The Value of Refrigerant Recovery Incentives
Is pay to play a proper way to increase reclaim rates in preparation of the final R-22 phaseout deadline?
Counting 2017, there are only three cooling seasons remaining until the only R-22 available on the market will come through reclaimers or individual inventories. As the ongoing transition away from R-22 continues, however, a certain urgency seems to be lacking — at least based on the U.S. Environmental Protection Agency’s (EPA’s) reclaim numbers.
For 2015, the total amount of refrigerant reclaimed by EPA-certified reclamation companies was 9.4 million pounds — 7.7 million of which was R-22. In 2014, 9.6 million pounds of refrigerant were reclaimed, of which 7.9 million pounds were R-22, and in 2013, 10.9 million total pounds were reclaimed with 8.9 million pounds of that being R-22. Even at their best, those numbers are well below the EPA’s forecasted R-22 recovery targets necessary to offset the supply deficit.
Are there ways to encourage greater collection of R-22 and other refrigerants so they can be reclaimed? And what form might that encouragement take? For example, should contractors who recover and turn in more R-22 be granted access to greater amounts of gas than their peers who might not be as diligent? Or should contractors who return the most refrigerant receive a price break on sales of reclaimed gas?
Brain Sorensen, operations manager, We Care Plumbing, Heating, Air, Solar, Murrieta, California, said the technicians at We Care are trained in the importance of carefully recovering refrigerant so it can be reclaimed.
“Those who are doing the right thing and recovering refrigerant should be rewarded one way or another over the guy who doesn’t follow the rules,” he told The NEWS.
FOCUS ON THE FINANCIALS
Brian King, general manager, service tools, INFICON, said it makes sense to him that contractors who always recover refrigerant might desire a break compared to their less-diligent peers.
“In theory, yes, if everyone’s supposed to be doing it, and you prove you’re doing it, you should get some benefit compared to someone who’s really not,” he said. “I can see how contractors who closely follow the rules might like to get a benefit compared to someone who can buy the same amount of refrigerant and yet has no record-keeping whatsoever.”
King noted, however, that technicians should be recovering refrigerant for reclamation not only because they’re required to do so for environmental reasons, but also because of the cost implications.
“Refrigerants are expensive,” he said. “And, in theory, contractors and technicians should be keeping close tabs on what they’re putting into systems and what they’re taking out.”
Jay Kestenbaum, senior vice president, sales and purchasing, Airgas Refrigerants, agreed that with the recent price increases of R-22, it’s becoming increasingly important for contractors and technicians to reclaim every pound possible.
“There will be shortages, and every extra pound that’s saved is a pound contractors can supply to their customers when they’re in need,” he said.
Kestenbaum believes this year will mark a turning point in refrigerant recovery.
“I think contractors will be told that if they don’t return refrigerants for reclamation, they’re not going to get access to as much product when they need it,” he said. “From a reclaimer’s standpoint, we are going to have to insist on safe and reliable practices from our customers to recover every bit of refrigerant and return it. If they don’t, they can’t expect access to an unlimited supply.”
For some contractors and technicians, this may require a change of culture, Kestenbaum noted. Many contractors tend to get caught up in doing as many jobs as possible, and they may view refrigerant recovery as a time-consuming expense. Yet, in reality, it’s a money-making opportunity for them.
“Let’s say a contractor is buying a 30-pound cylinder of R-22 at $800 and putting it in at $100 per pound minimum or $3,000 per cylinder,” Kestenbaum said. “That means every cylinder has $2,200 of potential profit. That’s a very simple calculation as to why it’s well worth spending the time to recover every pound.”
Kestenbaum is not unsympathetic to the hurdles contractors and technicians face when it comes to recovery. He understands that during a hot and busy day with many no-cooling calls, technicians will feel pressure to get to the next job rather than set up their equipment to suck the last two pounds of refrigerant out of a system. In addition, some may have had the bad experience of collecting gas from several jobs into one cylinder only to turn it in and find that one of the systems contained contaminated refrigerant, which contaminated the entire cylinder.
“Not only do they now have a cylinder that’s not worth anything, they may even be charged a disposal fee for the refrigerant they spent all that time collecting,” he said. “That’s frustrating and doesn’t exactly encourage technicians to do more reclamation.”
However, Kestenbaum said such cases are the exception rather than the rule, and, ultimately, proper recovery and reclamation benefits everyone — contractors, wholesalers, reclaimers, and customers.
“Wholesalers should start encouraging their contractor customers to be more diligent about recovering every pound by giving them access to more product as more product makes them more money,” he said. “It may not seem like it while they’re doing it, but refrigerant recovery is a moneymaker.”
CONSIDER BANKING PROGRAMS
Maureen Beatty, executive vice president, National Refrigerants Inc., said it’s an individual wholesaler’s decision as to how much access to R-22 certain contractors may receive.
“Some wholesalers might give more consideration to someone who is an active purchaser from them, but I don’t think there’s necessarily a direct correlation between the amount of recovered refrigerant you return and what you can buy,” she said. “I think what you can buy is based on your buying history. Our commitment to our wholesalers and their customers is to have a continued supply of R-22 available to satisfy their requirements for as long as they need it.”
Beatty’s suggestion to contractors who want to ensure they can purchase at least as much refrigerant as they drop off is to join a refrigerant banking program. She noted that National has seen a large uptick in banking over the past couple of years given the concern over the price of R-22.
“Contractors who join a refrigerant banking program maintain ownership of all the material they’re recovering,” Beatty said. “And when they want to get their refrigerant out of the program, it will be reclaimed to meet AHRI [Air-Conditioning, Heating, and Refrigeration Institute]-700 specifications, so it will be their own asset to use in any of their customers’ equipment as they see fit.”
Stefanie Kopchick, North America marketing manager, refrigerants, The Chemours Co., also recommended that contractors talk with wholesalers about R-22 buy back or banking.
“Buy-back offers and/or banking programs are ways to reward contractors and end users taking the right steps to recover and reclaim R-22,” Kopchick said. “In that way, they either receive a financial benefit that they can use to offset future purchases of R-22 or other supplies or they get access to reclaimed pounds that they took the time to recover and wouldn’t otherwise receive.”
“Rewarding contractors for proper service practices does not necessarily lend itself to a one-size-fits-all solution, but it may work in cases where a wholesaler feels that certain loyal customers are going to buy other things from them if they have access to more R-22,” Kopchick said. “Wholesalers will evaluate their customer bases’ needs and determine what makes sense for them.”
Kopchick added that the situation is somewhat different on the facility management level. Facilities managers who have multiple units on their properties can reward themselves for doing the right thing by encouraging their service technicians to recover refrigerant and then keep it in storage for servicing other R-22 units they own.
“There are property managers across the country with hundreds or thousands of air conditioning units on their site who are gradually retrofitting their R-22 units to Freon™ MO99,” Kopchick said. “As they do the retrofits, they recover the R-22, recharge the unit with MO99, and keep the R-22 on hand to service their remaining R-22 equipment. In this way, they’re rewarding themselves for having good service practices by buffering themselves against the concerns of the availability and price of R-22. This works really well for those who service a lot of equipment owned by the same entity.”
WHY INCENTIVIZE THE LAW?
Jon Melchi, vice president of government affairs and business development, Heating Air-conditioning & Refrigeration Distributors International (HARDI), said the goal of HARDI distributors is to foster an environment in which all refrigerant is being reclaimed so that there is a robust supply of reclaimed gas available to meet the needs of end users. To that end, the decision of how much refrigerant contractors can purchase should be up to individual distributors.
“It’s a business and relationship decision,” he said. “If a contractor is loyally doing business with a particular wholesaler, it’s certainly possible that that contractor may get preferential treatment. If they’re shopping around their reclaimed gas through multiple distributors, it might affect their ability to acquire that gas on the back end.”
Melchi said he has not heard of major issues in the marketplace of contractors feeling as if they are being treated unfairly when it comes to recovery of R-22 versus access to R-22, but he noted the point has not yet been reached where reclamation is the primary source of R-22.
The bigger question, he added, is why the reclaim numbers are so low.
“What’s happening in the marketplace that the gas isn’t even being brought back in the first place?” he asked. “Maybe there are ways distributors can use a carrot-and-stick approach to incentivize recovery, but, frankly, we shouldn’t have to incentivize behavior that’s the law.”
Publication date: 4/10/2017
DON’T OVERLOOK R-22 ALTERNATIVES
Dave Couchot, general manager and vice president, Diversified Pure Chem, said the recovery and return of refrigerant is an environmentally friendly solution that should help reduce the procurement costs of various refrigerants and advised contractors not to overlook the options they have other than purchasing reclaimed R-22.
“We believe contractors should have access to the materials they need to run their businesses,” Couchot said. “When it comes to R-22, my firm belief is contractors should recover as much refrigerant as possible and then consider purchasing the alternative products that are available as replacements. This would help incentivize everyone to make the right decision for the environment while also making smart business decisions.