If you’re reading this, that means you’ve reached the last page of yet another calendar year. Kudos for that. Of course, I make that statement knowing full well that few people still utilize paper calendars. In fact, we don’t even print this magazine on paper anymore.

While 2022 brought forth many challenges, 2023 is certain to pave a path full of unique twists, turns, hurdles, and pitfalls — including a potential economic recession. Thus, as you set the direction of your business for the year to come, I’ve compiled a few industry observations that could help you accumulate the paper that matters most: money.

New Efficiency Regulations Have Arrived

The U.S. Department of Energy's (DOE's) air conditioning efficiency increases were introduced in 2018 through a 13% increase in minimum efficiency. The second phase is scheduled to occur next as the government has planned another 15% increase in part-load (IEER) efficiency.

After Dec. 31, 2022, the efficiency changes for all commercial air-cooled unitary products will fall into three different categories based on the capacity of the equipment, measured in MBH (thousand British thermal units per hour):

• 0-66 MBH three-phase products: ASHRAE 90.1-2019 and any equivalent state or local code will require new SEER2 and HSPF2 minimum efficiencies that are more stringent than today’s requirements. Canada has said they will require these minimums sometime in 2023, but this decision has not been finalized.
• 67-760 MBH: ASHRAE 90.1 and any equivalent state or local code will require new IEER minimum efficiencies that are more stringent than today’s requirements. In addition, the DOE requires manufacturers to comply with these minimums on any unit shipped in the U.S. after Dec. 31, 2024. Additionally, per ASHRAE 90.1 and the DOE, the input capacity for furnace efficiencies greater than 225 MBH will simultaneously increase after Dec. 31, 2024.
• 760 MBH and greater: ASHRAE 90.1 and any equivalent state or local code will require new IEER minimum efficiencies that are more stringent than today’s requirements.

Additionally, the commercial HVAC market does not utilize regional standards. DOE compliance is based on the equipment's shipping date, meaning units can be stocked, sold, and installed after the deadline. Be aware of these rules and the impact they'll have on your firm's present and future designs.

Energy Prices Will Remain a Challenge

The U.S. Energy Information Administration (EIA) anticipates U.S. energy prices will remain historically high through 2023 across numerous sectors, including oil, natural gas, coal, and electricity, according to its Short-Term Energy Outlook (STEO).

For 2023, EIA anticipates retail electricity prices will average 15.32 cents per kilowatt-hour (kWh). For reference, the average retail rate in August 2022 was 13.61 cents per kWh.

As engineers, there is no better time to promote your energy- and cost-saving designs than now. Building owners and facility managers looking for a reprieve from rising costs may be more apt to consider energy efficiency as a solution. It’s your job to show the impact of rising energy costs and how/why efficient solutions make sense (cents).

Renewable Energy Continues to Evolve

Renewable solutions should be included in any efficiency package you offer from here on out.

The EIA anticipates 24% of electricity generated in 2023 will come from renewable sources, up from 22% in 2022. In the same breath, natural gas generation is expected to decline from 38% in 2022 to 36% in 2023. It’s difficult to fathom, but, based on these estimates, energy production from renewable sources in America only trails natural gas by 12%. And, that gap is expected to narrow even further in subsequent years. By 2024, almost 33% of the world’s electricity is forecast to come from renewables, with solar photovoltaic (PV) accounting for almost 60% (or at least 697 gigawatts) of that expected growth, according to Renewables 2019. Onshore wind (309 GW), hydropower (121 GW), offshore wind (43 GW), and bioenergy (41 GW) follow in rank.

We all know quality employees are difficult to find. This is further evidenced by a national unemployment rate of less than 4%. And, sustainability ranks as a very high priority among young workers who believe responsible leadership is positively related to an organization’s citizenship behavior toward the environment.

If your clients haven’t at least planted the seeds of a renewable-energy future, it’s time for you to do your best Johnny Appleseed and extol the virtues of sustainability.

The Influence of Refrigerant Regulations

Through the American Innovation in Manufacturing (AIM) Act, the U.S. Environmental Protection Agency (EPA) started phasing down the production of high-global warming potential (GWP) refrigerants this year and will continue to do so for years to come.

Under the AIM Act, Congress gave the EPA the authority to phase down the consumption and production of high-GWP HFC refrigerants in the U.S. by 85% over the next 15 years. Production will be reduced by 10% this year and next and phased down to 60% in 2024. Such a severe restriction on virgin supply in 2024 will drastically increase the need for reclamation, as contractors seek enough gas to maintain existing systems. Additionally, the EPA will ban disposable refrigerant containers in 2025, further increasing the burden on contractors.

As a result, the EPA is expected to ban the use of R-410A in new equipment, falling in line with California, which effectively banned non-reclaimed HFCs with GWP greater than 750 beginning in 2025.

As HFCs continue to be phased out, this will likely lead to a rise in the use of low-GWP, lower flammability (A2L) refrigerants, such as R-32 and R-454B.

As a designer, it’s important to inform owners and facility managers of these regulations and the sweeping changes necessary regarding the maintenance/replacement of such comfort equipment.

Reaping the Benefits of the Inflation Reduction Act

The Inflation Reduction Act (IRA) is the largest climate-based investment ever made by the federal government. The legislation commits $369 billion on behalf of energy security and climate change mitigation over the next decade with an overreaching goal to reduce carbon emissions by 40% by 2030 compared to 2005 levels.

This will be accomplished through several provisions, including Section 179D, carbon oxide sequestration credits, clean hydrogen production credits, renewable energy generation equipment credits, and much more. Make sure you’re familiar with this legislation and maximizing the full return on investment of these provisions within your designs.

Conclusion

There is a lot going on in the industry. And, as difficult as it is for you to stay up to date, it’s even harder for your clients, who rely on you to take care of the fine-print details. A great way to simplify these changes is to create and distribute a one-page summary that deciphers these difficult topics/timelines in layman's terms.

Over the next 10 years, the demand for HVAC engineers and the work they do will continue to increase, as new technologies, such as super insulation, glazing technologies, solar power cooling installations, etc., transition from idea to install. Make sure you’re investing in your position as an industry thought-leader to ensure your clients continue to invest in you.