HVAC Turns 13!: Is a Higher SEER a Harder Sell? It's Hard to Say

October 23, 2006
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When the 13 SEER mandate took effect in January, many contractors worried that the new rule would make it more difficult to sell higher-efficiency equipment. Their reasons for concern included rising prices for equipment, less disposable income due to higher gas costs, short summers in some parts of the country, and the increasing number of transient homeowners who don't want to invest in expensive, higher SEER equipment.

Other contractors weren't as concerned, stating that the escalating costs of electricity would prompt more homeowners to buy 14-plus SEER equipment. Their thought was that customers would be willing to spend more money upfront if it meant saving more money in energy costs over the years.

So which scenario turned out to be accurate? It's really difficult to say, as this year of transition has resulted in both of these situations being realized. Some contractors have had success selling higher SEER equipment, while others find their customers resistant to anything but minimum SEER units.

The interesting twist is that those contractors who are selling mostly 13 SEER units note that their customers are primarily buying upgraded units with variable-speed technology and/or R-410A. Even more remarkable is the fact that many contractors say these options - and not necessarily higher efficiencies - are more important and better serve their customers in the long run.

EDUCATION A PRIORITY

When homeowners need a new air conditioner or heat pump, chances are they're going to rely on their contractor to educate them about the different types of equipment available. The education process is something that Keith Kittrell, production manager, Parker & Sons, Phoenix, takes very seriously.

"I plan on being in the home for three hours, and I make the homeowner aware of that ahead of time," said Kittrell. "This is a major investment, so we go through the entire system thoroughly. Typically we perform a Manual J heat load calculation, address any hot or cold spots, talk about filtration or IAQ products, then the last thing we do is sit down with the customer. We try and educate our customers before we ever sit down at the table and negotiate a deal."

Kittrell also spends time educating his customers about what SEER means and how much energy a higher SEER unit could save a homeowner. "I use outside documentation, including information from the local utility that shows how much energy could be saved by replacing an existing unit with a higher SEER unit. Of course, I always point out that if they have a pool or leave the doors open or keep the thermostat at 72°F, they aren't going to see the energy savings that are in the brochure."

Brian Solan, general manager, Comfort Masters/Service Experts, Wheeling, Ill., also spends a lot of time educating his customers. In addition to performing a technical assessment, "We ask how long the customer will be in the house, if noise is an issue - basically we find out what's important to them. Then we discuss the different options available, so we can help them zero in on which system best fits their needs."

Solan's presentation also includes a thorough discussion of higher-efficiency units. "In addition to the obvious energy savings, we explain the added benefits of the higher SEER units on every sales call. These benefits include environmentally friendly 410A refrigerant, quieter operation, humidification control options, and longer standard manufacturer warranties."

Jerry Schilling, residential sales, Baete-Forseth HVAC, Sioux Falls, S.D., said that he frequently needs to explain to customers exactly what SEER means. "Customers often say they want a 94 percent efficient air conditioner, so I need to explain the difference between AFUE and SEER. It's amazing that oftentimes a customer knows what two-stage means or they know about R-410A, but they don't understand SEER."

Parker & Sons won the 2005 Better Business Bureau Ethics award, and the company strives for honesty and integrity in all interactions with customers.

THE SUCCESS RATE

Given the extraordinary amount of time contractors spend educating their customers, how successful are they when it comes to selling higher SEER equipment? It varies. According to Schilling, most of his customers opt for the better equipment.

"I tell them that 13 SEER is the minimum and that R-22 is going to be phased out, and 90 percent usually end up choosing a 15 SEER two-stage system with R-410A," said Schilling. "I always bring my laptop and ask how much their utility bills are. Then I punch in all the information, and I can show them how much they'll save if they put in a heating and cooling system with higher efficiencies. We only have about 600 cooling hours here, but people don't have a problem buying the higher SEER."

Kittrell stated that even after he presents all the information and the various options to his customers, they are still most likely going to choose a 13 SEER system. "There is the group out there who are energy wise and realize the benefits that the higher-efficiency equipment is going to provide them, but it's a much smaller group than those who say ‘I just want cooling, and I don't want it to cost me a fortune.'â€ä"

Customers also look at the payback of a higher SEER system and are discouraged from the purchase, said Kittrell. "For the cost differential between purchasing a 13 and a 19 SEER system, it's going to take about 10 years to pay back that differential. Most people - particularly in the Phoenix area - don't stay in their homes that long, so they're not going to receive that full award."

For those who do not want to purchase a high-end, higher-efficiency product, most will at least opt for a variable-speed 13 SEER unit, said Kittrell. "Variable speed is a big deal, and that's something we hit hard. In fact, it's the most common upgrade. Customers can buy minimum SEER equipment and with the variable speed, they'll still get the comfort they'd have with a more expensive unit."

Tim McIver, president and COO, Loesch Heating & Air Conditioning, Columbus, Ind., estimated that between 90 and 95 percent of his customers choose 13 SEER equipment, and it usually comes down to the initial cost.

"After January, we knew the price was going to go up. We used to offer a 3-ton 10 SEER unit with R-22 for $2,500 installed, and that became a 3-ton 13 SEER unit with R-410A for $3,500 installed. Most aren't going to spend the extra $700 or $800 on top of that to go to 15 SEER."

Especially when the payback will take a very long time to achieve. McIver noted that the efficiency curve is starting to flatten out, and that will continue to make it harder to sell higher and higher SEER equipment.

"When we went from 10 to 13, that's a 30 percent increase. Going from 13 to 15 is only a 15 percent increase. Now all we're doing is adding a lot of dollars, but we're not adding a great deal of operating cost savings. With a 15 SEER unit in our area, a customer would probably save $35 to $40 a year, and I'm asking him to give me another $800. You're going to have a hard time getting that to fly."

McIver stated that he would much rather see his customers choose a 13 SEER unit with R-410A than a higher SEER unit with R-22. He estimates that approximately 60 percent of the 13 SEER units he sells contain R-410A. "Customers will pay the extra $300 or $400 for a unit with R-410A, because they understand that in just over three years, the R-22 will be much more expensive and manufacturers will no longer be producing R-22 units."

Selling higher SEER equipment is definitely a challenge, noted Solan, who estimated that approximately 70 percent of his customers end up purchasing 13 SEER equipment. "The problem we have in the Chicago market is the cooling season is relatively short, so it's a challenge to sell a 16 or 21 SEER air conditioner solely on today's energy savings, versus the 13 SEER."

He thinks that will change in the years to come as electricity rates continue to rise across the country. In the Chicago area, Solan said that utility rates are expected to rise as much as 20 percent in the near future, which should make it easier to sell higher SEER units.

"Let's face it, though," said Solan. "HVAC isn't sexy, and at dinner parties, homeowners aren't going to drag their guests over to look at their new higher SEER air conditioner. It's not a status symbol like a new car is. But we believe that by educating our customers about the added benefits, such as the environmental benefits, the quietness, the longer warranty, that the higher-than-13 SEER units will definitely outsell the minimum efficiency units one day."

Publication date: 10/23/2006

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