Contractors Need to be Proactive on R-22

March 05, 2012

By: Peter Powell

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

EPA Expected to Reduce R-22 Refrigerant Allocation

Maintenance Insider

While the EPA is not expected to issue a final allocation determination until later this summer, R-22 allocations will likely be reduced between 11 percent and 47 percent from the previous level.

Property managers have recently received information from their service providers informing them that the supply of R-22 refrigerant is uncertain and prices have escalated sharply as a consequence.

NMHC’s Eileen Lee says that it has been implied that the Environmental Protection Agency (EPA) has accelerated the phase out of this refrigerant, thus causing the supply disruption. While EPA has temporarily reduced the allocation (the amount of R-22 that is able to be produced or imported), this is an interim measure based in part on the oversupply of R-22 in the marketplace. The final allocation levels of R-22 will be issued later this year, and supplies are expected to be available to meet demand.

Background: R-22 is a member of a class of ozone-destroying chemicals (HCFCs) that is regulated under an international agreement. As of 2010, manufacturers were prohibited from importing R-22 for use in new equipment and, after 2020, R-22 will no longer be permitted to be manufactured or imported. Only R-22 that is recycled from other sources will be available for servicing existing equipment.

EPA sets an allocation level for the amount of R-22 that can be produced or imported. EPA and equipment manufacturers expect that the phase-out timetable for R-22 will enable the servicing of existing equipment throughout its useful lifetime. EPA is not accelerating the phase-out schedule of R-22, Lee says.

However, last year, EPA found that there was an oversupply of R-22 in the marketplace. A trade organization representing the manufacturers and importers of R-22 supported these claims, and advocated for a 20 percent reduction in allocations (the amount able to be produced or imported) for 2012-2014. Additional information on R-22 is available at www.epa.gov/ozone/title6/phaseout/22phaseout.html.

Current Situation: In January, EPA issued an interim proposal that reduced allocations for the current period by 45 percent. This reduction caused concern within the air conditioning/ refrigeration service industry. While EPA is not expected to issue a final allocation determination until later this summer, R-22 allocations will likely be reduced between 11 percent and 47 percent from the previous level, Lee says.

Air-conditioning service providers did not anticipate the current supply disruption. NAA/NMHC have consulted with colleagues at the Air Conditioning Contractors Association for an explanation of the current marketplace situation. They have provided a memorandum at www.naahq.org/governmentaffairs.

Best Practices: See www.epa.gov/ozone/title6/phaseout/22phaseout.html for the description of the preferred common-sense approach at a technician level. It will help to properly diagnose a problem with an air-conditioning system and repair the system to maintain the smallest amount of R-22 possible. “When it is time to replace the system, recover the R-22 in such a way as it can be reused onsite to reduce the amount of R-22 needed to be purchased. This type of response ensures the smallest financial impact on the community regardless of the supply and price of R-22 in the future,” says Paul Rhodes, National Safety & Maintenance Instructor, NAA Education Institute.

What’s going on with – Part 2 – Today’s market

Posted by on Feb 17, 2012

A good question to possibly ask is, “why does this matter now?”. R-22 is available now, and we have until 2020 before the production stops. I guess the good news is that our industry has done a pretty job of changing over to R-410A and moving away from R-22. As a result, the demand for R-22 has actually been less than anticipated in the allocation plans. In 1986, producers of R-22 only utilized 86% of their allocations (source – acca.org). 

The EPA has to legislate these allocations. They have tried to reduce these allocations to not only comply with the law, but also to anticipate the market and demand. That being said, as of the 1st of January 2012, the EPA had not released their allocations for this year. So as of January 1st, the manufacturers of R-22 did not have the authority to produce or import and R-22 – production totally stopped.

If you remember from your high school economics courses, when supply goes down or stops and demand remains relatively constant, the price goes through the roof. As contractors, we saw an increase of almost 3x between December 2011 and January 2012. We also saw rationing – one of our suppliers will only sell 5 drums of R-22 per contractor per week.

On January 20th, the EPA set a letter to producers and importers of R-22 allowing them to resume the production and importing of R-22. But, they have not set final allocation numbers for this year. so, the market is still unsettled.

Over the last month, pricing has settled down a bit, but it is still 2-2 1/2 times the price in December. No one knows exactly where this will go moving forward and how much R-22 will be available for use this year.

The reason that we wanted to post this and give you the details is because a large majority of residential and commercial cooling systems still use R-22. And, while R-22 is not a consumable in the system, as your systems become older, they can begin to leak slowly which will require R-22 to be added.

Hopefully, this information will help you be able to make a good decision about whether to repair or replace a leaking system. Obviously, as R-22 wholesale pricing is up 2-3x, retail will be the same. We saw retail pricing of R-22 in the $80-$90 per pound range. And since a residential air conditioning unit may contain 5 pounds or more, it can get quite expensive to repair an R-22 system.

Next time, I will focus on more of the practical issues facing consumers and contractors this year. I will also discuss “dry-charge” R-22 units that have become available on the market – should you buy one or not?

As always, please feel free to call us at any time to discuss this or any other issues relating to your heating and cooling systems.

You’ll need cold cash to service your air conditioner

By Jim Weiker

Air-conditioner repairs could leave central Ohio homeowners hot and bothered this spring.

This winter, the cost of the refrigerant used in older air-conditioning units jumped more than 200 percent.

That means homeowners who used to pay $150 or $200 to recharge their air conditioners for the summer could pay twice that amount this time around.

“If you’ve got a leaker and need a couple pounds (of refrigerant) to get you through the summer, it’s going to cost you a whole lot more this summer than it has in the past,” said John Frary, service manager with the Favret Co., a Columbus heating and air-conditioning firm.

The price of R-22, the refrigerant used in many older air conditioners, skyrocketed on Jan. 20 after the U.S. Environmental Protection Agency ordered that manufacturers cut production of the material by 45 percent this year.

The wholesale price then “went off the charts,” said Rod Essig, with Carr Supply, a Columbus company that supplies the heating and air-conditioning industry.

The cost of a 30-pound tank instantly leapt from about $150 to about $400. Homeowners who traditionally have paid about $20 a pound during a service charge could now pay about $50 a pound.

The jump is so severe that at least one company, Sears Heating and Cooling in Columbus, might start charging by the ounce.

“We have customers who regularly ask us to add refrigerant every year because they have a small leak,” said Sears Heating owner Paul Schwerling. “But this will be so expensive by the pound.”

The EPA is phasing out R-22 by 2020 because it damages the ozone layer that protects Earth. Most air conditioners built in the past five years, and all air conditioners built in the past two, use a different refrigerant, called R-410A.

Still, an estimated 70 million — as much as 75 percent — of existing home air conditioners rely on R-22, according to industry sources.

January’s EPA announcement prompted such a run on R-22 that many distributors, including Carr, limited the amount that contractors could purchase. Distributors typically don’t stock a lot of R-22 until weather and demand heat up in the spring.

“We got caught with our pants down, along with many other distributors,” Essig said.

Some industry officials worry that air-conditioning contractors could end up without R-22 altogether this summer, although Talbot Gee, executive vice president of a trade group that represents heating and cooling suppliers, said he thinks there will be enough to meet demand.

Gee’s organization, Columbus-based Heating, Airconditioning & Refrigeration Distributors International, has joined others in an effort to raise R-22 production limits this year. Still, the long-term outlook on R-22 is clear: It will become more scarce and expensive until it vanishes altogether in eight years.

Manufacturers are promoting alternatives to R-22, although Gee said that using them could void warranties.

Industry officials think the rising cost to repair older air conditioners could fuel sales of new units, which can run $3,000 to $5,000.

“If you have a leak and need a refrigerant repair, it may be advantageous to upgrade your system because of cost,” Frary said.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

The Climate and Clean Air Coalition to Reduce Short-Lived Climate Pollutants

Price of R-22 Air Conditioner Refrigerant Drastically Increases

Written by Jesse Muench

We are quite concerned about the recent drastic price increase of R-22 (also called Freon), a coolant used in many air conditioners, due to a regulation put into place by the Environmental Protection Agency (EPA) (http://www.epa.gov/ozone/title6/downloads/Homeowner.pdf) that will phase out the use of R-22 completely by the year 2020. R-22 has been shown to release Hydrochlorofluorocarbons (HCFC’s), which are harmful to the ozone, leading the EPA to gradually eliminate it.

Because of this phase out R-22 refrigerant will gradually be produced less and less, thus diminishing supplies and increasing costs of the coolant. The cost for Freon recently doubled, and is anticipated to eventually triple, placing a major burden on air conditioner owners. The recent spikes in price have put HVAC contractors in a state of frenzy. In the South where air conditioners are used more frequently many HVAC companies are buying as much R-22 as possible thus making it even scarcer and making the price even higher in the North.

If you own an air conditioner that uses R-22 there are two primary issues that will affect you. The first is that as time goes on it will become more and more expensive to add Freon to your air conditioner, and eventually it will be completely unavailable. The second issue is that theft of R-22 from your air conditioner becomes much more likely. As Freon becomes more and more scarce and the prices rise it will become much more valuable, and increase the incentive to steal it.

Most air conditioners 5-10 years or older use R-22. If you are uncertain of what type of refrigerant your air conditioning unit uses don’t hesitate to give us call and we can help you determine if this recent price shift will affect you. We are also available for any questions you have about this change or challenges it may present to you. Feel free to give us a call at 262-677-1037 for any of these questions or for more information. There is also a Frequently Asked Question section on the EPA’s website that can help you better understand what this all means for you. We will keep you updated of any major changes in this matter right here on our blog. Also be sure to watch the video attached below in which our owner Steve Holland briefly discusses what to expect with Freon and how it will affect you.

The information contained in this article have been written for the HVAC industry public or private and are not to copied, reproduced or plagiarized without the written consent of the author. News publications and trade organizations interested in using content contained in this blog/article can contact Steve Holland at Holland Home Services at the Contact Us section of this.

HARDI has recently filed comments on two issues which will undoubtedly have a great impact on HVACR distributors.

HARDI recently filed comments on the Environmental Protection Agency’s (EPA) proposed R-22 allocation rule for 2012-2014. While HARDI supports an orderly reduction of R-22 it was our view that significant market confusion resulted from both the delay in EPA beginning this rulemaking process and concerns and delays with EPA’s “non-enforcement letters” which allow companies to produce and import refrigerants while the rulemaking process is taking place.
 

Last week, HARDI submitted comments to the Department of Energy regarding possible enforcement proposals for the newly established regional efficiency standards for furnaces and air-conditioners. HARDI stated in its comments that while distributors will likely play an active and voluntarily role in communicating the new standards to contractors, the Department of Energy lacks the legal authority to include distributors in enforcement schemes. HARDI maintained that legislative language clearly outlines responsible entities for the energy efficiency of furnaces and air-conditioners and distributors are not a named party.
 

HARDI will continue to update membership on these important issues as developments occur.