The HVAC industry is preparing for increased interest in high-efficiency products, such as variable-speed compressors and heat pumps, following the passage of the federal Inflation Reduction Act (IRA).
The IRA, passed in both houses of Congress and signed into law by President Joe Biden in August, includes a number of HVAC-related energy efficiency incentives billed as ways to curb greenhouse gas emissions and thus combat climate change. Expired tax credits for homeowners and home builders who take specific energy-saving measures were renewed and made retroactive; those credits, plus a tax deduction for the owners of commercial buildings retrofitted to meet defined energy-savings goals, will be enhanced beginning in 2023.
The IRA also sets aside $4.3 billion for state-administered consumer rebate programs designed to promote electrification. Details of the rebate programs, which are to be geared toward low- and moderate-income households, are expected to take months to work out, but for an eligible household, the rebate for a heat pump for both heating and cooling could be as high as $8,000.
The IRA’s incentives have Mark Kuntz pumped, one could say, about the sales outlook. Kuntz is the CEO of the joint partnership Mitsubishi Electric Trane HVAC U.S., or METUS, which manufactures inverter-compressor heat pumps and related equipment.
“We’re expecting substantial increased demand for our product,” said Kuntz recently by phone. “I don’t want to get into the exact number, but it’s appreciable.”
Kuntz said the IRA’s incentives are for products that include exactly the things METUS makes, and that similar incentives in the past, managed by a state or a local utility, have boosted the company’s sales.
METUS, Kuntz said, is planning to help dealers and contractors in its networks understand the incentives in order to present them to customers. METUS has scheduled educational summits around the country for companies that deal in its products.
“We’re advising our dealers on what they should be stocking,” Kuntz said.
Increasing public awareness is also on the agenda, and METUS will rely heavily on its partner contractors to explain the incentives to customers, Kuntz said.
“We believe the contractor is in the best position to spread the word,” he said. “Sitting across the kitchen table is where the biggest difference can be made. They’re going to be in the best position to help people.”
At Emerson, officials are expecting “a nice tailwind” from the IRA’s incentives, said Martin Leslie, vice president of residential marketing in the company’s HVACR Technologies business.
“This will probably accelerate some people’s purchases,” Leslie said.
Emerson makes Copeland brand compressors and company officials said the IRA’s incentives could greatly reduce or potentially eliminate the increased cost of upgrading to a higher efficiency two-stage or variable-speed heat pump system, rather than purchasing a more traditional fixed-speed system.
“Rebated dollars in some cases might incentivize someone, if they were already thinking about replacing equipment, to upgrade to a higher tier, more efficient product solution,” Leslie said.
Jennifer Butsch, director of regulatory affairs at Emerson’s HVACR Technologies, said a lot will depend on how the rebate programs, which will include an income verification component, are designed. A cumbersome program, she said, could discourage its use.
At HARDI, government affairs director Alex Ayers agreed.
“We going to work with dealers to make sure this is as simple a program as possible,” Ayers said. “We obviously want to see more product go out of our warehouses.”
Ayers said HARDI is currently gathering questions that it will ask of the Department of Energy (DOE) in order to clarify details of the incentives.
“Our members and the public have been reaching out” for details, he said. “There’re just so many unknowns.”
At ACCA, CEO and president Barton James sounded a cautiously optimistic note.
While he agreed that the IRA’s incentives could boost sales of some products, James said details of the rebate programs could take years to finalize, and he suggested that political differences could shape those programs, with states that are tightly linked to the oil industry or natural gas industry perhaps not even accepting rebate money.
James has previously worked in government, including a stint at the Small Business Administration, and said he has to “weigh the political realities” when thinking about how the IRA’s incentives will play out.
“Red and blue’s going to matter a lot here on even how this is perceived,” James said.
James said ACCA is working with officials from HARDI and AHRI to reach a common understanding of the IRA’s HVAC incentives, and plans to publish a position paper to clarify them for distributors, contractors, and consumers.
The HVAC industry, James said, has already benefitted from a boost in public awareness the IRA has brought to higher-efficiency products.
“The desire to use HVAC and new technology has already created a win,” he said.