result, we are constantly working to provide new tools to contractors to help keep them informed and to achieve their sales goals. Digital tools are an especially important area of growth.

There is also an urgent need for technicians in our industry and it’s something we need to address as a collective group.

It will be critical for our industry to recruit young adults. We’ve been formulating a plan to reach these individuals and will be launching a program called Tech Up later this year. Tech Up is a new initiative that seeks to address the shortage of HVAC technicians entering the workforce by raising awareness of the many benefits of this rewarding career path — such as competitive starting salaries, great benefits and entrepreneurial opportunities — and connecting industry professionals with the skilled technicians they need. Roberts: The biggest challenge is finding qualified technicians and getting people into this field. It’s crazy to think, in the environment and the economy that we’ve been in, that it’s been hard to pull people in. This is a huge area of focus for us. Our online training, all of the tools we’re bringing out are really trying to help contractors, as well as distributors, to improve the quality of their teams. We’re partnering with trade schools, local institutions

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and utilities, and people that are ahead of the curve, as well as trying to pull students into the programs. We’re also looking at things that we can do to partner with our local distributors in all those trade schools.

Scarbrough: Contractors are still having issues with training and retention. As manufacturers, we can help ease some of that tension by making resources and training opportunities more accessible, so the entire team feels comfortable and confident when going into the field.

They’re also looking at all this innovation and technology coming into the market, especially on the controls side, and want more training and information to stay current.

What type of education & training do you offer contractors? Davenport: We’ve got a variety of resources, not only on Oxbox HVAC, but also through our Oxbox distributors, that can provide education and training on our products as they become a new customer. Things such as installation practices and service practices, we offer those through a variety of different means, whether that’s a PowerPoint communication or training manual or through even on-site training, and then many of our distributor partners. Nguyen: We provide more than 600 opportunities to learn through our Lennox Learning Solutions program. It has e-learning resources, instructor-led courses and 59 career paths. We have training on technical skills, selling skills and how to run a business, creating a strong work culture … all these things. And all that’s available both online and in person through our Lennox Learning Solutions program. Nolte: Training is an area of focus for us in that we want to make sure our channel has the most current and effective training tools. Our technical training catalog continues to grow and is provided in several formats which are easy to access anytime, anywhere so that the technicians can learn on their schedule, and in short, interactive formats so the learning sticks. We use cutting-edge methods and delivery platforms including new custom virtual reality (VR) training modules. Carrier has been working with Interplay Learning to create these custom VR training modules, which feature product-specific content exclusive to Carrier and its network of dealers and distributors. Roberts: We’ve been opening training centers around the country — we’re up to six now, and we’ve got plans to open another this year.

We’re trying to bring the products and tools right into their offices, as well as giving them and having product available for them to be able to train on. Scarbrough: We have robust residential contractor programs. They offer participating contractors access to various resources, exclusive trainings and business development tools. We also have 11 training centers nationwide that allow contractors to gain valuable, hands-on experience