Renewable energy inventory may be a viable business solution for today's HVACR distributor - if the timing is right, and the products are shipped to the proper location.
A recent meeting conducted by Heating, Air-conditioning & Refrigeration Distributors International's (HARDI) Renewables Sub-Council examined the current state of renewable energy equipment and how some distributors are using tax incentives to bolster sales.
DRIVEN BY INCENTIVESConsumer interest in renewables is largely driven by tax credits.
Larry Trimbach, owner, 2 J Supply Co., Dayton, Ohio, and chair of HARDI's Renewables Sub-Council shared this note at the group's December meeting, insisting that distributors thoroughly investigate existing incentives before jumping into the market.
"Renewables are only robust when they are backed by some form of incentive or credit," said Trimbach. "Without consumer incentives, the products simply don't sell."
Section 1603 of the American Recovery and Reinvestment Act of 2009 offered companies the opportunity to earn a 30-percent tax grant for "the power generation component of the costs of a renewable generation project."
The project spurred great economic success, as the National Renewable Energy Laboratory (NREL) reported that, as of this spring, more than $11.6 billion has been awarded to help fund approximately 38,000 projects. More than 38,000 recorded projects were solar based ventures.
Assuming that each application maximized the credit's 30-percent allowance, NREL estimates the program has supported a total investment exceeding $38.6 billion.
Despite the program's positive results, it failed to gain a government extension and expired Dec. 31, 2011.
Trimbach said solar distribution has plummeted following the death of Section 1603.
"I know of many HVACR companies that invested quite heavily in solar. One company I know very well purchased containers full of solar panels from China," he said. "But, as the incentives went away, their once booming sales were reduced to almost nothing."
Geothermal sales have experienced a similar sales boom following the implementation of The Energy Improvement and Extension Act of 2008, HR 1424. The legislation spurred a long-term tax incentive encouraging the installation of residential and commercial geothermal heat pumps, offering a one-time tax credit of up to 30 percent for qualified homeowners installing geothermal heat pumps and ground loops through 2016. The credit may be applied to existing and new construction projects, and may be utilized on primary and secondary residences.
The credit isn't just for residential projects. A 10-percent credit is available, with no maximum limit, for commercial system installations.
Trimbach's 2 J Supply Co. went all-out, hiring a full-time geothermal sales manager to facilitate sales while the incentive is active.
"We met with a number of our peers at HARDI that were having great success with geothermal and we felt that this area provided us a great growth opportunity," said Trimbach. "We then evaluated our customer base and acknowledged that some of the small- to medium-sized contractors we work with may have some reluctance toward geothermal installations. So, it became our job to break these guys into the geo business.
"We felt that hiring a full-time guy was the right thing to do and it's worked out in our favor," he said. "In 2011, we grew our geothermal business by about 187 percent. This year, the industry is down about 15 percent as a whole; however, we're up about 26 percent.
Trimbach said he will continue to heavily market the benefits of geothermal - well, at least through 2016.
"As 2016 arrives, and the 30-percent tax credit expires, it will certainly impact geothermal sales nationwide," he said. "There will be replacement and maintenance opportunities, but, without this tax credit, consumer interest is sure to dry up."
The company said as the 2016 deadline approaches, they intend to slowly transition their full-time geothermal guy into other industry sectors.
From a manufacturer's perspective, Paul Quigley, vice president of sales, Bard Manufacturing, Bryan, Ohio, and vice chair of the Renewables Sub-Council, stated that while it is true that residential geothermal business is very reactionary to utility incentives and tax credits; the industry is keeping a very close eye on the impact of the new U.S. Department of Energy (DOE) regional energy-efficiency standards.
"As the DOE efficiency mandates continue to increase, the once large pricing delta between traditional air-to-air HVAC systems and the desirable geothermal and renewable energy equipment is beginning to close," he said.
LOCATION, LOCATION, LOCATIONThe performance of some renewable energy sources varies greatly by geographic area.
The American Wind Energy Association (AWEA) reports that South Dakota, Iowa, and North Dakota rank amongst the states with the highest wind generation as a percentage of their portfolio. Southeastern states including Florida, Alabama, and Louisiana are recognized as states having low wind-resource potential.
Arizona, California, and Nevada are recognized as the nation's sunniest states, while Alaska, Washington, Oregon, and New York rank as least sunny.
"From an HVACR perspective, wind and solar sales are a bit fuzzy," said Trimbach. "While wind exists everywhere, and the sun shines on every state, some states are windier and sunnier than others. It doesn't make sense to sell renewable products in areas with less profit potential."
Trimbach encourages owners to do their homework before jumping into the realm of renewables; however, if done properly, he acknowledges the rewards are plentiful.
HARDI's Renewables Sub-Council is a branch of the organization's HVACR Systems and Equipment Committee. The coalition was formed in 2011 by Trimbach, Quigley, and several other environmentally conscious HARDI distributors.