R-22 Phasedown Presents Opportunity
EPA slashes supply to 13 million pounds this year
The supply of R-22 is dwindling. Back in October 2014, the U.S. Environmental Protection Agency (EPA) announced its final phasedown schedule regarding the production and importation of HCFC-22. The order called for an immediate drop from 51 million pounds allowed in 2014 to 22 million pounds in 2015 and 18 million pounds in 2016. The supply will be further slashed to 13 million pounds this year, 9 million pounds in 2018, and 4 million pounds in 2019. No new or imported R-22 will be allowed in the U.S. on or after Jan. 1, 2020.
With the limited supply, cost has increased for both contractors and, in turn, their customers.
“I can’t believe anyone is still using or at least buying R-22 with the price gouging going on at supply houses,” commented Larry Zollinger, technical account manager, TDIndustries, Dallas. “I heard someone say they paid $825 for a 30 pound drum. It was the same with R-12 and R-502 back when they were phased out.”
Mike Agugliaro, co-owner of Gold Medal Service in East Brunswick, New Jersey, said the R-22 phasedown is impacting his customers in two ways.
“The biggest thing is its raising the prices of the product,” he said. “Secondly, they’re going to be stuck having to replace their units when the product is not around anymore. As a business owner, it’s a complete opportunity for me. But, for customers, it’s going to cost them money. However, most of the people replacing their systems are going to experience greater levels of efficiency, which is going to save them money in the long run.”
Gold Medal Service still works on older units using R-22, and, at the moment, is not having a hard time obtaining it.
“We’re still stocking R-22,” Agugliaro said. “It’s not that hard to obtain right now, just very costly. I think it’s going to become harder and harder to get over the next year to two years.
A shortage is looming, so people are buying it up because there is a tremendous amount of systems out there using it. Some companies are buying it in high quantities because then they can maintain the prices for it and still serve their customers. We’re buying it in bulk, as well. But, eventually, it won’t be available. It’s like what happened to fluorescent light bulbs — we’re seeing fewer and fewer of those on the market. We have to play the game that’s being thrown at us.”
Scott Trantel, owner of Trantel Heating & Cooling in Portland, Oregon, said his company has been changing systems to NU22.
“Performance has not been an issue, so far,” Trantel said. “Customers realize the immediate savings of the quoted R-22 price. We don’t stock R-22 on our trucks. We will only get it for our commercial customers, and then, we only use an R-22 drop-in when we replace a compressor or repair a leak.”
Paul Sammataro, owner of Plano, Texas-based Samm’s Heating & Air Conditioning, said his company still uses R-22. “However, when we’re adding R-22, we explain to customers why it is advantageous to consider upgrading to R-410A. Even with the increased cost and explanation, we still sold about 1,200 pounds of R-22 in 2016. We don’t use substitutes. We’ve definitely seen a diminishing demand with our customers and have converted many to R-410A.”
Overall, Sammataro said the shortage of R-22 has been hindering.
“The frustration is having multiple trucks on the road and suppliers limiting the amount that can be purchased at one time,” he explained. “We bought a half pallet in March and then three to six jugs, when needed. Not having the ability to buy 10-15 jugs or another half pallet is frustrating when you do not want to make many trips for something you know you will need.”
REPLACE VERSUS REPAIR
While contractors are struggling to deal with the dwindling supply and phasedown of R-22, it’s their customers who will ultimately bear the brunt of the cost.
Michael Blazey, regional field manager at CLEAResult — a company that designs, markets, and implements energy programs in Austin, Texas — commented, “Isn’t the elephant in the room on this issue really the consumer’s ignorance that this is all happening? How many of you have had to tell a senior citizen that it will now cost her a thousand dollars to recharge her unit? Obviously, the change in refrigerant composition is here, and we are all working with it, but why is it that there isn’t a greater emphasis on consumer education? I certainly don’t envy the technicians that end up being the ones who explain this to consumers during the next big hot spell.”
Trantel said his employees have been explaining the elimination of R-22 to customers.
“Customers seem to understand the reason for the high cost, and if they cannot afford a system upgrade, they will opt for NU22,” he said. “We’ve been telling them R-22 is ‘liquid gold,’ and every year, the costs go up. It’s an easy retrofit/replacement sell.”
Samm’s Heating & Air Conditioning is also educating customers.
“First, we like to explain the current supply and demand. Then, we move on to pricing and the phasedown,” Sammataro said. “Usually, it’s the pricing that opens the eyes of most customers. We still use R-22 to holdover systems that don’t have a significant leak until we replace the unit in a day or so after closing the sale. We then refund up to $500 for the charge of the added refrigerant.”
Agugliaro said his employees are letting customers know the phasedown is a federal regulation and also uses the interaction to inform them about HVAC’s role in ozone depletion.
“We explain to them that this thing that was safe at one time is no longer considered safe for the environment through testing, so the EPA made a decision to get rid of it,” he said. “You just need to explain it in terms that the customer understands, like how we used to have thermostats with mercury inside. Just like anything else, when we prove something is not the best for homeowners or the world, it’s time for it to go away. Most homeowners get it. They don’t mind the change in things like this — they just mind the money it costs them to have to make the change.”
Gold Medal Service is focused on using the phasedown as an incentive for customers to replace rather than repair old systems.
“We’re also telling them to do it now rather than later because costs are only increasing,” Agugliaro said. “Our manufacturers already told us our prices are going up in 2017. It’s like anything else, if you were to buy something 10 years ago and buy it today, it was cheaper 10 years ago. A lot of homeowners are choosing to do that. Another aspect is for someone selling their home. If you have an old system with R-22, it’s no longer just a house with an old system. Now, buyers are aware that it’s going to be a nightmare buying the house because they are going to have to replace the system sooner than later, so they want the seller to deal with it now. If we see an old unit, and the owner tells us they are selling in a few years, we explain the situation and what will likely happen at the negotiating table. We also point out the new system will also be more expensive in a few years. Homeowners are taking that into account.
“What contractors should know is that this is an opportunity for them, and they should make sure they’re educated about it,” he continued. “If you’re the person educating the customer, you’re going to be the one who gets the job. If you’re not educating them and just fixing something without talking to them about what’s happening and the changes being made, that’s going to hurt the customer. Make sure you leverage the opportunity to make it a win-win-win. I think it’s really important for contractors to take advantage of these opportunities, because, like all opportunities, they’re great when they’re here but they also disappear quickly. That means contractors have to get on board now.”
Publication date: 1/30/2017