Friday, March 16, 2012

Contractors Need to be Proactive on R-22

March 05, 2012

I’m not sure many people in the HVACR industry started 2012 with a New Year’s resolution that went something like, “I want to be totally confused over the cost and availability of R-22.”

After all, only a couple years ago everybody was on board with the idea of a gradual step down in supplies of virgin HCFC-22. That step down was to come Jan. 1, 2012, and was supposed to be about 11 percent or 10 million pounds less than the previous year. We can deal with that, everyone said. After all, the industry hadn’t used all the 2010 allocations; the economy was still sluggish in 2011 and probably would be in 2012; more HFC equipment was coming on line as R-22 equipment was coming off line; and even though the dry-ship R-22 component issue was keeping more R-22 in the field than may have been first anticipated, supplies seemed to be fine and everyone could deal with the cost.

Then came the curveball, courtesy of the U.S. Environmental Protection Agency (EPA). Rather than stay with the 11 percent step down, the agency, which determines allocations, said the step down could be up to 45 percent, or about 55 million pounds. Compounding the issue was the fact that 45 percent was not a firm number — just the deepest step down the agency would consider requiring. The agency said it could still be just 11 percent — but it may take until summer to come up with a hard and fast number.

When the EPA gave the go-ahead to produce virgin R-22, it came in the form of a non enforcement statement, meaning the EPA would not go after manufacturers as long as they worked out a production schedule that would not exceed 55 million pounds by the end of 2012.

Of course, the EPA could come back and eventually allow a higher amount. And that is the current guessing game.

The immediate effect was to take close to one-half of the planned virgin R-22 off the market, which resulted in the price spikes. I got an email from a contractor literally hours after the manufacturers announced the price hikes asking why. As I told him, it initially related to the law of supply and demand. When supply goes down, prices go up. Those of us old enough to remember the various oil embargos against the United States in the 1970s remember gasoline prices rising almost daily — and long gas lines which resulted in odd/even days for going to the gas station based on the last digit on your license plate. (Today, the price rises make little sense as it seems every time a tanker loses a bit of oil or a foreign country threatens to cut supply, prices immediately go up at the local gas station, even though the gas in the underground tanks at the station has been there long before the spill or threat.)
I will be following this allocation story through 2012 and beyond. For now, here are three thoughts for contractors:

• Make sure you have a really good relationship with your wholesaler. Refrigerant manufacturers have told wholesalers they will do their best to serve their best customers — their best wholesalers — first, and I’m assuming the wholesalers will do their best for their best contractor customers.

• Get serious about reclamation. That sector of the industry has been around for a long time with little product coming back. Remember, reclaimed R-22 brought back to ARI-700 purity standards comes back into the field without the restrictions or limitations of virgin R-22. The more R-22 there is in the field, the more there is to work with.

• Start working with the HFC retrofit alternatives. There are a lot of them with certain ranges of applications. To do the retrofit means recovering the R-22, which in turn can come back into use in the industry for those R-22 systems that might not yet have the right HFC retrofit refrigerant.

There are challenges facing our industry. But there are ways already in place to deal with those challenges.
Publication date: 03/05/2012

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