Business Insider

Contractor Q&A on new HVAC regulations

 

The 2023 HVAC regulatory changes are in effect, requiring a new understanding of equipment standards, pricing and ratings. With updates to the energy efficiency ratio (EER), seasonal energy efficiency ratio (SEER) and heating seasonal performance factor (HSPF), new HVAC standards will have an impact on every part of the industry.

To understand how contractors across the nation will face these changes, we spoke with a residential new construction (RNC) and two add-on and replacement (AOR) contractors in different regions. Dive into five aspects of the new HVAC regulations and hear what fellow contractors have to say.

2023 HVAC regulatory changes

Q: What are the new Department of Energy efficiency standards that will go into effect in January 2023? Exactly what changes will be made?

Kelly Painter, RNC contractor, Charlotte, NC, South region: The type of equipment that will be installed is changing per the efficiency ratings. From our business standpoint, we are having to redo our overall install and design process for all equipment in RNC.

Kerry O’Brien, AOR contractor, New York, NY, North region: The new standards are called SEER2 and they are different depending on where you are in the country. The South will have the biggest early impact as they will not be able to sell some equipment effective Jan. 1. We can sell through the lower SEER equipment and then make the switch to the SEER2.

The challenge is going to be explaining the changes to customers. What was a 16 SEER is now a 15.2 SEER and is a lot more expensive.

Frankly, the rating change will be good as it brings standardization to the HVAC industry. Overall, the information flow has been pretty good from the manufacturers, and I have attended ACCA (Air Conditioning Contractors of America) sponsored presentations that offered a lot of details.

Art Hernandez, AOR contractor, Las Vegas, NV, Southwest region: How I understand it is all gas/electric and HP equipment must meet a new minimum of 14.3 (15) SEER and an HSPF 8.8, respectively. It is my understanding that all manufacturers are having to rerate their equipment using different DOE guidelines. Their current rating system does not take into consideration external static in a home whereas the new testing will increase that up to 5 times, which is why the new SEER2, EER2 and HSPF2 are happening.

Impact on HVAC equipment manufacturers

Q: How will the new standards impact the manufacturers of HVAC equipment?

Painter: The testing protocols have completely changed from what they were previously. Manufacturers are required to change components to get to the correct SEER ratings in compliance with ongoing supply chain issues. It has the potential to drive the builders to reevaluate mini-split systems in new construction homes due to energy and cost savings through removal of the duct.

O’Brien: They will be heavily impacted in multiple ways. I know for a fact the size of the equipment will be increased, and that will have a big impact on everyone. Materials cost will go up, it will impact logistics as there will be less units per truck load, warehouse storage will be a challenge, and labor cost will increase as well.

Hernandez: Most manufacturers are having to redo their entire lineup to meet the new ratings. This will increase costs that will ultimately be passed down to the contractor and homeowner, driving up pricing 20-30%. Manufacturers may see a decline in equipment sales where homeowners are opting to fix their existing equipment rather than replace due to the increases overall.

Impact on price

Q: What level of price increase do you anticipate?

Painter: I anticipate a 6-12% price increase for the overall change.

O’Brien: We have already seen a number of price increases in the past 12 months, but we anticipate the new changes will bring an additional increase of at least 10%, maybe more.

Hernandez: I have been told from different suppliers we can expect anywhere from 10-30% across the board.

Impact on contracting business

Q: How will the changes impact your business?

Painter: Due to the current economic conditions, these changes will materially impact the competitive nature in the market. We are reworking several SOPs (Standard Operating Procedures) within our business to adapt to the changes from the design standpoint as well as field and install procedures.

O’Brien: The biggest impact will be the sticker shock by the homeowner. They have no idea what is coming. With the equipment size increase, we may have to open up a ceiling to fit the indoor unit into the attic of some homes.

We have always offered financing and we have seen an uptick recently, and we anticipate a big increase next year with the price increases that are coming.

Hernandez: We will definitely have to sit down and look over our price book and look at our overall overhead. I think we are prepared for this change because we offer financing on all of our estimates. We have a wide array of plans that will help make getting a new HVAC system more affordable. I sat in a couple different meetings where leasing to buy was available. We may have to add that to our options as well.

Homeowner understanding of new HVAC regulations

Q: What do homeowners know about the coming changes?

O’Brien: Very little—the changes are complex, even for contractors. Even when put in plain terms, it is not easily communicated to the homeowners to the point where most will understand the underlying changes and reasons driving them.

Discuss new HVAC regulations with Ferguson

Have you hit the ground running with the 2023 HVAC regulatory changes? Ferguson’s knowledgeable associates can help sort through the HVAC equipment you need for your region. Find your local Ferguson to discuss the standards today.

The opinions expressed in this article are those of the individual interviewees and do not necessarily represent those of Ferguson Enterprises, LLC. The information provided should be evaluated and verified for application to individual projects.