Making Lemonade from a Business Lemon

On Oct. 13, 2009, the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) signed an agreement with environmental advocates led by the American Council for an Energy-Efficient Economy (ACEEE) and other groups, notably the California Energy Commission. This agreement establishes several precedents: First, the consensus agreement calls for the Department of Energy to adopt regional standards for furnaces, central air conditioners and heat pumps, replacing the national standards approach that has long been in effect. Table 1 gives the values recommended to the DOE. The agreement also calls on Congress to allow states to adopt somewhat higher performance expectations in their state energy codes for residences. Other parts of the agreement will improve the information available to distributors and contractors, potentially improving the ability to differentiate the right product for each customer.

When adopted by Congress and the DOE, the move from national to regional standards will change business operations. Change can be scary, particularly in a depressed business environment. In this note, I'll try to give a little background and make some guesses about how implementation might work — and how distributors might profit, making lemonade with your customers out of the proverbial lemon you think this change could be.

National minimum-efficiency standards for furnaces, air conditioners and heat pumps took effect in 1992. Standards-setting by the Department of Energy has been acrimonious. The law mandates setting standards at the “maximum level that is technologically feasible and economically justified.” Environmental advocates and some utilities have pushed for more stringent standards, while manufacturers have resisted. Both sides make good cases. Manufacturers, distributors and contractors all worry that more stringency makes it harder to show cost-effective savings from premium products. Because better installation, such as the ACCA QI program, creates huge, well-documented savings, we all have a stake in avoiding selections based on Low Bid instead of Best Value.

Another problem with efficiency standards has been that the rating methods aren't very good and get worse as the equipment gets better. They don't do a very good job of helping consumers arrive at good choices for their houses, and they don't help contractors sell the best products for those homeowners. One reason is that the air conditioner laboratory tests don't approximate field conditions very well. For example, duct defects generally require much more fan power than the test assumes and affect both air flow/dehumidification and energy use.

But the most important reason is that the United States has many different climates. The right furnaces in Michigan and Minnesota are certainly condensing ones with at least 90 AFUE. These might not be cost-effective in Mississippi, but the federal process has required a “one-size-fits-all” approach.

Similarly, contrast what we need from air conditioners in Arizona vs. Alabama. In the hot, dry West, about the only thing that matters economically is performance at high outdoor temperatures. One third of the cost of air conditioning in Sacramento occurs when outside temperatures rise above 90°F. But, this gets only 7.4 percent of the weighting in SEER, the federal “score” for air conditioners. For California, Arizona and similar states, EER₉₅ is a better predictor of air conditioner performance than SEER. Conversely, in hot, humid climates, what matters most is how well the air conditioner removes humidity at part load, when the outside temperatures are in the upper 70s and 80s. Enhancing dehumidification (lower SHR) tends to reduce SEER, at least for low-end equipment. We think that a major consideration preventing manufacturers from cutting corners to improve SEER at the expense of dehumidification is fear of callbacks associated with mold.

These considerations led ACEEE to start work on the potential gains from regional standards years ago. With our research partners and help from an industry advisory committee, we published our recommendation for considering regional standards. The Energy Independence and Security Act (EISA) of 2007 provided instructions on how to proceed. Since then, we've worked with manufacturers and others on how to make this work to save energy and help industry. I want to stress that it's not the only thing we're doing: For example, we're actively evaluating the potential for early replacements of obsolete but functional equipment, as a stimulus and to save energy. Stay tuned.

The AHRI-Advocates agreement will establish two regions for furnaces and three for air conditioners.

What the agreement does

The AHRI-Advocates agreement will establish two regions for furnaces and three for air conditioners (Figure A). The boundary between “northern” and “southern” is the boundary between states with average winter intensity above 5,000 DD, versus warmer states. Condensing furnaces (AFUE ? 90) are required in the North; we recommend an 80 AFUE limit in the South. Air conditioner regions differ only in that there is a separate four-state “hot-dry” region with minimum EER as well as SEER requirements, to assure minimum high-temperature performance levels. The 5,000 DD boundary was a compromise involving many considerations. Climate mattered most, but we also tried to minimize the number and size of metropolitan areas that straddle a boundary, to reduce the number of affected contractors and distributors as much as possible. Table 1 gives the values proposed to DOE as the maximum feasible and justified.