ACHRNEWS

Chiller Sector Sees Star

May 10, 2010

The chiller sector is setting its sights on a Star - particularly a piece of legislation dubbed “Building Star” offering potentially billions of dollars in incentives for energy retrofit on larger buildings. When that is factored in with adjusting to environmental regulations, hopes for a recovering economy and equipment innovations, there results a four-fold approach to keeping a vital sector of HVACR moving forward.

For this article and a subsequent one, The NEWS contacted a number of manufacturers of products in the chiller sector to ask their thoughts on key issues. Their feedback came in mid-April and the article was written shortly thereafter, meaning some of the more fluid issues may be subject to change by the time this article is published.

This article covers some specific legislative and regulatory issues; the second article will focus on environmental matters and projections for economic growth in the chiller sector.

BUILDING STAR

Building Star is a nickname of Senate Bill 3079 introduced in March in the U.S. Senate by Sens. Jeff Merkley of Oregon and Mark Pryor of Arkansas.

“The proposed Building Star bill would promote energy-efficient retrofits of commercial, institutional, and multifamily buildings by improving tax incentives and providing rebates - up to 30 percent of the total cost of installation - to those building owners who install energy-efficient building equipment, materials, or products this year,” said Robert Wilkins, president, Danfoss North America.

“By rewarding owners for the installation of new energy-efficient equipment, the bill would help boost the business of commercial contractors, encouraging the return of new jobs and advancing skill sets. New equipment sales would also positively impact those equipment and component manufacturers who have been working to incorporate and maximize new, energy-efficient technologies.”

He added, “Currently, more than 25,000 inefficient CFC chillers remain in operation throughout the country. The proposed bill would seek to replace these aging chillers by providing rebates when new, more efficient chillers are installed in their place. Combined with the installation of variable-speed drives, which are also included as a part of the program, the replacement of old chillers would not only make commercial buildings more energy efficient - helping building owners to save money - but also more environmentally friendly by removing a significant portion of ozone-depleting refrigerants from use.”

Randy Newton, global leader of applied systems at Trane, said Building Star “offers rebates towards energy-efficiency upgrades/retrofits for commercial unitary equipment, variable-frequency drives, boilers, building management systems, and other commercial building upgrades.” He described this as one “of a number of proposals Congress is considering to incent early equipment replacements through either tax credits or federal government rebates.”

William McQuade, director of government and industrial relations, chiller solutions, Building Efficiency for Johnson Controls said Building Star “as it relates to chillers includes a number of provisions:

• $120 (less than 10 hp), $80 (10-100 hp), and $40 (greater than 100 hp) per horsepower for variable-speed drives attached to chilled-water pumps, cooling-tower fans, hot-water pumps, chiller motors, and return/exhaust fans on variable air volume units;

• $150 per ton based on the capacity of the replaced chiller; and

• $100 per ton of downsized chiller capacity.

“Under the terms of the bill, replacement chillers must be certified to meet ASHRAE 90.1 2007 Addendum M (same as 90.1 2010) and replace a chiller currently in operation that was installed before 1993 and uses CFC refrigerant.

“The bill defines qualified service on cooling as periodic maintenance service on a central air conditioner that is located in a commercial building or multifamily residential building and has a capacity greater than or equal to 2 TR [tons of refrigeration] - everything from cleaning condenser coils and inspecting/replacing filters to cleaning condenser tubes to checking/correcting refrigerant charge levels and airflow to conform to manufacturer specifications. The rebate for these services is equal to the lesser of $2 per TR of nameplate capacity of the chilled water system and 50 percent of the service cost, and covers a time period from the date of the bill’s enactment through Dec. 31, 2011.”

“The optimism is that the legislation would be passed with bipartisan support in May or June as part of a smaller green jobs bill.”

REBATES

Julian R. De Bullet, director of industrial relations for McQuay International, sees value in rebates for contractors and the industry.

“McQuay is one of several manufacturers deeply involved in providing language to support such a rebate. Such initiative will cause the controlled and timely replacement by new, more efficient machines using environmentally appropriate HFC-134a. We are promoting that this rebate or a tax incentive equivalent will be enacted quickly.”

Johnson Control’s McQuade explained the issue of depreciation schedules for HVACR equipment including chillers.

“The current Internal Revenue Code of 1986 uses a 39-year depreciation schedule for most types of HVACR equipment. Johnson Controls, along with many others in our industry, strongly supports permanently reducing that schedule to 20 to 25 years, which is much more in line with the actual service life of the equipment.

“Last year, U.S. Rep. Melissa Bean, D-Ill., introduced a bill (H.R. 2198) to amend the Internal Revenue Code of 1986 to provide a shorter recovery period for the depreciation of certain systems installed in nonresidential real property or residential rental property. It proposed a temporary reduction from 39 to 20 years for equipment that exceeds 90.1 energy efficiency by 10 percent, or 25 years for equipment that just meets the minimum standards. As currently written, the bill would apply to equipment placed in service from Dec. 31, 2008, to Jan. 1, 2013. Over the last 12 months, this bill has lost some momentum in light of other political priorities and its large estimated cost to the Treasury Department ($3 billion). At last check, the bill remains stalled in the Ways and Means Committee.”

McQuade also noted tax rebate aspects affecting the chiller sector.

“Senate Bill 1639 is a tax incentive to replace remaining chillers using CFC refrigerants. Based on historic statistical data, these chillers are on average 25-plus years old, have average capacities of 400 TR, and have efficiencies of 0.9 kW per TR.

“Despite much higher efficiency levels available with new equipment, there are several factors that have contributed to these chillers remaining in operation. First is the construction cost to remove and replace chillers in some existing buildings. There are many instances where water chillers are located in a part of a building that is very difficult to access with a crane or rigging equipment. Demolition of a wall or digging up of a city street may be required to replace a chiller. These costs can be significant and, in some cases, can be more than the new chiller itself. In addition, there is no legal deadline to replace existing CFC equipment, and CFC refrigerants continue to be available at low costs due to effective reclaiming practices.

“Senate Bill 1639 proposes an incentive - a $150 per TR transferable tax credit for the replacement of an operational CFC chiller. The transferability will allow both taxpaying and nontaxpaying entities to take advantage of the program. As currently written, the application period would be from the date of enactment through Dec. 31, 2012. According to the bill’s provisions to qualify, the chiller being replaced must:

• Have been installed after 1980 and before 1993;

• Use CFC refrigerant;

• Have remained in operation, cooling a commercial building; and

• Be replaced by a water-cooled chiller that is certified to meet the efficiency standards of ASHRAE 90.1-2010.

“In addition, an energy audit of the building is required prior to installation that satisfies criteria established later by the government.

“An additional tax credit of $100 per ton of downsized capacity is available if, through other energy-savings improvements, the capacity of the replacement chiller can be reduced. In this case, all water-distribution pumps connected to the chiller must be fitted with variable-frequency drives.

“Originally intended to be part of a comprehensive climate change bill, Senate Bill 1639 has not yet passed. With the likelihood of a comprehensive climate-change bill now in doubt, the goal is to attach this provision to a stripped-down energy bill. Speaking realistically, it is unlikely such a bill will move through Congress before the November elections.

ASHRAE 20.1-2001

Another issue being watched closely by the chiller sector is the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) 90.1-2001’s minimum efficiency requirements. According to many, the most significant change is the addition of a second method to reach minimum efficiency. Path A involves full-load efficiency; the second method, Path B, recognizes part load.

McQuay’s de Bullet said, “The new 2010 version of ASHRAE 90.1 far exceeds all previous versions for chiller efficiencies and recognizes that variable-speed drives offer optimized performance of the chiller closely matching the part-load performance of the building. Only by having multitiered efficiency standards can we meet the aggressive energy goals of sustainable designs and of rightsizing the large components of HVAC such as the chiller.”

Noted Ian Casper, senior program manager, building efficiency, Johnson Controls, “The likelihood of a Path A and Path B being added to the air-cooled chiller segment is a strong reflection of the growing focus in part-load efficiency for air-cooled chillers.

“In the past, air-cooled chillers have been considered by some to be a commodity-type product with little differentiation or focus on performance. Now, both more stringent requirements on full-load efficiency and an alternate Path B to allow for a focus on off-design conditions (which dominate chiller operating hours) demonstrate a shift in perception of the air-cooled chiller segment and another sign of growing focus on efficient building design.”

Said Newton of Trane, “Having two paths gives project teams options. It must be remembered that once a path is chosen, both full- and part-load efficiency (integrated part load value or IPLV) are mandatory requirements - and both must be met to comply with the standard. Since 90.1 is also a prerequisite for Leadership in Energy and Environmental Design (LEED), both full- and part-load efficiency must be met for LEED projects.

“One drawback of a number of the Path B full-load efficiency requirements is that they are less stringent than the 90.1-2007 requirements. This can lead to higher demand charges for the building owner; in some cases demand charges are more than half the utility bill. These lower full-load efficiency requirements also impose higher peak demand on utility infrastructure, which could cause issues such as brownouts to be more severe in the peak summer months.

“It is extremely important to remember that 90.1-2010 defines minimum requirements. Superior chillers with both higher full-load and part-load efficiencies are available - and should be considered. Also remember that the part-load efficiency rating (IPLV) is a single number, part-load performance figure of merit that allows comparison of similar chillers one on one. However, it is not intended to replace a comprehensive building simulation that reflects actual weather, building load characteristics, operational hours, economizer capabilities, auxiliary energy use and the use of multiple chillers. Building simulation is the only way to project actual energy consumption in a specific application.”

Publication date: 05/10/2010