At the beginning of the year, the U.S. Department of Energy’s (DOE’s) minimum efficiency standards for residential air conditioners and heat pumps went into effect, dividing the country into three regions — North, South, and Southwest. The standards dictate that contractors in the latter two regions are allowed to install 13-SEER heat pumps and air conditioners until mid-2016 (or until supplies run out); then, they must only offer 14-SEER (or higher) equipment.
Many HVAC distributors in those regions stocked up on 13-SEER equipment ahead of the deadline and are happy to see that their bets paid off as the inventory flew off the shelves. Some contractors followed suit and ordered additional 13-SEER units to see them through the summer while others went ahead and made the switch to 14-plus-SEER equipment. Regardless of the strategy employed, many contractors are chafing at the new government-imposed regulations, noting that proper installation is far more important than mandated efficiency ratings.
Installing 14-plus-SEER equipment is nothing new to David Mathews, owner, CCAC Air Conditioning in Corpus Christi, Texas, who’s sold numerous higher-SEER air conditioners and heat pumps well before the standards were implemented. Even though he feels relatively unaffected by the new minimum efficiency standards, he disagrees with the government dictating what equipment he can install, noting he knows what units will best meet his customers’ needs. “Rating everything simply by SEER is not a good gauge of the true energy efficiency of the system, because an oversized system will consume more energy than a properly sized or even slightly undersized system.”
Geography plays a factor, as well, said Mathews, noting that humid climates require special attention when selecting a cooling system. “A system that is designed to get a higher-SEER rating by lowering the latent capacity and increasing the sensible heat will end up causing the consumer to use more energy than a system with more latent capacity and a lower SEER rating. With less latent capacity, the consumer will turn down the thermostat to try and get comfortable, which will cause the system to run longer and consume more energy. I’ve seen many cases where homeowners used to be comfortable with their old systems at 76°F, but, with a higher-SEER system and its oversized evaporator coil, they have to set the thermostat below 70° to get the same comfort level. Then, they complain that the new high-efficiency air conditioner actually costs them more on their electric bill.”
Mike Atchley, president of Atchley Air in Fort Smith, Arkansas, is also not a big fan of the government interfering with the free market. “From what I’ve seen, the government is very good at creating rules for our industry and very bad at enforcing them. My thoughts on the new standards can be summed up with a quote from President Reagan: ‘The nine most terrifying words in the English language are, ‘I’m from the government, and I’m here to help.’”
The new standards have not had a significant impact on Atchley’s business, as he’s always focused on offering higher-efficiency equipment to customers. “We tried not to sell 13-SEER units before, so we’re trying not to sell 14-SEER equipment now. We’ve found customers are happier with multi-stage, or even variable-speed, compressors and variable-speed indoor fans. During the first quarter of 2015, we had some specials on high-end equipment, which meant we weren’t selling a lot of base-efficiency products, anyway. By the time summer rolled around, our distributor had sold all of its 13-SEER product to their new construction accounts, so we transitioned over to 14-SEER equipment without a problem.”
Moving to 14-SEER-minimum equipment has also not been a problem for William Blaze, president, Advanced Air, Fort Myers, Florida, who notes that the supply of 13-SEER equipment in his area is dwindling rapidly. “The majority of equipment we sell is 16 SEER or higher, and we don’t even offer 13-SEER units to our customers. We do let customers know about the change in efficiency so they don’t get stuck on 13 SEER, but our typical good-better-best scenario starts at 16 SEER.”
Don Johnson, president and owner, Freedom Heating and Cooling in Birmingham, Alabama, made the decision to invest $150,000 in 13-SEER equipment before the standards went into effect, and he still has some inventory left. “We planned ahead and bought all the 13-SEER equipment we could handle. About half of our jobs are still 13 SEER, and the other half are 14 SEER. Our distributors are out of units, but we still have many sizes in stock. It’s likely that our 13-SEER air conditioners will be gone by early fall, but 13-SEER heat pumps may last through the end of the year.”
Stocking up on 13-SEER units made sense to Johnson, who used the new standards as a way to motivate homeowners to replace their older systems. “It’s been a very effective strategy for us as it brought extra jobs this summer, and the 13-SEER inventory meant we could keep our prices the same as last year. Other companies in our area have used the new standard as a way to push 14-SEER units, but, through the blog on our website, we’ve been able to reduce the incorrect information that is circulating in our market.”
New rules or regulations often result in intended — and unintended — consequences, and, for consumers, the DOE’s minimum efficiency standards will likely result in higher costs. This concerns Atchley, who hopes sales will not be impacted as a result. “I started in this industry in 2001, which doesn’t seem like that long ago, but I occasionally come across some of our pricing from that time. A 14-SEER, R-410A unit is significantly more expensive than a 10-SEER, R-22 unit was back then, and, these days, customers have to pay as much for a condenser and coil as they used to pay for a complete system.”
Even though Atchley estimates that 14-SEER equipment costs about 10 percent more than 13-SEER equipment, he does not believe the price difference will cause most homeowners to repair rather than replace their equipment. “While there may be a few here and there who just can’t spend the extra money, most customers don’t even know about the change. All they know is that this 14-SEER unit we’re giving them a price on is the least-expensive option they have right now.”
Price is always a consumer concern, said Johnson, who notes it’s the primary concern for his customers about 60 percent of the time. “Prices for 14-SEER equipment initially looked to only be about $400 more; however, the use of larger coils — which cost more and come with longer install times and more difficult transitions — can lead to an approximate $1,000 increase to the consumer. This may cause more consumers to repair rather than replace in the future, but we haven’t seen that yet.”
The standard also affected equipment matchups from manufacturers, which, in some cases, will no longer match a standard 3-ton air handler with a standard 3-ton condensing unit because of the minimum efficiency requirements, said Mathews. “Now, if we register a system matchup that only gets 13.9 SEER, the manufacturer is required to turn us in, and we’ll have to replace the equipment with a 14-SEER matched system. But, sometimes, we’re limited by what will fit in the existing space, and we cannot put in the higher-efficiency equipment.”
It may be too soon to know what kind of an impact — if any — the new minimum efficiency standard will have on the HVAC industry, but contractors are hopeful that higher-priced 14-plus-SEER equipment will not keep consumers from replacing their older units. As Mathews noted: “Most of our customers were already looking at upgrading to higher-efficiency equipment anyway, so they were not interested in the basic model. Now, with 14 SEER being the minimum, they’re moving even higher up the SEER ladder.”
Publication date: 10/19/2015