Technology, Energy Efficiency Will Drive Change

—by Sanjiv Bhaskar

Historically, central air conditioning has been the hallmark of residential and commercial buildings, new and old. As a result, the entire HVAC industry and value chain concentrates on this segment. Manufacturers have churned out unitary systems, distributors have stocked them, contractors have installed them, and the service fraternity has serviced them.

Is this scenario going to change dramatically in the foreseeable future? Not likely. However, ever increasing cost of energy and energy codes being implemented by federal mandate could assist in changing the scenario to some extent. To what extent, time and the market will dictate.

In 2003, the air conditioning market generated $5.49 billion in manufacturers revenues. Unitary systems, heat pump, and room air conditioners accounted for 66.6%, 15.4%, and 18%, respectively, of the market. This ratio is expected to change to 62.5% unitary, 14.7% heat pump, and 22.8% room by 2009.

See the trend? Window air conditioners are expected to gain in revenue share over the period, and these machines could make a dent in the energy consumption in the U.S by the end of the decade. This could impact the contracting community, if it causes central air conditioning to lose some ground, and if the trend of zoned cooling picks up.

Another important trend is the growth of ductless air conditioners in the U.S. markets. Ductless systems are popular in Europe and Asia, and again help in zoned cooling. These could also help answer the energy conservation questions that are asked on a regular basis.

Although,the majority of standard tract homes are still continuing with one central air conditioning unit for the entire home, a growing percentage of tract homes and high-end homes are now being equipped with two air conditioning units to be operated as required.

The market for thermostats is also undergoing a transition of sorts. Electronic thermostats are dominating the market revenues at this time, relegating mechanical and pneumatic thermostats to the position of insignificant technologies in the market.

In 2003, the revenues generated by electronic thermostats were 85.9% of the total of $533.3 million. Electronic thermostats are expected to account for 95.3% of the revenues in 2009, a compound annual growth rate of 5.9% over the period. What’s the buzzword for this kind of dominance? Energy efficiency. The only reason for survival of electromechanical thermostats and pneumatic thermostats is the replacement demand for these products.

In conclusion, technology and energy efficiency could set the pace for a subtle change in the residential HVAC markets in 2004 and beyond.

Sanjiv Bhaskar is industry manager, Building Technologies Group, at the market research firm Frost & Sullivan. He can be reached at 210/348-1014, or by e-mail at [email protected]

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