BSRIA Predicts Steady Growth for Several Major HVACR Markets
CHICAGO — Every year, the AHR Expo brings forth educational sessions that help contractors and manufacturers better understand how the HVACR industry functions and how it is constantly changing and evolving. Ten years ago, a session focused on smart devices and the connected home wouldn’t have existed, yet now it is one of the most buzzworthy facets of the entire marketplace.
Perhaps the most talked about and well-attended session at this year’s Expo in Chicago was the one presented by the Building Services Research and Information Association (BSRIA), titled “Global HVAC Trends.”
The session centered on the following topics:
- BSRIA’s American research;
- HVAC and refrigerant trends and forecast;
- Intelligent Building Controls and the Internet of Things (IoT); and
- Urbanization / Digitalization / Commoditization — How are the mega trends impacting the HVAC product and distribution markets?
THE AIR CONDITIONING MARKET
A strong U.S. economy boosted the a/c market stateside in 2017, even as the current presidential administration’s decision to withdraw from the Paris Agreement (an agreement within the United Nations Framework Convention on Climate Change dealing with greenhouse gas emissions, set to start in the year 2020) caused some uncertainty in the marketplace, according to Anette Meyer Holley, general manager, air conditioning and refrigeration, BSRIA.
“While the U.S. pulled out of the Paris Agreement, there is still a commitment to the Kigali Amendment (an effort to phase down hydrofluorocarbons [HFCs] under the Montreal Protocol),” said Holley. “The U.S. economy sees healthy growth, which benefits the mature a/c market. Globally, the market had a setback in 2017, but a rise is expected in 2018. The market has become much more competitive, and Chinese brands are making a bigger presence. They have been looking for opportunities overseas to sell their stock. The U.S. has experienced good growth and is expected to see the largest growth of anywhere across the world. Latin America has a mixed picture, with Brazil and Mexico still struggling. Europe is small in the global picture and is slowly recovering.”
Some of those opportunities for Chinese brands to increase their global presence may come from window sales in the U.S., where 60 percent of such sales take place. Another is in rooftop units, which Holley said are the dominant light commercial segment in North America, with 90 percent of sales in the U.S. but a growth rate of just 3 percent.
Mission critical cooling data centers are growing at a much higher rate in North America.
“Research findings show that the market is growing at a compound annual growth rate [CAGR] of 14 percent to 2022,” said Raphael Chalogny, general manager, BSRIA. “It will be a $2.9 billion market in 2022. The growth of the data center construction market in North America is a major driver. Enterprise data centers still have a large share of the market but are losing size. There is also an increased need for data cooling in the telecoms market.”
Notably, Holley said the chiller market has continued to struggle because it largely depends on new construction. The U.S. is second in the world, with $1.1 billion in 2017, and a CAGR of 3.3 percent. The U.S. makes up 14 percent of the overall market, while China is the leader at 31 percent.
“Companies are introducing centrifugal chillers and accounting for growth,” she said. “Major players worldwide are showing interest in this market, and the recovery of these markets over the next few years will largely depend on Chinese and U.S. markets.”
Through all of the turnover, change, and upheaval that takes place year-over-year in HVAC trends, furnaces remain the main heating technology in North America.
“The U.S. furnace market value is $1.7 billion,” said Chalogny. “There are eight times more furnaces sold than boilers in North America. Sales of gas furnaces are accelerating, and the furnace market has grown by a 6 percent CAGR in the last 5 years.”
A shift toward gas continues in the North American boiler market. Gas is the dominant fuel both residentially and commercially, and it was a $1.2 billion market in 2017.
“Instantaneous water heating is gaining share in North America over the past 10 years,” continued Chalogny. “Demand for instantaneous water heaters is rising quickly.”
One area where the U.S. market is showing strong growth is actually in service and maintenance.
“We estimate the U.S. market to reach some $8 billion in 2018,” Holley said. “Smart platforms have accelerated, and smart maintenance has become a real business opportunity.”
A SMARTER MARKETPLACE
The acceleration of those smart platforms became a centerpiece of BSRIA’s presentation, which honed in on the IoT.
Last year, Krystyna Dawson, business manager, BSRIA, said smart products that give consumers the power to control their own use of electricity are in demand.
“Smart, connected HVAC is coming, and it is likely to be big,” said Dawson. “Now, will product manufacturers be able to maintain their strong positions in this new, very challenging and unknown future?”
That future is arriving quicker than perhaps anyone could have predicted, even a year ago. Gartner estimates 20 billion IoT devices will be connected by 2020, 63 percent of which are related to consumers; Bain predicts business-to-business (B2B) IoT will generate more than $300 billion annually by 2020, including about $85 billion in the industrial sector; and McKinsey estimates the total IoT market size in 2015 was at $900 million.
“There is an increase in smart HVAC products across the board,” said Holley. “There are also channel changes for residential products. The distribution channel is moving to the internet. In 2017, the residential market volume was 14.3 million, and the non-residential market volume was 5.6 million.
“The consumer market is trending towards entertainment, video streaming, tracking, security monitoring, smart HVAC controls, and voice control,” said Lone Hansen, research manager, IT cabling and associated technologies, BSRIA. “Comfort, wearables, health-related devices, and social networking are also important.”
In regards to Building Automation and Control Systems (BACS) in the U.S., field devices comprise 44 percent of the market, software/hardware is 15 percent, and controllers are 41 percent.
“It’s a $1.9 billion market in 2017,” said Chalogny. “The key trends are more intelligent controls, IP capable, and more analytics.”
Most BACS are still installed as standalone systems focused on HVAC — 80 percent or so in the U.S. and 70 percent in Europe, according to Hansen.
“There are increasing sales of software, but they are still low,” she said. “Many devices today are IP [enabled], and a growing number are connected to a physical network.”
BACS are cloud-based software. Hansen said most suppliers are reporting increased sales of software installed on premises. There is a higher uptake of cloud-based Building Energy Management Systems (BEMS) compared to supervisory software.
“Suppliers are largely leaving the hosting choices to the end users, but there are also still security concerns in regards to a private vs. public cloud, and few suppliers currently sell software as a service (SaaS),” she said. “Software is often sold with hardware to add value. The uptake is low due to it still emerging. Suppliers are still looking at the business model, and many end users are nervous because of the security concerns.”
On the plus side, worldwide cloud IT infrastructure revenue has almost tripled since 2013 and grew by 26 percent in 2017.
The public cloud represents 70 percent of total cloud IT infrastructure revenue, while traditional IT infrastructure continues its decline but still accounts for 52 percent.
“The biggest trends in BACS include wireless technologies, use of IP, individual user control, and artificial intelligence being used to predict and prevent data,” said Hansen. “There are more and more intelligent controllers with no need for gateways. There are also home devices being used in commercial applications. Still, cyber security is one of the big issues and the main reason uptake is not as high as it could be.”
“[Overall], energy transition shakes up and alters traditional HVAC product strongholds worldwide,” said Dawson. “Connectivity and smart technology will impact products and the way they get to market.”
Publication date: 3/12/2018