2013 Economic Outlook RSES Perspective

economic growth looks goodWhat a difference a year makes. Or not. The overall mood of the nation – pensive, anxious and waiting to see how the seemingly endless presidential election campaign would turn out – during 2012 seems likely to continue into 2013.

According to Alan Beaulieu of ITR Economics, the mild economic growth of 2012 will continue into mid-2013, after which the economy will slide back into recession through 2014. If that holds true, it would seem that general consumer and business owner activity in the HVACR market will remain similar to what it has been the last few years.

Lower new equipment shipments from 2011 to 2012 in virtually every category measured (AHRI Nov. 15, 2012 News Release) would seem to support the premise that equipment owners are holding off on replacing equipment. Instead, squeezing additional utility out of aging equipment through repairs and maintenance continues to be a growing trend. For sufficiently diversified wholesalers and contractors, this simply means continued emphasis on parts and service rather than new equipment installations.

However, it does continue to highlight the importance of a highly skilled and knowledgeable workforce to deliver the necessary repairs and upgrades. According to the HVACR Workforce Development Foundation, 136,000 new jobs will be created in the HVACR sector by 2018. Combined with the looming retirement exodus of much of the current labor pool, the industry continues to lag others in terms of recruiting sufficient numbers of new workers.

This newly formed Foundation hopes to jump-start the process of attracting new recruits. Eight industry organi-zations have collaborated to launch the effort:

  • ACCA – Air Conditioning Contractors of America.
  • AHRI – Air-Conditioning, Heating, and Refrigeration Institute.
  • AMCA – Air Movement and Control Association.
  • ASHRAE – American Society of Heating, Refrigerating and Air-Conditioning Engineers.
  • HARDI – Heating, Air-conditioning & Refrigeration Distributors International.
  • HRAI – Heating, Refrigeration and Air Conditioning Institute of Canada.
  • PHCC – Plumbing, Heating, Cooling Contractors – National Association.
  • RSES – Refrigeration Service Engineers Society.

Initiatives include development of cohesive and consistent recruiting materials, such as videos, pamphlets, presentation materials and websites. All these will include targeted tracks for young adults, parents, educators and industry participants.

In the meantime, although the federal legislative morass of the last four years seems likely to continue on issues impacting the energy side of HVACR, the regulatory environment seems equally likely to be dialed up even further – with about as much clarity and certainty as has been demonstrated of late.

Some rulemaking has been relatively straightforward. Early in 2012, the Environmental Protection Agency announced approval of several hydrocarbon refrigerants to be used in a limited set of refrigeration applications through its Significant New Alternative Policy (SNAP) program. Although various public comments encouraged imposition of technician certification to handle flammable refrigerants, the EPA stuck to its “strong recommendation” that technicians should be trained in safety precautions. RSES has responded with a certificate training program for technicians and contractors, featuring a study guide and online review with assessment and certificate indicating comprehension of the information presented.

Other EPA activities are a bit murkier. It would appear as of early December 2012, with no final 2013 manufacturing allocations of HCFC refrigerants in place – just like last year – that we’re going to see a repeat of market confusion concerning R-22 availability. Some theorize the lack of definitive allocations is simply federal bureaucratic bungling, while others contend it is a deliberate effort by a regulatory agency to influence the marketplace.

To the surprise of many, the market price of R-22 hadn’t skyrocketed before 2012. However, allocation uncertainty (and therefore general availability) has driven up the price, perhaps ultimately achieving the goals to push the industry more definitively to HFCs and beyond. Whatever the cause, wholesalers and contractors can expect the drive toward the next generations of refrigerants to accelerate.

Not to be outdone, the U.S. Department of Energy continues to impact the HVACR industry as well. Although ACCA and HARDI filed a lawsuit challenging them, and AHRI has requested an 18-month delay in implementing them, regional standards for minimum air conditioning and heating equipment energy efficiency are scheduled to take effect May 1, 2013.

Though there are penalties for installation of equipment that doesn’t meet these new minimums, the rule doesn’t provide a formal enforcement plan. As CFC refrigerant reclamation volumes can attest to the efficacy of enforcement with those rules, so too can we expect the industry to respond to equipment standards. Those supply chain players who want to follow the law will attempt to do so at the expense of scofflaws who underbid them by selling cheaper, less efficient systems because they know they can get away with it.

To help stave off some of the growing surge of regulations, ACCA is leading a panel of industry stakeholders to develop a model for state licensing of contractors. Although perhaps counter-intuitive from the standpoint of encouraging states to require licensing, an industry-initiated model for how to license its most visible assets in the supply chain should be more effective than a government-generated one.

These examples only skim the surface of the numerous regulatory activities swirling at the federal and state levels that will impact HVACR manufacturers, wholesalers, contractors and technicians. Though the foreseeable future continues to hold challenges – economic as well as regulatory – the solutions to thriving in it remain consistent, too. Those who continue to provide their customers with cost-effective options at varying energy-efficiency levels, while also staying abreast of all the relevant regulations and investing in a better trained workforce, will always stand a better chance of succeeding than those who don’t.

Mark Lowry is the executive vice president of Refrigeration Service Engineers Society (RSES). Contact him at 800/297-5660 x4051, [email protected] or visit www.rses.org.

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