Tick, tock … the countdown for the Department of Energy’s regulatory changes are quickly coming upon us, and the regulations just keep stacking. New laws have been enacted — for example, as of June, the Defense Production Act went into effect declaring that noncondensing indoor gas furnaces would be phased out beginning in 2029. There are two more acts waiting for legislation: the ICEE HOT Act of 2022 will reduce residential building greenhouse gas emissions and increase energy security by incentivizing electric HVAC equipment, water heating, and other home appliances across the supply chain; and the HEATR Act of 2022, which aims to establish upstream incentives for manufacturers to transition production to heat pumps. Plus, the HVACR industry is on the brink of yet another refrigerant phasedown — R10A is effectively eliminated in January, and the refrigerant transition is complicated by the fact that it is occurring on a state-by-state basis, which leads to more confusion. Collectively, there is a lot to wade through, but you can see that all roads are leading to electrification and the highest efficiency equipment. Ready or not, this massive push is coming.
To start, let’s look at what got us to this place — the place where a government agency has to step in to regulate our industry. There’s no denying the industry faces a mix of consumer, contractor, manufacturer, and environmental challenges, but I keep reiterating these known truths:
In North America, 80% of replacement sales are made at the time of a breakdown. There are currently over 260,000 technicians just in the United States; this means that there are over 260,000 opinions on diagnostic processes, equipment replacement, and equipment efficiency. With a technician making a manual recommendation, U.S. consumers purchase the lowest efficiency replacement model available 81% of the time. And, the final truth is that residential HVAC is the No. 1 contributor to the global climate crisis. This is why we are now faced with imminent change.
If we’re honest, the only thing consistent about our industry is inconsistency. There is no one standard model for technicians — hence the 260,000 variances in opinion. Inconsistent application of the known best practices leads to poor field recommendations, poor consumer experiences, and an overall mistrust of the industry. If we don’t address the consumer experience and the overwhelming desire for transparency, then there is zero way that you can effectively navigate these upcoming changes or be able to explain to your customers why this is the time for a “more affordable” replacement system; why pricing and standards will change in January; why if you have a heating and cooling system and one appliance breaks down, why the whole entire system needs to be replaced. If they don’t trust you, they won't believe you.
There are really three areas you need to be focusing your energy on for the coming changes.
First, gather your team. Understand the new equipment ratings and create the standard for consistency. What will the new consistent recommendations be? What is the new consistent way to diagnose a unit to make that consistent recommendation? How do we consistently identify the new needed SEER2 rating? How do we consistently calculate energy consumption? How do we consistently relay this information to the consumer? How are we consistently writing our invoice to show clear and transparent pricing?
Second, empty your expiring inventory. Many larger contractors have warehoused units, especially with the pressure of recent supply chain delays, that will soon be out of date. These units must go before the end of the year. Contractors that have relied on low-price wars or the lowest grade units as the lowest as their competitive advantage will have to reimagine their engagement with consumers. Once you establish consistent processes, you can communicate with your customers what these changes are and what the raw impacts are for a homeowner.
Third, educate your local consumers. Coupled with the phaseout of R-22 in 2020, homeowners with older systems are facing a higher-efficiency replacement. The communication to your customers needs to be stressing the importance of proper maintenance to both minimize further environmental damage and prolong the life of the unit. If a replacement is needed and a customer really wants a less expensive but less efficient system, they will have a limited time to complete that purchase, and lastly, educate the consumer on the benefits of higher-efficiency units so that they understand why these changes also bring the lowest cost of ownership, over time, of a new system.
These series of regulations are culminating to have the greatest impact our industry has ever seen. What's your roadmap for 2023? How will you be capitalizing — and not just in a way to survive, but to actually thrive?
If you’re interested in a more in-depth look into these changes and the widespread industry impacts, join us for our free ongoing DOE webinar series: https://fyxify.pro/doe-regulatory-changes.