Price of R-22 Refrigerant Soars After EPA Reduces Allocations by 45%

When the 25C Tax Credits were in place in 2010 allowing a $1500 Federal Tax Credit (on top of utility rebates) to upgrade to a 16 SEER high efficiency system with R410 refrigerant, consumers in the northeast rushed to the opportunity to upgrade their systems and switch to environmentally friendly refrigerant from R-22.  However, last year those tax credits were reduced to $300 per system and demand fell off steeply. This year, they were not renewed at all and the lack of incentives combined with the deepening recession has pretty much squelched most consumer demand to switch out older refrigerant 22 systems.  The EPA has just made that decision a very costly one, especially for those with consistent system leaks who will be looking for a “top-off” instead of replacing their old system. Although this news story on an Illinois HVAC contractor’s refrigerant pricing sounds a bit onerous, it will become the status quo this summer.

Another contractor’s opinion on where R-22 refrigerant prices are going:

According to Charlie McCrudden,  ACCA Vice President of Government Relations, “the EPA controls the production of HCFCs, including the refrigerant known as R-22, through allowances that limit how much each gas manufacturer and importer can produce or import in a given year. Under the implementation of the Montreal Protocol, the production and use of R-22 is slowly being phased out. In August 2011, the EPA proposed to adjust the allocations in place for the years 2012-2014. This adjustment was necessary because of a lawsuit filed by two HCFC producers who had completed a legal trade of allocations that EPA had failed to recognize in its allocations released in 2009. The EPA consulted with industry stakeholders before proposing to reduce the annual allocations. In gathering information used to develop the August 2011 allocation adjustment, EPA found that there was an oversupply of R-22 in the marketplace, partly evident by a lack of demand, increased reuse of R-22, and low wholesale prices. In fact, in 2010, producers of R-22 only utilized 86% of their allocations. A trade organization representing the manufacturers and importers of R-22 supported these claims, and advocated for a 20% reduction in allocations for 2012-2014. By the end of 2011, EPA had yet to finalize its adjustment proposal for the 2012-2014 allocations. But EPA did release a subsequent version of the August 2011 adjustment proposal on December 30, 2011, one that proposed to reduce the allocations for 2012-2014 between 11-47%. Without a finalized adjustment rule, the producers and importers of R-22 were stuck in a legal limbo – on January 1, 2012, they did not have the authority to manufacture or import R-22.”

As a result, the price of R-22 has skyrocketed by as much as 40% in the last few weeks and contractors have not been able to fill standing orders on skids at originally quoted prices. Consumers with older R-22 systems will be paying considerably higher per pound prices if they cannot be convinced to upgrade their systems. R-22 refrigerant prices have already passed R410A prices with this one increase and now many homeowners who opted for replacing just their condensing units with a “dry shipped” model this year are already about to feel the pain of what they thought was an economical alternative to a complete system upgrade.

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

Northeast US Feels the Economic Crush of Home Heating Oil

It seems my last blog post was timely indeed as the New York Times did a piece this weekend on the high and ever-increasing cost of home heating oil and how it mostly affects the northeastern United States. The poor infrastructure for access to natural gas pipelines in our area is a testament to how poorly northeastern utilities are managed, how often they change ownership and what little oversight both the Public Service Commissions and state governments have provided over the last few decades. New England and New York State gas utilities have been reticent to extend natural gas pipelines into many neighborhoods.  I tried for years to get the gas main pipeline extended down our cul-de-sac, but was told this can’t happen unless all of my neighbors agree to convert.  During the two decades I have lived in my home, the gas utility ownership entity has changed hands at least five times.

Welcome to the northeast, the oldest area of the United States with the most dilapidated infrastructure. At times it seems that our world is crumbling around us and every public works project is a patch job. We have the highest concentration of the oldest bridges, tunnels, roads and buildings. Many of them were civil engineering wonders and the pioneering projects of their time (the NYC Subway, the Brooklyn Bridge, The Verrazzano Narrows Bridge, the Empire State Building), but for those that are not designated landmarks, not much has been done to keep them from crumbling. With that in mind, the extension of underground gas mains in the northeast will probably not become a major focus for Federal or State government until our transportation infrastructure has had its first overhaul since the New Deal nearly 80 years ago.  Of course, it will take a well-managed public utility with a stable plan for expansion and the trust of ratepayers before the Public Service Commission will allow an increase in gas rates to include significant extensions. The price of natural gas has plummeted over the last few years because of the discovery of increased reserves created by shale hydrofracturing in the northeast. This graph shows that the average oil customer pays nearly $2400 per year to heat their home, while the average natural gas customer pays only $951. With this in mind, why isn’t now the right time to keep the price of natural gas at a stable plateau by adding an excise tax or rate line item to help pay for the extension of gas mains into additional suburban areas?

This map of the United States shows how dependent the northeast is on home heating oil. The rest of the US (with the exception of Alaska) has much greater access to natural gas or inexpensive electricity. The high cost of home heating in New York and New England is one of the main reasons so many northeasterners are flocking south and west. They just cannot afford the high cost of living here, especially in retirement. Utilities (including home heating), housing costs and property taxes are the main culprits. The mass exodus of the northeastern population also increases the burden on those who stay in hopes of a brighter economic future here. Its time for the state governments and the public utilities to come up with a master plan to provide lower cost natural gas and electricity to all who want and need it. Until then, the best bet for anyone who can’t get natural gas and plans to stay in their home for the next 5 years is to install a geothermal heating and cooling system. The 30% Federal Tax Credit will be available until 2016 and this combined with utility rebates makes it your best return on investment for the long term. However, 2016 isn’t that far off and it is best not to wait for the crush that will ensue in 2014 and 2015 when the price of oil is even higher and the threat of the sunset of the 25C Renewable Tax Credits is upon us.

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

Fossil Fuels Comparison, Geothermal HVAC, ROI and Home Heating

When deciding upon a heating source for a new custom home or commercial building people often ask, “what is the best bang for my buck”?  This is obviously a loaded question and will be answered in a myriad of different ways depending upon whom you pose the question to.  Here, on Long Island, where No. 2 fuel oil is still a dominant market influence, your local oil dealer will espouse the benefits of oil heat with special emphasis on the fact that it has the most BTUs per gallon of any of the 3 fossil fuel sources (the others being natural gas and propane).  Your natural gas utility will tell you that the cost of oil is never going down again and that the cost of clean natural gas is stable and the supply is plentiful. Furthermore, if you measure the cost per BTU of gas versus oil, you will see that natural gas is the less expensive better choice, especially considering that high efficiency gas fired equipment can operate at efficiencies of over 95%, while even the highest efficiency oil burner will top out at 89% or so.  And then there is propane, which propane dealers will argue is much better than oil because it burns cleaner, can operate with gas equipment to give you those higher efficiencies and can be used for cooking as well.

So, who is telling the truth and where is the proof?  We don’t sell any fuel commodity, so I really don’t have a horse in the race and although the prices of fossil fuels are changing all the time, there are some constants. Let us say, for this example, that you live in suburban or rural Long Island and you cannot get natural gas as a heating source. As of this writing, according to NYSERDA, the current price per gallon of #2 fuel oil on Long Island is $4.05 per gallon. The cost of propane (LPG) is $3.38 per gallon. To the layman, this may make propane look more attractive than oil, but the truth is that there is considerably more BTU capacity in a gallon of No. 2 home heating oil than there is in a gallon of propane.  This stands to reason because propane is actually a byproduct of petroleum and its relative price fluctuates in much the same way oil does. Considering that there are approximately 138,000 BTUs in a gallon of oil and 92,000 BTUs in a gallon of propane, this changes your understanding a bit.  If you divide the BTU output versus the cost, you will see that currently oil provides 34,100 BTUs per dollar spent while propane provides 27,200 BTUs per dollar spent.  Well, that makes it a no-brainer right?  Oil is cheaper on a per BTU basis.  Unfortunately, you forgot one thing. Gas-fired equipment can operate at a higher AFUE (Annualized Fuel Utilization Efficiency) than propane. So if you compare a 96% efficient propane burner to an 85% efficient oil burner, what happens? Then you are just about dead even. Do the math yourself.  Now, if you add the non-tangible benefits of propane, like being able to install a gas stove, gas dryer or gas fireplace insert, it might just tip the scales for you.  It actually makes sense that this decision could come down to a coin flip on a cost basis because LPG does indeed stand for liquified petroleum gas and propane is a byproduct of petroleum.

So much for the propane versus gas battle. What about the properties and cost of natural gas?  According to NYSERDA, the current price of natural gas in New York State is $1.60 per Therm (or 100 CCF). There are 100,000 BTUs per Therm of natural gas.  Therefore, if you were to price natural gas versus no. 2 fuel oil by the BTU content of a gallon of oil (138,000 BTUs) the current rates would be $4.05 for a gallon of oil and $2.21 for a “gallon” of natural gas with the same heating capacity.  So, is there really a consideration here?  You don’t need to hear about cleanliness, safety, efficiency and other factors with such a price advantage.  However, this has not always been the case.  In fact, the January home heating price of natural gas has fallen by 28% in New York State (and across the country) over the past 5 years.  The cost of petroleum based fuels in New York has continued to steadily rise. The reasons for this evolve around the fact that hydrofracturing processes have opened up vast new reserves of natural gas in subterranean shale fields throughout the US. At the same time, the volatility of foreign oil reserves and the limited capacity of US refineries all but assure that petroleum products will not see the same type of price reductions. At best, petroleum prices will slowly increase with plateaus at various levels.

Now, how does this all relate to the cost of geothermal heating and cooling. After several years of doing Return On Investment comparisons for new homes and buildings I have seen several consistencies. Geothermal HVAC is by far and away the best investment for your dollar in new home heating while the current 25C Federal Tax Credits are in place.  If you combine the 30% Federal Tax Credit (good until 2016) with the advantage of no recurring utility cost (besides a small electric KW requirement) against the installed cost of fossil fuel heating and electric cooling systems, you should see a return on investment of anywhere from 4 to 8 years, depending upon the type of fossil fuel, your rates, your usage and the efficiency of the equipment chosen. In our comparison analysis, the payback period typically ranges from 4-6 years versus fuel oil/propane and 6 to 8 years versus natural gas at current rates. This can change in retrofits depending upon the age of your home, the condition or presence of existing ductwork and the amount of site work required for the ground loop heat exchanger.  Try out our home savings calculator sometime to see your savings versus fossil fuels. This does not apply to commercial projects, as the 30% Federal Tax Credit is only available residentially.  There are other credits and financing considerations for commercial geothermal projects that can be seen in the state incentive database.

If you want to compare all of your potential fuels and relative equipment efficiency to determine what is best for you, this link will download a great fuel comparison spreadsheet.  It was created by the US Energy Information Administration and you can input your local utility rates and fuel costs and the efficiency of the equipment you are considering to determine the best estimate of your true cost to operate with different fuels. Under “electricity”, it does include geothermal heat pumps as long as you know the COP (Coefficient of Performance) of the geothermal heat pump being selected.  We will also be happy to provide an ROI analysis for you on any project you are considering.

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!

Show Your “IQA” by Building an Energy Star Home

Builders, Developers and Real Estate professionals are competing for the chance to build new homes now more than ever. The smart ones are luring energy conscious home buyers with the added incentive of an Energy Star Qualified rated home. These homes are built to strict energy efficiency standards and are guaranteed to be at least 15% more efficient than those built to the guidelines of the 2004 International Residential Code.  These homes meet strict standards for insulation, low leakage ductwork, Energy Star rated windows and independent inspection and testing.  In this way, home buyers can be assured that they are buying an energy efficient home.

In order for homes to qualify, a builder must use a Quality Assured HVAC Contractor who has been certified through ACCA’s Quality Assured New Homes Program for “ENERGY STAR 3.0″ new home construction projects.

By offering Energy Star rated homes, Real Estate professionals and builders will be providing consumers with the confidence that they will have lower ownership costs, better home performance, environmental consciousness, carbon reduction and assurance that they have made a smart investment.

Homeowners looking to build their own Energy Star homes can find qualified builders at this link.  Air Ideal is a Quality Assured New Homes Recognized Contractor.

As always, to keep up to date with what’s new in HVAC technology, visit our website at airideal.com and follow us on Twitter @airideal and at our Facebook page!