HVAC Residential Market

Generating Interest in High-End Solutions

HVAC Contractors See Surge in Standby Generator Sales

June 24, 2013
Trans

The weather has been in the news a lot lately, with blizzards, hurricanes, and severe thunderstorms wreaking havoc across the U.S. Many of these storms have resulted in power outages that have lasted anywhere from a few hours to a few weeks, and homeowners in affected areas have grown weary of being without power.

As a result, HVAC contractors are experiencing an increased interest in standby generators that operate on propane or natural gas. These are not the portable generators that are available for a few thousand dollars at the local big-box store; these are permanently installed units that start automatically within seconds of a power outage and can provide electricity for just about any size home. With installed costs starting at around $7,000, these are luxury items that not every homeowner can afford; however, contractors are reporting a surge in sales that they expect to continue for the foreseeable future.

Fueling Demand

Isaac Heating and Air Conditioning, Rochester, N.Y., has offered standby generators to customers for more than 10 years, said vice president of operations, Eric Knaak. “We started because it fell in line with what we already do — electrical service and gas piping. There was a growing demand, and it has been a good fit for our company. We have seen generator sales increase year after year, and we expect they will continue to do so.”

Knaak believes the severe storms that have repeatedly hit the East Coast the last few years have played a role in driving customer demand for generators, especially when the wreckage leads to a life-threatening safety issue. This could include an elderly person living alone, or someone in the home requiring medical equipment, such as an oxygen machine. But he also credits the doomsday shows on television, which tout the benefits of self-sufficiency, with raising consumer awareness. “It’s a market that is growing,” he said. “It’s still a niche market, but we’re definitely seeing more and more homeowners investing in whole-house generators.”

Gary Marowske, president, Flame Heating, Cooling, Plumbing, and Electrical, Warren, Mich., whose revenue per year in generators and generator maintenance is between $500,000 and $1 million, has also seen sales of standby generators increase over the last few years. “Power seems to be more unreliable these days, mainly due to infrastructure problems, but we also have power going out fairly often due to cars hitting a transformer or a pole. And when there’s a heavy load caused by air conditioners, we have a tendency to lose power more frequently.”

When customers lose power, Marowske is ready to let them know where they can purchase a generator. “As soon as we have 80,000 to 100,000 people out of power, we have a couple of radio stations that will automatically run our ads about generators. We want to reach homeowners immediately, because if they don’t have pain, they’re not going to buy a generator.”

Knaak utilizes a similar strategy, targeting affected areas with a direct mail piece that will reach them soon after a power outage occurs. “Our service technicians will also bring it up as an option during the course of a regular maintenance visit, if a customer seems interested.”

Fred Starck, owner/president, Thornton Heating Services Inc., Libertyville, Ill., relies on a direct mail piece sent in the spring, word of mouth, and the company website to drive sales of generators. He started offering the equipment in 1998, when customers were concerned that power outages could occur due to Y2K. “Everyone thought the world was going to come to an end, and we were going to have no power on the day the calendar rolled over. It was a good opportunity to expand our field and gain customers for add-ons to our existing replacement sales. At the time, there weren’t many who were offering generators, but the market has grown quite extensively over the last five years.”

Most of Starck’s competition comes from big-box stores, which can often sell generators for a lower price. When customers express sticker shock, Starck tells them the reason his price is higher is because his company does everything to code; they’re licensed and insured, and they can take care of all warranty work. “We also have three full-time technicians on staff who are certified to install and service generators up to 150 kW in size. Most of the service issues we get are warranty issues that come from bad installations. We’ve seen bare wires running across outside walls to a box on the garage, as well as gas lines that aren’t sized properly. It’s frightening.”

Sizing and Maintenance

But cost is definitely an issue to some customers, as the generators that Marowske sells usually range in price from $8,000-$16,000. “Generators are not for everybody, which is why we make sure that when customers call us, they know these are not the $2,000-$3,000 units they can buy at the big-box store and roll into their basement. We want them to know upfront what they are getting.”

Marowske offers Cummins Onan generators, because he likes the fact that they come with a block heater, which is used for cold starts, and a trickle charger to keep the battery charged. They also have a remote screen that is installed in the home, so homeowners can tell when the generator is running and whether it’s operating properly. Once a week the units exercise, turning themselves on and off to ensure smooth operation.

Generator size is important, because if the generator is too small, it may not create enough electricity to run everything required by the homeowner. “Usually we sell one that’s large enough to cover the majority of appliances, because the chances of running everything at once are pretty slim,” said Marowske. “Typically, we’ll install a 20 kW generator, which will operate 80 percent of the appliances.”

Knaak offers Generac generators, which feature an automatic transfer switch that senses when the power goes out and automatically activates the generator. “Most of the generators we install run off of natural gas, so if the power goes out, homeowners never know that it happened. They are usually set up to exercise once a week for about 10 minutes, just to make sure everything is working OK, and the engine gets lubricated with oil. That way homeowners know it’s going to be there when they need it.”

Installation is straightforward, but time consuming, noted Marowske, and permits are needed for both the electricity and the gas line. “It usually takes two or three technicians a day or a day and a half to do the complete installation. The equipment itself is similar to a car engine with electrical windings on it, and then there’s the transfer switch, which is in the main breaker panel that goes between the generator, the home breaker panel, and the electric meter. Generators are sophisticated. There’s a lot to the installation.”

Like furnaces and air conditioners, standby generators require regular maintenance, usually once a year. However, if the power goes out for a couple of days, the generator should be serviced again, noted Knaak. “We have a lot of maintenance contracts for generators that were installed by other companies, mainly because the customers weren’t happy with the service they were getting. They come to us because we can also maintain their HVAC equipment. Customers like one-stop shopping and we like to offer them that convenience.”

Starck also has a number of generator maintenance contracts that require annual service. “Once a year we change the oil and put in a new oil filter. Depending how many hours are on it, we’ll change the spark plug, check operation, check the transfer switch, do a load analysis on the unit, and check the safety controls and battery strength. It’s a regular tuneup, like what you’d do with a riding lawn mower, because it’s a gas air-cooled engine. It normally takes about 45 minutes to an hour.”

Sales of generators represent about 10 percent of Starck’s revenue, and he thinks the market will continue to grow. “Once new construction gets going again, I think high-end home builders would be nuts if they didn’t automatically offer a generator with the home. It’s a great sales tool, and there’s definitely a market there.”

SIDEBAR: A Day Without Power is One Too Many

Reliable electrical power is the most basic of modern necessities, but with the summer storm season in full swing, power outages are no rarity. Consider that in 2012 alone, there were 2,808 power outages in the U.S., affecting 25 million people, according to Eaton Corp.’s 2012 Blackout Tracker Annual Report.

That’s probably why Clay Blevins, president of Comfort Supply, a Nashville, Tenn.-based HVAC wholesaler, is seeing an uptick in generator sales. “The people who buy them tell us that they want to be prepared for even the most minimal of power outages.”

Ruud’s Seregen™ 300 Series 20-kW home generator system is the company’s most sought after model. Fully automatic, it detects power outages almost instantly, kicking the generator on within the first
30 seconds of the outage. It’s large enough to run a 1,500- to 2,000-square-foot home’s heating and air conditioning system along with its lights, freezer, well pump, and computer electronics all at once. With a model like this one, homeowners aren’t forced to pick and choose what they want to run, said Blevins.

HVAC contractor, Eloy Saban, president, Temp Control, Nashville, regularly installs Ruud generators and said the installation is a quick process that can usually be completed in one day. And better yet, his customers see the benefit in them.

For example, Nashville dentist Dr. Graham Locke purchased two generators — one for his home and the other for his office. Locke appreciates the low noise level and said with his generator installed, his house is “lit up like a Christmas tree when the power goes out. As you might imagine, we also get a lot of visitors when the power goes out.”

Locke purchased a second generator for his office to provide protection for his patients in case the power goes out while he’s doing a procedure.

Every year, power failures leave millions without reliable electrical power. A home generator system provides high-end customers with peace of mind, knowing they have assured backup power during the worst storms.

Publication date: 6/24/2013 

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