Executive Roundtable: Residential Heating
Originally published: 08.01.19 by Pete Grasso
Driven by efficiency and comfort, residential heating systems now offer your customers a multitude of options.
It’s August. Temperatures continue to rise and calls for air conditioning service pour in … it’s the Dog Days of Summer, and that can only mean one thing to an HVACR contractor: heating season is right around the corner.
It might be difficult to imagine now, but soon you’ll start getting calls for “no heat.” It’s never too early to start thinking about heating, especially with so many new efficiency standars and regulations looming in the industry.
I recently spoke with a handful of top executives at many of the top manufacturers to get their thoughts on residential heating efficiency standards, how contractors should market these solutions to customers and what challenges lie ahead.
How has residential heating category evolved in the past few years?
Day: Residential heating has consistently gotten more efficient, not only due to the specific furnace regulations, but also as the cooling side of the system has gotten more efficient. That’s always important to remember, that the furnace is a key part of that system … it’s the main air mover. As cooling efficiency increases, so does heating.
Dziwoki: With an ever-increasing emphasis on the cost of heating and “decarbonization,” partnerships such as the Northeast Energy Efficiency Partnerships (NEEP) and the Northwest Energy Efficiency Alliance (NEEA) and others are strongly influencing local market incentives for higher efficiency and cleaner solutions. In addition, heat pumps, particularly ductless and variable refrigerant flow (VRF) solutions, have continued to gain greater acceptance for heating capability among the HVACR community.
Haggerty: We’ve had a lot of changes around efficiency and a focus on sustainability that have been driven by the Department of Energy (DOE) and through energy advocates, as well as companies really wanting to align with overall sustainability efforts within their businesses. HVACR systems are the largest energy user in the home, and so we’re trying, as an industry, to really understand how to reduce our carbon footprint, how to improve our overall efficiency and, at the same time, improve comfort within the home.
Nguyen: Products continue to get more and more advanced, and there is continued shift to a higher end product with more features and more benefits. Once upon a time, most of the market was one-stage, non-connecting furnaces. You see a lot more two-stage, a lot more variable speed, and that’s been driven by both regulation as well as customer preferences. It continues to grow into a very healthy category with a continued movement towards higher efficiency and higher comfort.
Our panel includes:
Director of Product and Brand Marketing
Vice President & General Manager, Ducted Systems
Vice President & General Manager
Senior Vice President
Vice President & General Manager
Vice President of Product Strategy & Engineering
O’Brien: As consumers continue to look for cleaner, more efficient, more comfortable and more environmentally friendly options, manufacturers are applying advanced technologies to capitalize on those trends and those desires.
Tran: Every year there’s sort of an increase and a shift of going toward high efficiency, especially as customers become more aware of environmental impacts. Governments are pushing us to go that way too. That includes condensing products on the gas side as well as heat pumps on the electrical side.
Are there any new regulations contractors should be aware of?
Day: We’ve seen some compression across the residential heating category. Certainly the market’s shifting more toward 90 percent furnaces and that’s increasing as well, in terms of what the market’s demanding. So instead of having a great stratification across 90 plus, we’re seeing the market move fairly rapidly towards the highest efficiency in those tiers.
Dziwoki: We are seeing more residential rebate incentives for higher efficiency systems than actual regulations. However, that trend will likely lead to more regulation (stick versus carrot) over time, especially by local governments.
Haggerty: As you go into heating season, I’d say from a regulatory perspective, is just that new found efficiency rating and being able to understand the changes that are going on around fan efficiency within the furnaces, and which has pretty much obsoleted the PSC motors, and is now moving everybody to more of a ECM motor. I think it’s just a knowledge base of what’s available out there from an overall product offering.
Nguyen: This is a big year in regulation, and there are two elements. Number one, fan energy regulation (FER), the other one is around Ultra Low NOx, which is specific to California. Both of these are driving us to create and bring new products to the market. We have a full line of furnaces that meet that requirement in order to provide that quality air that they made in California, which will likely spread across North America.
Nolte: When you look at the Ultra Low NOx, there’s a change in cost there, in development and technology, with which contractors really need to be comfortable. From that standpoint, I think we have all the things they need to make them feel comfortable during that transition, and provided them with all the tools and materials they need to do so. Simply being aware of how that affects the customer and how they then communicate to them and explain to them what the changes are, and give them the education, is the biggest piece.
What new solutions in this space can contractors now offer to customers?
Day: We launched last year our modulating 98 percent efficient furnace. And the cool thing about that furnace is it’s a 98, it’s the highest efficiency out there in the market, and the other nice thing is it hits 98 percent in all inputs, so even from our 50,000 up to 125,000 BTU furnace, you’re getting 98 percent efficiency on the heating side, with connected, variable speed blower.
Dziwoki: Contractors can now offer ductless and VRF solutions as a single source of low ambient heat or integrated with existing heating systems. Panasonic is expanding its high efficiency, lower temperature heating capabilities in more models this coming year, with the added benefit of significantly enhanced indoor air quality (IAQ).This is particularly important during the heating season in airtight residential buildings when air quality tends to suffer.
Haggerty: We’re continuing to understand what’s coming next in this space, and understanding how we can continue to differentiate ourselves but continue to provide better options to the consumer around solving solutions, rather than it just being about cold or warm air. With the legacy of our controls side of the business, it’s important that we continue to leverage that capability as we start looking at not only where we are today, but also our future road map.
Nolte: One of the trends that we’re seeing now is electrification. In California, you have a lot of utility and state demand for moving to all electric homes and that’s starting to spread throughout the U.S. and Canada. We’re seeing a big shift into what I’d call more advanced heat pumps, or cold climate heat pumps, which can work in colder climates and still provide the comfort and efficiency that they need. You see it with our Greenspeed heat pump, where we have really great heating performance, even in the colder climates.
Tran: Product efficiency is only one part because controlled delivery and home design also play huge factors in reducing energy costs. Contractors should expect development of smaller and more efficient ways to use the heat being generated and a big step for reducing energy bills.
How has the evolution of connected homes impacted residential heating products?
Day: Contractors are seeing a tremendous amount of value in connected and communicating systems because they’re able to effectively diagnose the product much, much quicker. So they can maintain uptime in a house, and or repair, do diagnostics before they’ve even seen the equipment in a lot of cases. Customers become much more satisfied with a service call and so the contractors are actually pulling on us regularly to give them more and more access to data and information that they had not had access to before.
Haggerty: Customers now have the ability to actually have better insights into what’s going on in their home, including the ability to monitor IAQ. Our GLAS thermostat, which is predominantly focused at the residential space, allows customers to actually understand the quality of the air they have in their home. That’s very important as homes become tighter in terms of how they’re built, and so the need for outdoor air refresh and the ability to understand the air quality level you have in your home has become very important to customers.
Nguyen: What that’s doing is it’s creating a customer that is more and more demanding. They want to be able to manage their furnace remotely, so before they get home if the house is cold and they’re coming from vacation — they don’t want to keep their home warm while they’re away but they do want to make sure it’s warm when they step in. The other part of the spectrum is that their equipment is smarter and more reliable. What you see now is smart equipment that has the ability to self-identify, self-diagnose errors that come along so that the contractor can get ahead of it so the customer doesn’t have a no heat situation.
Or if they have a no heat situation, the contractor’s making one visit to the home, coming with the right part, with the right skill set to fix it the first time.
Nolte: You’ve got Amazon Alexa, Apple Home Kit, Google Home, and so forth … all these ecosystems, which consumers are bringing into their home and they want to interact with their HVACR. We need to integrate well with those platforms but still maintain the proprietary nature of how our equipment operates. That’s the biggest shift. For HVACR to win in that space is very difficult. We just need to play very well with other ecosystems and make sure we integrate flawlessly.
O’Brien: In general it’s changed controls and thermostats the most. That’s where the innovation resides most significantly. But we believe the best systems are the ones that are connected from the thermostat or control all the way through to the equipment. Our kumo cloud app is an app-only thermostat replacement which allows you to program and control your METUS equipment from your handheld device from anywhere in the country.
That allows you to program and control that individual indoor unit directly like you would have with a thermostat but from your handheld. It also allows you to control basically all the functions that are available on an indoor unit, including fan speed, and vane direction, and all those kind of things.
How do you see the residential heating market changing over the next few years?
Dziwoki: We expect to see these trends to continue: higher heating performance in cold climates, higher efficiency and lower environmental impact. Manufacturers will continue to innovate around these trends, including the ability to integrate more seamlessly among each other’s different heating solutions.
Haggerty: The change that’s coming for contractors in the residential space is really the change that’s going to happen in the refrigerant space with low global warming potential (GWP) refrigerants. There’s a lot of work going on within the industry to educate contractors about what that’s going to mean and get them ready before the timing that this happens, which is a little bit up in the air right now based on where California has put a stake in the ground versus other states.
Nolte: The biggest thing over the next couple years is the new cooling standards and heating/cooling standards for heat pumps and air conditioners in 2023. That’s right around the corner. You also have the Kigali Agreement and so forth, and how states are changing or limiting the GWP limits for refrigerants. When you look at that and the technologies that need to be incorporated to address those regulations, it’s going to drive a lot of change in the industry.
What are contractors saying are their greatest challenges?
Day: One of the biggest challenges the industry faces is having a workforce that’s deep enough and experienced enough. Whether it’s heating or cooling season, the answer is the same.
Dziwoki: Contractors want more education and tools to help them sell — especially for newer, higher efficiency solutions like ductless and VRF.
Haggerty: It continues to be a challenge to get people to come into the industry at the technician level. I don’t think the issue is as much in the installing level as it is having educated technicians. And that’s going to become even more important for us as OEMs, to continue to provide the right level of training to contractor technicians as you get into more complex, higher efficiency, more controls built into the systems, to be able to ensure that we give contractors the right training to teach their folks on how to do proper installation, but also your proper setup and servicing of the equipment.
Nguyen: The biggest challenge is getting a talent to do installing services, and this isn’t a new challenge. There are simply not a lot of folks out there who want to get into the trades. As a manufacturer, we have a responsibility to support our contractors. What we want to do is make our products reliable, easy to install and easy to service.
Nolte: The technician shortage is a real big challenge. And how do we address that collectively? So there’s a big need to really address that shortage. And so what can you do, from our standpoint, around awareness and generating awareness around the trade itself, and the career path that it offers? Training.
O’Brien: Contracting firms are having a difficult time recruiting, training, developing and retaining high quality help. Contractors cannot let their product line or their labor become commoditized. We often tell them try not to spend your precious labor installing equipment you can’t make a good profit on. Use it to install equipment people want and people will pay more for so you can make a higher profit.
What type of education & training do you offer contractors?
Day: We’ve opened five innovation learning centers starting in the last few years where we’ve got hands-on demonstration labs with equipment, where we do training for contractors and distributors. We’re encouraging, promoting and helping fund training centers in every one of our wholesale locations, or at least in some of the key locations across the country.
Dziwoki: Panasonic offers classroom training at multiple training facilities in the U.S. as well as on-site field training, and online live and pre-recorded video training. Our curriculum is customized to the contractor’s needs, covering product sales, application, project design, installation, operation, maintenance and troubleshooting.
Haggerty: We do both technical training and education, which is around understanding how to properly install multi-stage, variable speed equipment, connected thermostats, and really how to manage the technical side of that in terms of the understanding of how to set the system up when it gets installed, and ensuring that it’s operating properly. And then we also do a lot of business training, providing tools to the sales people within contractors on how to go and position the product so that they have the tools to be able to communicate the better value proposition.
Nguyen: Our training arm is Lennox Learning Solutions and we think about training in different ways. One way is classroom training, one is virtual training and one is online. We have classes that go from sales, installation, and service across those three spectrums. They’re all available to any dealer to sign up for those classes.
Nolte: We’ve spent a lot of time in our training program over the last couple years with providing online training and virtual reality (VR) training. If we can engage a new generation of technicians with a more immersive experience, ones that sticks with them, they can either use a laptop or a computer, and more importantly, a VR, which really puts them in a real field-like experience. Instead of sending technicians to a training center somewhere for the day, they can have a VR setup within their office, or a computer or laptop, and still get that same experience.
O’Brien: Currently we offer product training, applications training, and service and controls training to contractors, engineers and distributors, or basically any stakeholder in our channel. To do all that, we have 11 company-owned training centers, ones that METUS owns directly, and 51 more that are owned by our distributor partners, including Trane as a distributor partner and half owner of our joint venture. Just this last 12 months, we’ve trained more than 21,000 people in a variety of programs we offer that I just mentioned.
What’s the most important thing contractors need to be aware of as they head into heating season?
Day: Be aware of the changing space when it comes to regulations. We talked about FER and we talked about Ultra Low NOx. Contractors who aren’t in California need to be paying attention to the trends that are going on in other states. Canada’s another good place to look at the trends that could be out there, and paying attention to those, and being aware. More and more local governments, as well as states, are evaluating potential regulation changes that could impact the heating business as a whole.
Dziwoki: More and more people are demanding higher efficiency systems with a lower impact on the environment. Fossil fuels are becoming taboo, while heat pump technologies, such as ductless and VRF, are closing the gap on being a single source of heat in almost any climate. Contractors should also reach out to past customers to offer a pre-heating season check up to make sure the heat pump system is fully charged and filters are clean.
Nguyen: At the end of the day, all the products that we build are important, but the most important thing contractors need to be able to do is a quality installation. Sizing the home, sizing the heating load, recommending the right product to meet their needs. From a feature and benefit standpoint, what do they value? Hot and cold spots, quietness, dialed in comfort are all things that come with that qualifying installation. Getting that quality installation to meet that customer’s needs is what’s going to best allow that contractor to be successful.
O’Brien: Don’t settle for replacing like for like because that can allow your product and your service as a contractor to be commoditized. Ask the customer if they’re comfortable in every room. Are they happy with their utility bill? Are they happy with the sound level of their system and satisfied with the environmental impact that their system is having? If they’re unhappy, then consider an alternative.
Tran: It’s important to be aware of the availability of products they might not know of. We fairly recently released a product that does both domestic hot water and radiant heating. It’s kind of a two-in-one product, but it does it simultaneous. Usually there were products like that before combination boilers that only did one or the other and just recently our competitors have done the same. They’ve been able to release products that kind of fit in that space and I think that’s a fairly new product to some contractors.