HVAC Impact—New Regulations and Low Energy Costs Spur Market

HVAC Impact—New Regulations and Low Energy Costs Spur Market

The demand for HVAC solutions is on the rise according to ACHR, reporting on recent Transparency Market Research data. In their new report, Transparency predicts an HVAC market topping $155 billion by 2022, with heat pumps and in-room air conditioners accounting for the bulk of this market growth, while unitary AC units also gain significant ground. A recent Contracting Business roundtable with notable HVAC executives comes to the same conclusion but digs deeper into root causes—both new regulations and lower energy costs are helping to spur HVAC increases.

Market Drivers

As noted by ACHR, there are a number of HVAC market developments which should come as no surprise. First is the shift away from CFCs and HCFCs to more eco-friendly options both in the wake of stricter government controls and consumer perception of these chemicals. In addition, there’s heavy geographic segmentation when it comes to HVAC with Asia Pacific nations making up more than 50 percent of the worldwide market thanks to improving economic conditions in countries like China and India. And while the Pacific region will retain its top-purchasing status over the next few years, it’s the North American market that’s predicted to show the greatest amount of increased demand.

Costs and Compliance

According to Gary Bedard of Lennox, North Americans are more willing to spend on new HVAC installations in part thanks to the use of incentives and rebates. Both manufacturer-sponsored and government-funded initiatives are often enough to convince homeowners that upgrading their current system or opting for a newer model is worth the cost, especially if these are costs can be quickly recouped over time. Bedard also mentions the falling price of energy as another HVAC driver; prospective buyers are more likely to purchase new systems and services when the cost to run these units is allows them to quickly offset initial spending.

There’s also the impact of proposed Department of Energy (DOE) regulations to consider: By 2021, the Department wants all new gas furnaces to meet 92 percent AFUE. Minimal industry consulting took place before this new goal was announced, and companies like Rheem have gone before congress to ask for the ability to negotiate with the DOE before regulation targets are set. What does this mean for the North American HVAC market? That both buyers and sellers are motivated to install current units and sidestep the problem of costly upgrades or compliance challenges.

HVAC companies, however, must also understand the needs of increasingly savvy consumers. As noted by Tony Uttley of Honeywell, for example, while his company still serves a number of clients who take a short-term view of energy efficiency and value, Honeywell is now seeing “residential and commercial consumers that are aware of the total cost of ownership and [are] making system efficiency-based decisions.” In other words, consumers are now more likely to view HVAC as a long-term decision with long-term returns.

Bottom line? The worldwide market for HVAC is on a steady upward trajectory, while North American companies should expect a significant demand spike over the next five years.

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