What’s next? That’s the perennial question we all have asked ourselves, given the exceptional circumstances that the coronavirus epidemic has imposed on people and businesses. At HVACR Business, we thought the timing was appropriate to ask various industry leaders their thoughts about current trends, how they responded to the pandemic and what challenges to anticipate in the coming year. Unlike a review of past behavior that can provide a gauge for future direction, this past year has been unlike anything we have experienced. Here’s the insight that our experts offer, which just might provide a touch of direction in your business.
This Executive Roundtable panel included Bryan Davenport, general manager, Oxbox; Katie Davis, vice president of engineering of residential HVAC and supply, American Standard, a brand of Trane Technologies; Chris Day, vice president, product strategy & engineering, Rheem; Todd Nolte, senior director, product strategy and regulatory, HVAC-residential, Carrier; Tom Overs, vice president, residential business, Mitsubishi Electric Trane HVAC US; Bryan Rocky, director, residential technical services, ducted systems, Johnson Controls
Some of the answers have been edited for brevity and clarity.
Bryan Davenport: Over the last couple of years, we’ve seen the introduction of the new FDR requirements, to indoor blowers, as well as ultra-low NOx and low NOx requirements in the state of California. Those two regulations have impacted the heating category in a very significant way over the last couple of years.
Katie Davies: In 2019, the Department of Energy put into effect the Fan Energy Rating (FER). This regulation drove improved efficiency of furnace fans in the market, which substantially impacted many OEM furnace offerings. Along with that transition, we’re starting to see a gradual shift toward “electrified” solutions, especially in markets such as California.
Chris Day: Nationally, there was a change in Fanning Efficiency Rating (FER). And that really shifted motor technologies almost completely away from TSC motors to an electrically commutated motor. And that was a big change. That’s now being audited. It’s now in full effect that all residential furnaces need to meet that requirement. There’s also been increasing regulation in tightening of NOx emissions. There’s now two tiers of actual NOx emissions. There’s low NOx. That’s a 40 ng/J number. But then certain parts of California, their air districts drove that to 14.
And that’s across not only residential furnaces, but in the entire HVAC landscape, 14 ng/J, and in packaged products included. But imminently, the Bay Area of California I would arguably [say is] the next largest district to change. They may adopt the current 14 ng/J. If they do, that’ll easily push the population head count for California that’s regulated to the ultra low NOx, much greater than 50% of the state.
Todd Nolte: When you look at it from a contractor perspective, one of the big things that happened over the last couple of years was the DOE’s fan energy rating that went into effect in July 2019. They probably started feeling that toward the end of 2019, where there was a changeover of products to meet that new regulation and essentially moved every motor from an ender blower perspective to an ECM motor. So they would have seen that change.
Also, when you look at California, there’s two air quality districts that enacted ultra low NOx rules, which basically required a NOx emission less than 14 nanograms per joule. So they would have seen a complete changeover of that, the heating product line in those markets. And in some cases, a new technology from a burner standpoint that would have been introduced to them. That would have been a change that they would have gone through, training and so forth, to prepare them, and it should be effectively, fully integrated with that product at this point.
Tom Overs: Because of COVID, customers are working from home or just staying at home, they’re more in tune with their home environment when it comes to heating and cooling. What they found is, in many cases, they’re uncomfortable. But we’ve benefited by the savings rate being high, which as U.S. consumers, they don’t like to save, so they’ll find a way to spend. And I think what we’ve seen in, 18 months is that consumers are willing to spend money to improve the comfort of their home. And as they look to maybe repurpose a room for an office, they changed the bedroom into an office and they sat there. It was uncomfortable.
The other thing that we’ve seen in the last couple of years is the research done by consumers to try to understand the options that they have for comfort, and specifically, heat pumps. They got to heat pumps by looking around for sustainable products for their homes, meaning, looking at the global warming potential of something that they would put in their home as a point of decision where they would invest in that. And as they looked at heat pumps, for example, I think what consumers have found is they’re different from what they were 30 years ago, or they may not have been right for a cold climate, but today they are. And if you look at our products that can heat down to minus five degrees Fahrenheit, it becomes a more viable option as the technology has advanced.
For the contractor, probably two things. There are more options available to them. When you look at the furnace, gas furnaces and heat pumps, that as efficiencies have continued to grow with manufacturers coming out with 99% efficient furnaces, it’s hard for them to differentiate in the market because it used to be that you could differentiate your product line by the efficiency of the furnace. I think that’s becoming harder and harder to do. And they’re looking for different ways to differentiate themselves in the marketplace with other equipment that they could sell to consumers.
Bryan Rocky: With implementation of requirements for furnace Fan Efficiency Regulations (FER) in 2019, residential gas furnace product offerings have consolidated into two basic efficiency levels with two types of blower motors. Control functionality, connectivity, ease of installation and service, and customer support are all areas that help us differentiate the Johnson Controls
brands from the pack.
Other changes include the introduction of Ultra-Low NOx emission natural gas furnaces and residential gas packaged units in California, but higher product costs and availability have led toward fuel shifting to electric heat pumps in some applications.
Are there any new regulations contractors should be aware of?
Bryan Davenport: A new, more efficient fan motor will be placed into the indoor heating products. That required us to move away from a traditional blower motor that was less efficient. And these new requirements went into effect in 2019. So as manufacturers moved through their inventory, as well as distributors, the new, more efficient furnaces have now been in the market almost two years now.
That’s great for the homeowner because it provides them an upgrading of heating products that really encourage more energy efficiency and help the environment in the long run, as well. Once again, it helps the environment reduction of the harmful gas emissions from fossil fuels.
Katie Davies: Minimum efficiency requirements changes have been placed into effect by the DOE, with an implementation date of Jan. 1, 2023. In addition, DOE has also required lower GWP refrigerants by 2025. In California, ultra-low NOx furnace requirements are in place. There are also potential regional regulations around electrification in new construction.
ASHRAE 62.2 is also exploring a proposal defining certification of air cleaners to UL2998 “zero ozone” for residential buildings.
Chris Day: Overall, we’ll always take that approach of trying to embrace it and use it as an opportunity and potential for growth. The regulation that was passed on Jananuary 14th of this year, the DOE made a decision to withdraw a controversial gas furnace efficiency rule that was going to increase the minimum across the board to 92%. No more 80’s. And that’s being revisited for a variety of different reasons in the new administration. But at the end of the day, there is a lot of discussion as to whether anything less than a condensing furnace will be allowed. That’s some years from now. In the way rule making takes place, we’re looking at this that maybe in 2026, 2027. But it’s already on the horizon, and that’s going to get a lot of attention over the next couple of years as we and the others need to move away from noncondensing to solely condensing furnaces.
Todd Nolte: The biggest one is in 2023. There is a minimum efficiency change and a test procedure change, which is across residential and commercial products. We’ll be changing over all the residential and commercial products from a heating and cooling perspective when you look at it from a split condenser standpoint. We’re going to be updating all of our products and updating the factories to meet these increased levels of efficiency. Although that was more of a cooling statement, you do have heat pumps that are involved, so that is a heating product. When you look at the complete system, we’re working to enhance the furnace blower motors to provide additional system efficiency and improvements and optimization around those test procedures.
That’s the big one that’s in front of us that goes into effect Jan. 1, 2023. And that’s essentially just an increasing of the minimum efficiency in the North and South. Then a little bit further out, we’re planning for HFC reductions that begin in 2025. In keeping with our long history of environmental responsibility, Carrier has taken a leadership role in offering the refrigerant of the future. After extensive tests and evaluation, Carrier has identified R-454B, to be known commercially as Puron Advance, as its primary lower global warming potential solution to replace R410A. So that’s going to be a big impact at the contractor level as well.
Tom Overs: There’s two. The first one is Energy Star manufacturers have really positioned their products to being Energy Star qualified or rated, as a differentiator for them that contractors use as well. When they’re in a home, they can talk about Energy Star rated products and they can recommend a dishwasher or washer and dryer that have that designation, and consumers resonate to that. As an HVAC industry, we wanted to do the exact same thing. They’re on the fifth revision, so the Energy Star 5.0 has been in place for a number of years. And that’s about to be replaced by Energy Star 6.0, which goes into effect January 2023. The challenge that we have is any new product that’s introduced in 2022 actually has to meet the Energy Star 6.0 guidelines for ‘23, so that’s something to be aware of.
They’ve also done a few things with Energy Star 6.0 where the heat pump EER and HSPF will change along with requiring a cold climate certification. That is something that is a little bit more challenging. Heat pumps in general, when you look at EER, the ratings are challenged by the different markets in the U.S., and depending on where you are, [it’s] really hard to qualify for Energy Star. They’ve made that a little bit harder with this 6.0 version. The other issue is that they’ve introduced a requirement of installation capability for products. They introduced that probably with good intentions to make sure that the installation of the system meets the consumer’s expectations and really makes what the manufacturer wants to do. But the challenge is they have put that [responsibility] on the manufacturer to provide things like verification of refrigerant charge, air flow measurement, and so on. And that’s very challenging for any manufacturer because we haven’t done that before.
There’s about six points within that installation capability, and manufacturers have to be able to achieve three of them.
Bryan Rocky: For the near future, regulations for increased energy efficiency requirements, including test procedure changes for January 2023 and the implementation of Low GWP refrigerants for January 2025, are the two main drivers that will be influencing our residential products.
One area that contractors need to be aware of is changes in codes, such as the National Electric Code 2020 edition for power connections and ground fault circuit interruption as related to HVAC products. Another area for attention is the city or state code changes on electrification, i.e., promoting electric heat pumps as primary heating sources to reduce carbon emissions or decarbonization (i.e., elimination of gas furnace installations/applications).
Bryan Davenport: Within the Oxbox, we have a complete portfolio of products to serve the residential heating market. We not only introduced products to meet FDR requirements, but also to meet the low NOx and ultra low NOx for requirements as well. We’ve got solutions across the portfolio that are extremely affordable. For the tenants of the Oxbox brand, we want to make sure that we provide solutions to those contractors and consumers that are of affordable quality. They get the Oxbox, a brand that is an endorsed, with an extremely reliable portfolio of solutions to meet whatever needs that consumer or contractor may have.
Katie Davies: There is a heightened focus on Indoor Air Quality. Adding an IAQ component into your conversation with homeowners can not only improve their awareness of options but can potentially improve their overall indoor environment experience.
Chris Day: We’ve put a lot of time and attention into really our hybrid that are most commonly called dual fuel products. Because residential furnaces are clearly still a significant market; gas-fired products in general. We see pockets around the country, some around the world, that are already drawing some fairly strict gas regulations, especially on new construction, replacement comp, gas follow-up. Our most logical solution is helping contractors understand and embrace dual fuel products and educate homeowners at the end of the day because it’ll solve that electrification [issue] if it’ll have that gas backup. For the most part, they’ll prove to themselves that they’re not using as much gas as they need. And the heat pump, particularly the new heat pump technology that we’re launching over the next year, is far superior to the heat pumps that people remember a couple of decades ago..
Todd Nolte: They would have seen a lot on the heating standpoint. We introduced a full lineup of gas furnaces, gas electric, small package products, hybrid systems that were designed to meet the DOE for regulation in 2019. So they have all those products. They also have the ultra low NOx compliant products in the California market. But the other one that we’re excited about is our latest addition of a high-end heating technology called the Infinity 24 heat pump, which offers ratings at up to 24 SEER, 15 EER, and 13 HSPF. And the Infinity 24 also offers strong heating capacity at lower temperatures all the way down to minus 15. And that’s a product that really is introducing new technology and capability for the technician as well. There’s Bluetooth connectivity that allows them to quickly see and diagnose what’s going on within the system itself. That’s a new technology that they can be looking out. It is really a game changer at that point.
Tom Overs: Mitsubishi has been an industry leader when it comes to the inverter technology that we use in our heat pumps and we’ve been able to continue to evolve over time. We have what we call a Heat 2I or H2I, which is a technology that allows us to really attack those cold climate markets and look at that optimal point of transitioning from maybe the gas furnace to the heat pump, and really allowing the heat pump to run down to minus five degrees Fahrenheit. We have a new product we call an SUZ. That’s the nomenclature for the product, but it’s a universal outdoor unit that has the hyper heating inverter. That’s the H2I technology that I was referring to. It provides the ability to better service homes and buildings in the cold climates, as well as ones with larger zones using an expanded single zone system.
We really are able to look at removing fossil fuels in the marketplace where traditionally [we] would not have thought you could do that and position our product to satisfy the majority of the needs in the marketplace. The other products we have are on the indoor side. We have what we call a deluxe wall-mounted system with that H2I plus technology. The benefit of the indoor unit is a dual barrier coating that we put on the product side to prevent accumulation of dust and dirt inside the unit. It provides a cleaner surface, but it also collects oils and grease mist and, in the end, provides better indoor air quality for the consumer, because as it gets in there, it sticks to the dual barrier coating, and then air blows past it. It doesn’t get blown out into the room.
We have about 30% better air flow with that product over the lifetime of it, and 80% less energy consumption than a system without the coating. If you think about a system that has buildup on it, the more buildup, the less efficient, in essence, the more the unit must work in order to get the airflow into the room that you want. So those are two things we have if you think about a system are targeted to meet the needs of the market as we see the trends today.
Bryan Rocky: Product offerings are being updated to include better control designs, with improved functionality, connectivity, and features such as enhanced apps for connectivity. The use of horizontal discharge condensing units, such as the Johnson Controls HMH7 products as part of residential ducted systems, has started to really grow.
Bryan Davenport: Consumers today expect to be connected to their residential heating systems. I think we’ll continue to see that market expand, the desire for consumers to be able to connect increase over time, [allowing] more ways for the consumer to interact with their home, not only while they’re there, but also while they’re on the go. That’s what’s great about our Oxbox portfolio is it’s simple by design. All of our systems are 24-volt systems, which means they will connect with most connected controls that are available in the industry. We don’t require a proprietary control option to be able to operate our system or to be able to connect to it. So consumers really have choices in their connected control solution, and the Oxbox portfolio will pair with most of those.
Katie Davies: Generally speaking, many manufacturers have integrated connectivity and diagnostics into higher-tier products. The insights from these products can help dealers potentially predict and prevent problems with HVAC systems/heating products.
Chris Day: To us, it’s about the data that we can develop or use in our channel. And literally that does mean distribution, contractors, and yes, the homeowner. The homeowner will gain in terms of comfort and convenience. They get a win in overall health and wellness because they have more control and more feedback from their systems. But then there’s also the contractors that stand to gain, and arguably more, from usage of the data that we can generate and supply. Over the entire lifetime of a product, let’s say, it’s an average, but it’s a 10-year product. When you model that out and use of data through connectivity, the contractor is going to be able to optimize the work that they do on that unit and the service that they do in that unit in a way that it’s better for them and their business. You think of time-based systems, right? And we all started that. We all started with time-based filter changes, and time-based defrost.
The analogy is like an automobile, right? Automobiles started there too. Do 3,000 miles, change your oil. Well, we didn’t really know if it’s needed or not. Turns out, it depends on driving conditions. Now vehicles have gotten smart enough where they tell you based on your driving conditions, and they’re constantly updating, and they’re giving you a much more optimized answer for that owner. The same thing will then apply into the connected space of HVAC products. The more that we can get the system tuned to the home and we can allow the contractor to optimize, we cannot just drive service. Again, filter changes, other changes in the system based on time. I think everybody wins in that scenario.
Then there’s an increased level of credibility for the home when a contractor suggests to a homeowner, “Hey, it’s time to change X part,” they’ll have some data to back that up. It’s a more informed decision, and then their conversation with the homeowner or building owner in the commercial space will, I think it’ll go much, much better.
Todd Nolte: The impact is really on the control side of things and being able to work with various platforms like Amazon Alexa, Google Home, and with other connected products throughout the home. For Carrier, we continue to focus on making our products compatible with other connected systems and products. When you look at some of the consumer expectations that demand contractors use intelligent control to better service their equipment, we’ve developed a secure connected portal program, which is similar to the auto service technician reading the code from the car and knowing what diagnostic repair approach is necessary to address the issue.
Tom Overs: I think it’s affected everybody in the industry, mainly because if I’m a consumer today, there are so many options that I have to control my home via my phone than I have ever had in my lifetime. And the convenience of being able to turn on the lights, open the shades, do things like that, let alone ask the device on that counter what’s the weather outside, play some music, and even raise and lower the temperature of the hall. It’s the convenience factor that consumers see as the law, if you will, of these connected home devices. When you look at our industry, mainly what I see is the fact that manufacturers want to be able to fit into the home ecosystem. I don’t think we have the wherewithal to control the home environment and total ecosystem. We’re looking at specifically, heating, cooling, probably indoor air quality, as the places that make the most sense for us to have an offering.
Consumers today are always looking at their our phones, one of which is home temperature and being able to raise and lower that while you’re away. For example for those who are retired and potentially have a second home in Florida, they want to look at their house temperature in Ohio, and to make sure that it is where they left it. That’s becoming more common.
It’s something that consumers want. They want that peace of mind that the home environment is operating. The other piece that is growing is on the indoor air quality side of things where we can monitor the system performance. And with sensors, being able to identify if there’s filter buildup or dirty air, if you will, that requires a filter change, maybe some other ventilation-type solution to provide a better home environment, provide cleaner air to the home. As you look at the home ecosystem, I just think it’s going to continue to grow. I think the technology is going to continue to advance, and consumers are going to want more and more of that visibility/control.
Bryan Rocky: Connected homes continue to be the most important aspect that will change residential heating products in the future. The next advancements are already being developed in enhanced energy cost management, equipment performance, diagnostics and troubleshooting problems, and direct communications with service providers. One likely direction is the elimination of thermostats themselves – homeowners will communicate through smart devices, with sensors mounted on the wall.
Bryan Davenport: The awareness is certainly elevated, that is, one of the things that many asked for and certainly many are more aware of, not only in their home but in their workplace as well as in the schools of their children. For us and for the Oxbox contractor and really contractors in general, staying connected with those customers, talking to them about the importance of system maintenance, about the importance of changing their filters, those are going to be really some lasting impacts for consumers, to not only improve the efficiency and operation of their system, but also to improve the quality of the air inside their home.
Katie Davies: We are seeing a much stronger customer interest in IAQ due to the pandemic. Customers want to know what they can do to make indoor air safer. Instead of filters just being a necessary part of maintenance, there is now a strong interest in the efficacy of the filter and its ability to remove airborne contaminants. In addition to filtration, there has been much focus on in-room and whole home air purification products and their ability to prevent the spread of microbiologicals. With inexpensive indoor air quality monitors now available, there is heightened awareness of contaminants other than viruses, such as carbon dioxide, volatile organic compounds, fine particulates and an interest in methods to mitigate these as well.
Chris Day: Absolutely. You dial back 18 months ago, and the phone’s ringing off the hook. And the good news is we sell, Rheem sells, almost any IAQ product that is needed through green parts. And that also includes our consumer facing website as well. So, multiple channels to get access to Rheem IAQ devices. At the same time, we hadn’t put as much intentional effort into what we call healthy buildings, because it’s more than just the indoor air quality. When you look at the nine tenants of a healthy building, which is something we study with Harvard University, indoor air quality is a big chunk of it. But there’s other things too that we can have an impact on a HVAC manufacturer. It’s really those nine tenants that we’re targeting and we’re upping [our] game. We’re designing systems that are really more integrated, call it IAQ devices, that are going to have a much greater impact on the entire space.
Todd Nolte: We’ve learned quite a bit about our industry during the pandemic. People are spending more time at home, obviously. Their home comfort has become increasingly more important. Not only have we seen a significant uptick in new installations and maintenance on existing equipment, but we’ve also seen a tremendous amount of increase in indoor air quality. People are more cautious about the overall health of their home, and then interested in how to improve it has increased dramatically. And a lot of this comes around in filtration. We have two whole house solutions in the Infinity Air Purifier and Infinity Return Air Purifier that serve as whole home solutions that can be added to heating and cooling systems. They use Captures & Kills technology, which third-party testing has proven to inactivate 99% of select airborne pathogens trapped by the MERV 15 filter, including coronavirus, bacteria and other pathogens.
We introduced a new product last year called the OptiClean. The OptiClean is a unit that is designed to move air potentially contaminated by the virus using a high efficiency particulate air filter. We’ve been working with school districts across the country that have chosen to use the solution as part of their plans to improve the air quality in their facilities in preparation for return of students to campuses. We also found that medical practices, salons and offices are also ideal for the OptiClean product to help purify rooms up to 1,500 square feet. It’s really around this filtration and ventilation aspect that is kicking in.
Tom Overs: Yes. I think, again, as you consider the amount of time consumers have spent at home over the last 18 months, they thought a whole lot about their home and how it was operating or how it was functioning and, in many cases, determined that they’re just uncomfortable. Whether it’s a better filtration system, that in many cases, they may be changing this over more often because they’re home and they can see the dust, they want the ventilation to bring in fresh air from the outside. That’s a better solution in the end, that dilution of air. Changing the air in the home is a better way to provide a cleaner environment for consumers. And then there’s the advanced solutions that consumers can get too, where there’s UV lights that purify the air. They sterilize the surfaces to prevent microbial growth that gets into the air stream and affects consumers that makes them uncomfortable.
The whole indoor water quality or the indoor environment has become very important in the last 18 months. And the last point is just being at home. Remember, kids were home too, so mom and dad were not just concerned about their health and well-being, but the kids as well, because they were there more than in the past.
Bryan Rocky: Absolutely yes, and the industry has already come up with new advanced air filtration equipment designs to improve air quality and remove smaller viruses and contaminants that impact our health. I expect this will continue to be one area where new products will continue to help make our homes and offices healthier going forward. The challenge will be, how do we adapt existing HVAC equipment to handle the airflow with increased resistance from enhanced filters and reduce the cost of those more effective filters, which do a better job of removing the contamination but will also need to be replaced more often?
Bryan Davenport: I think specifically around residential heating, we’ll continue to see awareness and expansion of electrification. I think we’ll continue to see electrification expand into other markets and to other parts of the country. We’ll see new regulations when it comes to efficiency coming in 2023, with new regulations and refrigerant just a couple of years later. The industry certainly continues to be very dynamic, and the Oxbox portfolio continues to stay ahead of that curve and making sure that we meet and exceed all those regulations that are coming. So I think we’ll continue to see those continue, and we’re prepared to respond to those.
Katie Davies: With a heightened focus on sustainability, we’re seeing some regions and consumers make the switch from natural or propane gas to all-electric heating solutions. This switch is especially prevalent in areas where regulations are pushing for electrified solutions, and/or ambient temperatures allow for these electric solutions (i.e., Southern/mild climate regions).
In addition, we see an opportunity for dual fuel systems, which combine a heat pump and gas furnace, in regions beyond those with mild outdoor temperatures. These systems can help reduce environmental impact while maintaining perfect comfort – no matter the weather.
Chris Day: The next decade is going to show a fairly significant shift toward heat pump products versus gas-fired and may even be a greater shift of heat pump versus straight AC if the run is a hybrid or dual fuel system at the end of the day. There’s no doubt that gas-fired furnaces will decline in volume. And again, a lot of that’s driven by regulation. The major movement is really 10 to 15 years out. But the next decade will show some decline, particularly in new construction and the certain pockets of the country that are being very aggressive with gas dams.
Todd Nolte: It’s mainly regulatory-driven. It’s driven by the one we talked about earlier with the minimum efficiency changes on Jan. 1, 2023, which will increase the baseline efficiencies of outdoor equipment. In the North, it’ll go from 13 to 14 SEER and in the Southeast and Southwest will go from 14 to 15 SEER. In addition, heat pumps will go up to 15 SEER nationwide. Also, we talked about the regulatory environment, and with the refrigerant changeover in 2025, that’s going to be a big impact. Typically, when you see these regulatory changes and the efficiency changes, you’ll see this potential buildup of existing products that will be sold later into 2023 for products that are allowed to do that. So, that’ll be a change for contractors in how they manage that changeover, the phase-in and phase-out of the old product to the new product. That’s going to be the biggest one.
There’s also a continued trend with electrification in residential homes. And we see that continuing to accelerate, that this could drive more demand for inverter-driven heat pumps because of their higher efficiency and higher heating capacity at lower outdoor temperatures compared to their single and two-stage counterparts. In addition, we see equipment getting smarter. Wireless technology will become even more important as technicians look for support in the field. This will also help streamline tech time at the job, as data becomes more available to upload away from the home and equipment issues become repairable remotely.
Tom Overs: If I remember some data ... that said 67% of consumers are going to do research on the internet before they even call a contractor, which is really trending up. In the past, maybe it was 50-50 that a consumer would be doing research versus asking for a referral. As we’ve had more time at home, we’ve got more time to do research, and the internet has a plethora of information out there for us to review. And I think when consumers do research, they tend to buy better products. They tend to look at what they could get as opposed to what they have to get. And that goes to the planned replacement versus a reactive replacement. My furnace or air conditioner doesn’t work, I’ve got to get it replaced. And we just kind of went with what I can get installed.
I believe when you look at the research that’s being done, it’s going to lead to higher efficiency systems. It’s going to be one that someone’s looking to for personal comfort. They want higher efficiency; they want cleaner air. They also are looking at the opportunity for them to move from maybe fossil fuels to strategic electrification. Strategic electrification doesn’t roll off the tongue of consumers. But as they’ve done research over the last year, they really have been able to look at options that they can put in their home that lower the global warming potential of the system that they have. And I think that’s a trend that consumers are looking at today to improve their home and, in their minds, they’re doing a good thing.
As I look at the opportunity to do research, it’s going to lead to products that, in the past, had been upgrades that may become more the standard, at least for the next five years because of the research that’s been done, and consumers are trying to plan for the purchase. And the other thing is the ability to finance a project today is greater because the savings rate is higher, and consumers have a little bit more money to leverage. The ability to finance a job lends itself to being a bigger purchase, meaning a better product. I think when you put those two things together from an industry point of view, we should see consumers buying higher end products that are, again, more efficient, provide cleaner air, and overall, provide more comfort in the home.
Bryan Rocky: Several major challenges are on the horizon, such as decarbonization (fewer gas furnaces), electrification (more heat pumps), energy source use (fuel oil conversion to other energy sources, new natural gas service limits for home connections), developing a cold climate heat pump that will not require auxiliary electric strip heat as a backup, and more. Controls are driving the future, as heat transfer technology is currently pushed to the limit for gas furnaces.
Another item in the picture is the Department of Energy (DOE) regulatory position on furnaces and water heaters. DOE is readdressing if an 80% non-condensing furnace design can be eliminated from the market to advance national energy savings. This could be a major directional change for our industry.
Bryan Davenport: It’s probably finding products. The supply chain challenges that exist today are unlike any that I’ve faced in my career. And so making sure the contractors partner with the right suppliers that can give them the equipment, the parts, the materials they need to meet those customer demands are critical. The global supply chain will stabilize, hopefully, sometime here in the not too distant future, but that’s certainly a dynamic condition that all contractors and consumers are facing today.
Katie Davies: Major trends:
• Technician shortages (skilled labor)
• Supply impacts due to the pandemic
Chris Day: The greatest challenge is keeping up with all of these changes. When we say things like, all of the products that you buy from Rheem today, a year from now are going to be substantially different in many ways. Their first question then is, OK, how do I get caught up on training? How do I get caught up on what these new regulations are? How do I get caught up on even understanding the new vernacular?
I’ve been saying for a while, that the most challenging part of this Jan. 1, 2023, step, is going to be that the entire industry, starting with our contractors, is going to have to talk about products differently because the metrics that we’ve used for decades are changing. I think that’s going to be a big challenge. Not only for them to understand what we’re going to offer and are already starting with so many different training platforms and channels to get them up to speed. But then they’re going to have to sit there across from the proverbial kitchen table and be able to explain it to a homeowner as well.
Todd Nolte: Because of the pandemic, our dealers will continue to face challenges seen in other industries but contact with service calls and transactions will continue to be important to homeowners. Our dealers will continue to thrive as homeowners remain concerned about the overall health and comfort in their homes. People are investing in their homes as they continue to spend so much time in them, plus many people are now working at home permanently or at least working from home part of the time. The trend continues, the outlook remains positive for the industry. So just really adapting to that change, most contractors have done that to this point and really changed how they go to market. And I think they’ve been adapting well in that area.
The other one would be supply chain challenges, issues, and they’ll continue to be challenging in the short term. The pandemic disrupted the supply chain in several ways, and I think we can still see the lingering effects from that for the remainder of the year. Those are really the big things that they’ve been talking about beyond the labor shortage.
Tom Overs: I lived in Australia for three years and led up a business and asked what’s the biggest challenge we’ve got? And they said labor. It is a global issue that we have to manage. I think from a contractor perspective, probably a couple of things come to mind. One is the ability for them to familiarize themselves with the advanced products that are offered by manufacturers and to install them in a manner that it meets the expectations of the consumer, but more importantly, for the contractor, so they don’t have callbacks. And that’s the biggest challenge that contractors have today in terms of cost overruns: not getting the job done right the first time and having to go back. For me, and looking at it from the contractors lens, it’s about making sure that my installers know the best installation practices, that they can go out and do the job and meet the expectation of the consumer.
The other issue is a little less today than it was in previous years. The pandemic has driven up a huge demand for our products and our services. The ability for contractors to effectively market their business so that they’re offering a differentiated option to consumers that it gives the consumer reason to call them as opposed to somebody else [is the challenge]. And that’s one reason that we’re talking a lot about strategic electrification with our contractors because it is something different that they can talk to consumers about and provides them an advantage in the marketplace because they’re bringing knowledge and information that wasn’t out there.
Seventy percent of contractors were technicians. They liked to fix things. And when they fix things, they’re looking at the current product, the current technology. They’re not looking at what they could have or what a consumer could have in their home and the upgrades or options that can make them more comfortable. I think it ties back into marketing, evolving into good marketers to get a consumer’s attention. And that information they’re passing along matches what they’re reading and seeing on the internet so that they come across as a credible source of knowledge. And that’s the reason the consumer’s going to buy from us.
Bryan Rocky: Contractor feedback revolves around the difficulty in getting HVAC equipment and repair/replacement parts from OEMs.
With the economy coming back this year, we all face shortages in equipment, parts, supplies and labor, while freight and raw material costs continue to rise (anyone bought lumber or copper tubing this summer?).
Another industry challenge for contractors is getting trained, knowledgeable technicians in a tight labor market.
The alternate refrigerant mandates will also have a huge impact on those contractors who are more focused on supporting just one market segment, such as residential products.
Bryan Davenport: Our distributors offer a variety of in-person and now virtual training classes to their contractors. We provide them a variety of tools and solutions through online materials, as well as online courses conducted in a virtual setting. And then obviously as travel is allowed, we do in-person sessions with our distributors as well and sometimes coupling up with their contractors to educate them on the Oxbox portfolio. With the pandemic, I think what we’ve seen is that it’s allowed us to accelerate the use of technology and really put us in a path to try and engage with a variety of audiences in a variety of formats, like audio and video platforms. It gives us a way to reach new and different audiences. Had it not been for the pandemic, we may not have gotten to it as quickly. That’s really allowed us to accelerate some of our approaches and some of our thinking when it comes to engaging and training with our distributors and contractors.
Katie Davies: We offer dealers and distributors more than 350 sales and technical training opportunities for our residential and light commercial HVAC products. As part of this training, we provide quick Field Tech Help videos to assist installers and service technicians to navigate problems while they are in the field. We also offer training around our programs, marketing, brand and digital products. Modes of learning include eLearning, videos, podcasts, virtual sessions and social learning.
Chris Day: It’s the full spectrum. It’s anything from sales and marketing training, business training, to advance system diagnostics. We continue to invest in Innovation Learning Centers globally. We opened our last Innovation Learning Center about two months ago in Dubai. That was on the cusp of our first manufacturing facility in the Middle East. It’ll be opening in two months. But we’ve got another one already started, Innovation Learning Centers, that’s going to be dedicated to commercial products, and that’s in addition to the half dozen we already have here in North America.
Our job is to place these Innovation Learning Centers in locations that are appropriate to distributors so they and contractors can use them. And then it’s a train the trainer philosophy. There’s no way that we alone will be able to train a quarter of a million contractors. And that’s our goal, by the way. That’s one of our sustainability goals and initiatives is to train a quarter of a million contractors. We said it at the beginning of 2020, and our end date is Jan. 1, 2025. So we’re moving a lot of people through these ILCs and the field extension programs.
Todd Nolte: We have a full curriculum of education and training courses for our dealers. The courses focus on sales, business development, installation, service and products. Course delivery ranges from in-person classes to e-learning, self-paced courses to VR simulations. Carrier’s learning management system, My Learning Center, can be assessed by dealers at mlctraining.com. In addition, many courses are available to students as well, to the public.
Tom Overs: We have our traditional classes that talk about product and benefits, service, installation. We have an MNP class. Our product classes talk about the operation of the product and the application. We definitely want to make sure that we have our contractors in the installation classes. We’re also looking at something that I think manufacturers have gone away from, which is the business training for contractors. So how do you run a successful HVAC contracting business, and specifically, how do you run one when you incorporate ductless systems, heat pump systems into your business? And what does that look like in terms of leading you to success for your business and in your market? Contractors don’t necessarily work on their business; they’re working in their business. We want to be able to bring that type of business operations type training to help them either grow their business top line, or probably more important, grow it on the bottom line.
The other thing that we’re looking at is the retail sales side of the contractor’s business. How can we help them be better retailers when they’re talking to a consumer, so that they’re incorporating our systems, our products into the equation? They talk about their company. They get the consumer very comfortable with that. They do a good calculation on the home, so they have the exact requirements for the product. They’ll say we have air handlers today, along with our ductless systems that we can offer a very flexible solution. And we want to make sure that that conversation is very fluid with a contractor to the consumer. They become credible in front of that consumer and they sell that solution. I think it’s important for us because it is different from unitary, that we offer retail sales training for our contractors. They’re incorporating our solutions into their business. And overall, it’s something that contractors have said that they want.
Bryan Rocky: Working with our distribution channel partners, Johnson Controls offers a wide variety of business, management, and technical training for our contractors through our Ducted Systems Academy, located in Oklahoma City.
Our distribution partners also provide this type of training for our contractors through Johnson Controls Factory Certified Training Centers, which provide equivalent training at their locations.
Distribution partners may also request that in-person training sessions be provided by our DS Academy staff or our Regional Technical Service Managers.
Bryan Davenport: There’s a desire on our contractors’ and distributors’ parts and our team’s part [for training programs]. Safety is paramount for us. We want to make sure we’re not only protecting our associates, but we’re protecting our customers as well. There are opportunities while limited today to engage in person, and we ensure that we’re following the appropriate protocols to ensure the safety of everybody involved. And when that’s not possible, we’ll continue to use [communication] platforms to engage and interact and train all of our customers, while we continue to navigate this new, dynamic world..
Katie Davies: We moved most of our training to a virtual platform, and we’re determined to continue providing the best training and onboarding experience for both our dealers and dealer-supporting sales staff. The response to the virtual realm shift has been encouraging, with a 35% increase in training engagement from 2019 to 2020, and 2021 proving equally as strong.
Among our new virtual offerings is a monthly FieldTechTalk to meet the training needs of those in the field. One of our technical experts hosts the virtual session that includes a presentation, live demonstration, activities for engagement and Q&A.
Chris Day: It has been a challenge, and we’ve been extremely and appropriately cautious, always following in line with the CDC guidelines along the way. What we did, though, is we pivoted very quickly to hybrid type. Either training programs or conventions, because with all of the work that’s being done for this 2023 overall, there was no way that we could stop. We had to get creative. We’ve done entire sales meetings hybrid online. And of course we all miss being in the same room together. We miss being out there in the field with contractors and our distributors. But we do feel that with the exception of getting hands on equipment together, there’s still high, high retentions, there are still other training plans that the team has designed.
Todd Nolte: While the basic foundations of our training programs haven’t necessarily changed, we’ve added delivery mechanisms to address the conditions of the pandemic. Fortunately, we’ve already had our learning platform, My Learning Center, in place that features hundreds of self-paced online learning modules, including 3D and VR technical courses, featuring care and equipment. In addition, we were able to quickly pivot and begin offering instructor-led courses, which are traditionally taught in the classrooms, and move them to virtual classrooms. We were able to start offering these virtual classes in just over a month after stay-at-home orders began. You’re really seeing that trend where you would have an instructor-led, typically, they would come into the classroom and you were able to recreate that experience virtually.
Tom Overs: Well, I think back to April of last year, it was something that we had to do and pivoted very well, where there was the sales training service for installation training that we offered because our training centers were closed. We have 11 training centers across the U.S., let alone our distributor training centers. We had to figure out a different way to get the message across to our contractors. And initially, it was the perfect time because everyone was trying to understand what was going to happen, what was next. And the default people had was, I’ve got a week or two here. Let’s spend some time on improving our skills as a contracting business so that we’re ready when things open back up. Things opened up very quickly, depending on the market. But we had this kind of hockey stick recovery in the industry, and we went right back to it. It’s been unprecedented. But we went back to the summer selling season in many respects.
But we did adapt. We have a very good library of virtual training that’s available from our training team. Our sales team continues to do some virtual training, but after probably 12 months, there’s fatigue when it comes to virtual training. Everyone wants to get back to in-person training within our training or distributors’ locations or even in the contractor’s business. We’ve swung back to doing what we’ve done in the past. However, I still think that there’s a place for virtual training because what we learned was it saved an enormous amount of time. It doesn’t require someone to travel, and you can get a lot done. The question is, how effective was it? How long or how will it be maintained within that person’s mind is probably still out for the jury, but we see a place for it. I think this industry, from what I’ve learned is that we’re a hands-on industry. We like to be face to face. We like to be able to ask questions, make sure everyone’s engaged, and that it makes a more effective training class.
Bryan Rocky: Like almost every company, travel to in-person training sessions was restricted and replaced with video conferences, live webinars and online recorded training for our distribution partners and contractors. As many companies have realized, going to the web-based video training or online self-paced training actually increases customer participation in our programs. When in-person training was halted, the cost for training was reduced (no travel), and training availability increased. While remote training does lose the benefits of an in-person, hands-on approach, we found that the overall levels of training did increase.
Bryan Davenport: They need to make sure they’re focused on the solution that best meets their customer needs. So, as we go into this fall, as we go into any season, make sure you’re listening to your consumers, understanding what’s at the core of their needs, and responding with a solution or solutions that meet those needs. And that’s where the Oxbox portfolio comes down. We offer a variety of affordable, quality solutions to meet the needs of those contractors and those customers. And I just encourage contractors to listen to that feedback and respond in a way that meets the needs of the customer.
Katie Davies: As with many other items in the market, we’re seeing a high level of demand for our products. We anticipate that dealers will experience longer lead times due to this demand and should be prepared for that this season.
Chris Day: For this heating season, I think it’s ... think about it this way. Since they’ll be able to get into homes in a way that maybe they haven’t last heating season, it’s really that whole health checkup.
They should provide this to homeowners and make sure that things are appropriately working and moving. And so maybe that extra touch that they haven’t been able to do in the past would be helpful. There’s no doubt that people are more conscious and have been during the pandemic as to how their systems are operating, and what needs to be done, and clearly upgrades. And yes, [every] industry now faces supply chain challenges. At the same time, I think the Rheem operations team and the supply chain teams have done a fantastic job of mitigating risks for us and moving us forward and farther than a lot of the others.
Todd Nolte: Fall and winter are ideal times to upgrade your consumers’, your customers’ filtration and indoor air quality products. There’s never been a better time than that when you’re doing a furnace switch-out or a service call to add a whole home purifier, whole home humidifier and UV lamp. Plus, indoor air quality is obviously very top-of-mind with homeowners right now, so it’s a great time to talk with them about how they can improve their indoor air and help provide peace of mind.
Upselling can be beneficial and promoting the features and benefits of higher end equipment can lead to better sales. It’ll be important for contractors to understand these features and benefits and how to position them to homeowners as differentiators in the marketplace. And then the other thing I would say is supply chain issues will also continue to be a challenge and something that contractors need to keep in mind.
Tom Overs: When you look at the trends out there, it’s their ability on two fronts, one to be able to manage this continued high-demand, high-volume environment within their business and they look at their business so that they can maintain profitability or increase it. It’s a great time for them to slow down just a little bit to get things right, even though the pace is at a very high level. And that is a challenge in these times because many people just want to be able to capitalize on the volume. I think one is just slowing down a little bit to make sure that they’re doing everything right for the best consumer experience, but also makes them profitable.
The other thing that I look at is being able to do the installation right the first time so that they don’t have callbacks. And I think that’s important, no matter what time of the year you’re looking at, going into the heating season with the peak demand that we have to get it right. And knowing as they look at heat pumps, they look at strategic electrification, as an option for consumers, that they can translate that information and knowledge back to their business of what they’re doing and why.
Bryan Rocky: The last several years have really been tough, but as an industry, we learned about change, resiliency and being focused on what’s important for all our businesses, regardless of their size. Keep your priorities straight, understand what and how you can do better, and use the resources that Johnson Controls provides through our distribution channel partners and directly to our contractors. That includes all the training offered through our Ducted Systems Academy, sales support, marketing programs, technical services support, Source 1/DS parts support, and more.
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