The fall heating season is upon us. What changes and forces are affecting how we do business? It is easy to get bogged down in day-to-day challenges that we forget to take a minute and look ahead to see the big picture and the changes coming our way.

Refrigerants

R-410A refrigerant is being phased out. Manufacturers have already begun producing equipment with the new A2L refrigerants. We went through this transition a dozen years ago as R-410A replaced R-22.

The change is here. It is time for contractors to get educated and trained on A2L refrigerants, which can be toxic, flammable or both. The best training source for new refrigerants is through the distributor of your equipment of choice and the Air Conditioning Contractors of America (ACCA). 

Service

Service work is a constant; it will always be there. It may fluctuate with the weather, but as long as mechanical devices exist, they require service and maintenance. This is a good thing for service contractors and the primary reason our industry is attractive to outside investors. 

This is nothing new. I have been in this trade for 38 years. Service work has always been there. What is new is the way we interact and communicate with our customers. Technology has changed the way our clients schedule service and maintenance calls. 

For decades, customers who wanted to schedule a service visit picked up the phone and talked to a scheduler, customer service representative or dispatcher at the service company. That is still in play, yet customers now have several other ways to schedule those calls when it is convenient for them.

Website scheduling, phone apps and texting allow customers to schedule calls directly without any employee interaction. Many customers prefer this scheduling method rather than a phone call. It also allows for scheduling at their convenience, 24 hours a day. If you are in the service business, it behooves you to give your customers the choices they demand and offer convenient solutions to resolve their problems. 

Electrification/Heat Pumps

Both government influence and consumer demand are causing a market transition to decarbonization and electrification. Heat pumps are at the forefront of this paradigm shift. 

Heat pumps were everywhere as I walked February’s AHR Show in Chicago. I saw many more air-to-water heat pumps than in previous years. These heat pumps are designed specifically for the hydronics market. 

My company has been designing and installing heat pump systems for years, both geothermal and air-to-water units. The key to a good installation is designing around low water temperatures. An accurate heat loss calculation and a tight building envelope are absolute requirements. 

Two recent projects come to mind, both with heat pumps supplying space heat. 

The first is a new home we are currently working on in Arlington, Va. It is being built to passive house specs with R-30 walls, R49 ceilings and triple-pane glazing. The house is so tight we are installing three energy recovery ventilators to bring in filtered fresh air and exhaust stale indoor air. The heat emitter will be radiant floor heat in the ground floor concrete slab and thin slabs on the two upper floors. 

This is a perfect application for the air-to-water heat pump. The design supply water temperature for this system is 95 F. At this low water temperature, the system will approach geothermal efficiencies. 

The second job is a cautionary tale. I was called in to consult on an underperforming geothermal retrofit. The home was built in a nearby District of Columbia suburb in 1930. It is brick-on-block construction with plaster walls and no insulation. There were maybe 4 inches of rock wool insulation in the attic. The original single-pane windows were still in place. 

The home was originally heated by a steam boiler connected to wall convectors. A well-intentioned contractor installed a geothermal water-to-water heat pump and connected it to the original steam piping. The owner was hoping for a clean, quiet, efficient heating system. Unfortunately, he received none of these benefits. 

The heat pump ran continuously and barely heated the home. The electric bills were sky-high. On the day of my site visit, a cold January day, the heat pump was running nonstop, yet the air temperature in the home was 56 F. There was no fix for this system.

The mechanical design was not well thought out; the retrofit was not a good application for a heat pump. The convectors were originally heated with 215 F steam. The heat pump could only supply 115 F to 120 F warm water. This was nowhere near enough to heat this leaky, poorly insulated home. My recommendation to put steam back in fell on deaf ears. Last I heard, it was headed to litigation. 

The takeaways: Proper design and an accurate load calculation are critical to heat pump application. You must design around low supply water temperature. The building envelope is key to a good installation. Heat pumps will not perform well in leaky, poorly insulated homes or buildings. 

“We have seen the market for air-to-water heat pumps rise steadily,” notes Jim Bashford, SpacePak national sales and training manager. “Newer technologies such as variable-speed compressors have helped make our heat pumps adaptable to load fluctuations as well as zoning. Training is a priority for us. We educate our installing contractors through a combination of factory training, local training through our reps and distributors, and online webinars.”

Jeff Riley, co-owner of COREDRON, the SpacePak rep in the District of Columbia, Maryland and Virginia, adds: “With a focus to decarbonize and better protect the environment through this electrification movement, heat pumps are ideal for the Mid-Atlantic’s climate. Since my first heat pump installation in 1987, it’s been interesting to experience the evolution of today’s heat pump technologies. 

“Efficiency has improved along with the varieties of air-to-air or air-to-water versions. As the SpacePak representative, I’m particularly intrigued with the surge in public interest in air-to-water heat pumps.” 

Acquisitions and Private Equity

The pace may have slowed down, but home service companies are still being acquired by private equity firms as well as larger independent companies. Our industry continues to be attractive to outside investors. The recurring revenue stream of service/replacement work is very attractive.

A couple of forces are at work here. One, the flurry of acquisitions of the previous two or three years was bound to slow down naturally. Prime candidates have already been sold. 

Two, rising interest rates have made acquisitions more expensive. In a recent podcast conversation with Eddie McFarlane, chief learning and development officer of Sila Services, he says: “When the cost of money was low, you could have a few misses. Now with higher interest rates, private equity is much more selective on the companies they acquire as the cost of making a poor decision got much more expensive.” 

Home service companies will continue to be acquired and consolidated, but at a slower pace than the preceding three years. 

High Efficiency

The U.S. Department of Energy (DOE) and our congressional leadership are pushing for higher efficiencies in heating and cooling equipment. The DOE has been pushing a mandate to require all gas-fired heating equipment to meet a minimum efficiency of 95%. Similar legislation has been proposed for commercial boilers.

I am all for high-efficiency equipment; we feature 95% efficient boilers and furnaces on most of our projects. I am also for individual choice. Some jobs do not lend themselves to high-efficiency equipment. Venting, condensate drains and the cost of condensing technology are all valid issues. 

What about steam? Steam boilers max out at about 82% AFUE. Several million steam boilers are still in place. There are unintended consequences of mandating high-efficiency equipment. 

Industry trade associations such as the Air Conditioning Contractors of America and the Plumbing-Heating-Cooling Contractors—National Association are your best allies when it comes to advocacy. They keep an eye on Congress and look out for legislation affecting contractors. I encourage my fellow contractors to join one or both associations as there is strength in numbers. 

Long Lead Times

For the most part, unitary residential manufacturers have resolved their supply chain issues. My company has not had issues sourcing residential boilers and HVAC equipment over the past year. With few exceptions, almost all our orders have been filled locally or with relatively short lead times.

There have still been some problem areas. Specialty made-to-order equipment has seen long lead times. I have to wait seven months for a commercial pool dehumidification unit. In the past, this equipment had eight- to 10-week lead times.

Commercial cast-iron boilers have been a hit or miss. Some orders have been filled relatively quickly, while others have seen much longer lead times. I have told my commercial accounts needing boiler replacements to sign the contract no later than July to get the projects complete by next fall. 

“Commercial cast iron is still playing catch up,” notes Bill Genes, regional sales manager for Velocity Boiler Works. “Lead times are better but still longer than they should be. The primary issues are industry casting capacity as well as DOE regs.” 

Genes is referencing the DOE efficiency regulations. Manufacturers were unsure of how the ruling would go. The possibility existed that commercial cast-iron atmospheric boilers would not meet the efficiency mandates. No manufacturer wanted to get caught with dead inventory. 

After months of testing and product updates, the DOE vacated its 2023 policy in late August. In turn, the industry “rolled back” its product ratings and listings to pre-DOE 2023 standards. A backlog of orders still exists. It will take time to work through this backlog. 

We must adapt and prepare for industry change to serve our clients and employees. The issues and challenges may be different, but the pressure of change is constant. Those who embrace it and adapt are the ones who will be successful, while the rest will be left behind. 

Dan Foley is president and owner of Foley Mechanical (www.foleymechanical.com), based in Lorton, Va. FMI specializes in radiant, hydronic and steam systems as well as mechanical systems for large custom homes. Foley can be reached at 703-339-8030 or at foleymechanical@msn.com.