Are HFCs Headed Towards a Price Hike?

By Danielle Wright, NASRC Executive Director, and Keilly Witman, NASRC's Policy Expert

Retailers are experiencing the painful transition from R-22 as prices have doubled, or even tripled, with no end in sight. The question retailers need to consider next is whether the commitments made by the United States under the Kigali Amendment to the Montreal Protocol will drive similar price increases for R-404A and R-407A.

The Kigali Amendment to the Montreal protocol, adopted in 2016, mandates the phasedown of Hydrofluorocarbons (HFCs). The amendment establishes a timetable for all developed and developing countries to freeze and then reduce production and use of HFCs. To meet its target, the United States will need to reduce HFC use by 40% by 2024. 

The HFC phasedown will be implemented through EPA production allocations for chemical manufacturers in a way that is similar to the way the R-22 phase-out was implemented. Each chemical manufacturer will be awarded a maximum amount of carbon dioxide equivalent that they will be allowed to manufacture each year, and e each chemical manufacturer will develop its own strategy on how to translate that carbon dioxide equivalent into HFC production. For instance, a chemical manufacturer that is allocated 100,000 pounds of carbon dioxide equivalent, can choose to manufacture approximately 25 pounds of R-404A, or they can choose to manufacture about 70 pounds of their patented HFO blend.

This will drive the chemical manufacturers to invest their allocation towards the more profitable HFO blends, rather than the lower-priced high GWP HFCs, such as R-404A and R-407A. If you had the choice to sell 70 pounds of a patented HFO blend at $20 per pound or 25 pounds of R-404A at $10 per pound, which choice would you make?

With reduced supply of high GWP HFCs and the very high demand for those HFCs for supermarket refrigeration systems, the price of those high GWP HFCs will go up. Eventually, the current price premium of the HFO blends will disappear, which makes the HFO blends even more attractive.

The European market, another leading indicator for what might happen in the U.S., is accelerating the phasedown of HFCs well ahead of the Kigali Amendment schedule. HFC prices have already begun to increase due to the reduction in supply. According to the Environmental Investigation Agency (EIA), one major producer has increased the price of R-404a by over 60% in the first quarter of 2017.

The potential price increase of high GWP HFCs is just another challenge added to the list of hurdles that supermarket retailers face when it comes to refrigerant management. Natural refrigerants are the ideal solution, as they “future-proof” your business against future phase-outs and phasedowns. They are also insulated from refrigerant price volatility driven by chemical manufacturer production levels.

Natural refrigerants have their own hurdles when it comes to technology costs, service technician availability, and the lack of codes and standards. Now is the time to focus on overcoming these hurdles, so that retailers can avoid the uncertainty and cost of multiple refrigerant change-outs. How can you take action? Join one of NASRC’s progress groups and contribute to the real change today.

Natural Refrigerants Seminar & Hands-on CO2 Training Coming to Boise

Boise residents will have an exclusive opportunity to learn about natural refrigerants and receive in-depth training on a CO2 transcritical system. Danfoss has scheduled their CO2 Mobile Unit to stop in Boise, as one of two locations in the United States, before continuing on its world tour. 

    Click here for flyer

    Click here for flyer

NASRC will hold a Natural Refrigerant Seminar featuring two half-day sessions to provide an overview of natural refrigerants, the benefits and challenges, and see a live CO2 transcritical system. Attendees will include end users, contractors, educations, local government and utility representatives. 

The seminar will be hosted by DC Engineering in partnership with NASRC, KW Refrigerant Management Strategy, CTA Group and Danfoss. A social event will follow the final session and is open to all attendees. 

Session 1: 9am – 12pm – for government and educators
Session 2: 1pm – 4pm – for end-user and utilities
Social event: 4 – 6pm, open to all

   Click here for flyer

   Click here for flyer

The Danfoss CO2 Mobile Training Unit team will be also offering three 2-day training sessions designed to provide hands-on experience for retailers, system builders and installers and service technicians. Sessions are expected to fill up quickly as space is limited to 12 participants per session. 

Training Session 1 – July 11-12, 9am – 4pm
Training Session 2 – July 13-14, 9am – 4pm
Training Session 3 – July 18-19, 9am – 4pm

Member Perspective: Q&A with Sprouts Farmers Market

NASRC interviewed Frank Davis, Director of Facility Engineering at Sprouts Farmers Market, for his perspective and experience with natural refrigerants. 


Q: Why was it important to join NASRC? What do you hope to gain?
A: We were motivated to join after the NASRC workshop at SMUD. When I saw all the partners involved that share Sprouts’ interest in taking steps to explore natural refrigerants, I recognized that being a member will help us gain a better understanding of how to manage and operate natural refrigerant systems. The workshop and membership reminded me of the GreenChill program, where collaboration really helped to share end-user experiences and opened the door to connect with others.

Q: What technologies and refrigerants have you tested?
A: We currently have three sites. One CO2 cascade system in California, built in 2011, that is using 407a on the high side. This system has had no leaks on the HFC refrigerant side to date. We also have a CO2 transcritical system in Georgia, complete in 2013, and another Sprouts that opened there this June with parallel compression. We are now looking for another site in Sacramento.

Q: What drove you to test natural refrigerants?
A: Natural refrigerants are the future for Sprouts stores. It has been only talk over the last 5 to 10 years, but now it’s here and is only going to accelerate. We really needed to explore the technology and get our feet wet to discover and overcome the challenges, including cost, energy, maintenance and serviceability.

Q: Was it difficult to find technicians to service these systems?
A:
Hillphoenix provided training after the opening of our store in Georgia, but finding qualified technicians to provide ongoing service is difficult.

Q: Was the new system more expensive? If so, how did you justify internally?
A: The new systems were more costly, but the pilot will help Sprouts learn what works for us so we will be prepared for future regulatory changes. Our investment in this technology helps further Sprouts’ commitment to responsible retailing, and as a member of the NASRC, I hope that our learnings can help other retailers.

Q: What was biggest challenge compared to a traditional system?
A: The installation was very straightforward, but the biggest challenge since has been the general cost of ownership. The system requires specific maintenance, which calls for more hours and more costly parts in addition to storage and rental for CO2 tanks. We expect the third store to show energy savings and are looking forward to seeing how it counteracts these costs.

Q: What was the biggest benefit or gain?
A: We’re gaining a base of experience and data which will make it easier for us to manage changing regulations. New technology always brings a learning curve, but we keep learning and growing as we experience it.

Q: Would you do it again? Why or why not?
A:
Yes. Overall, the systems are more complex to manage, but increasing our learnings is worth the challenge. In the future, I would like to see a store with only self-contained cases which would help reduce costs and minimize maintenance.

SMUD Launches Natural Refrigerant Incentive Program

The Sacramento Municipal Utility District (SMUD) has announced the launch of a new pilot program that will provide incentives for direct greenhouse gas (GHG) emission reduction. The program will provide incentives for both energy savings and GHG emissions reduction.

The program is open to SMUD's commercial customers that install new natural refrigerant system or retrofit a system from a high-GWP refrigerant to a natural refrigerant. New systems can include distributed systems, transcritical and cascade, stand-alone systems or self-contained units. 

Incentive levels for GHG emissions reduction are calculated separately from energy savings. Energy savings are paid under SMUD's Custom Incentive program for both kW and kWh reduced. GHG emissions reductions are paid per metric ton of CO2-equivalent emissions reduction.

A bonus incentive is available for projects implemented by small businesses located in disadvantage communities. The bonus equates to 25% of the GHG emission reduction incentive.

The total combined incentive is capped at $250,000 or 50% of the project cost, whichever is less.

The GHG emission reduction calculation is based on the refrigerant GWP, charge size and annual leak rate. For retrofits, GHG reduction is calculated based on the difference between the existing and forecasted performance of the system. New systems will use a pre-defined baseline that assumes a default refrigerant, change and leak rate. The following equation will be applied:

Participants must also agree to allow SMUD access to collect energy consumption data for a minimum of a three-year period. Sub-metering equipment will be installed on refrigeration and electrical systems to monitor energy use.

According to SMUD, in addition to the energy savings and GHG emissions reduction, one of the primary purposes of the pilot is to conduct research that will contribute to the growing body of literature that supports refrigerant policy and practice.

For more information, please refer to hand-out below:

SMUD's Natural Refrigerant Incentive Program process 

SMUD's Natural Refrigerant Incentive Program process 

NASRC Receives Award from the National Small Business Environmental Assistance Program

Tony Pendola, NSC Chair, Keilly Witman, NASRC, Danielle Wright, NASRC, and La Ronda Bowen, CARB SBO

Tony Pendola, NSC Chair, Keilly Witman, NASRC, Danielle Wright, NASRC, and La Ronda Bowen, CARB SBO

NASRC was recognized by the National Steering Committee (NSC) of Small Business Environmental Assistance Programs (SBEAPs), and Small Business Ombudsmen (SBO) for its leadership nationwide in the areas of compliance assistance, sustainability, advocacy and collaboration. The award was presented to NASRC at the NSC meeting May 17, 2017, in Denver, Colorado.

NASRC was awarded for its work in accelerating the transition from fluorinated gases — F-gases, including hydrofluorocarbons — to low-global warming potential, or GWP, refrigeration equipment and technologies. F-gases are the fastest-growing source of greenhouse gas emissions in California and globally.

NASRC is being recognized for establishing best practices for natural refrigerants such as low-charge hydrocarbon and ammonia, and carbon dioxide; providing educational resources to service providers, end users and manufacturers of natural refrigerants; and supporting certification organizations and government agencies to help streamline approval processes for natural refrigerant equipment and technologies.

NASRC’s collaboration with utilities such as the Sacramento Municipal Utility District and end users of refrigeration equipment has been instrumental in developing utility incentives that include an extra bonus for small businesses to encourage the conversion to natural refrigerant gases and energy efficiency equipment. Because refrigerant equipment has a high cost of ownership, it is imperative small businesses have incentives. This award underscores NASRC’s leadership in the industry, not only shining the spotlight on sustainable practices, but also for showcasing low-GWP alternatives and the importance of business/small business incentives, and the role of small businesses in this industry.

NASRC board members Clay Rohrer, Tristam Coffin, Keilly Witman, Aaron Daly, Todd Washburn, Bryan Beitler, Peter Narreau and Peter Dee pose with the award of the most recent board meeting.

NASRC board members Clay Rohrer, Tristam Coffin, Keilly Witman, Aaron Daly, Todd Washburn, Bryan Beitler, Peter Narreau and Peter Dee pose with the award of the most recent board meeting.

“It is a great honor to be selected for this award. NASRC has accomplished a tremendous amount given we have only been in existence for less than two years. There is still much work to be done to remove the barriers of adopting natural refrigerants, especially for small businesses that need financial incentives to support the transition. This award not only highlights the important role of natural refrigerants in significantly reducing greenhouse gas emissions but the collaboration necessary in order achieve our vision of a more sustainable future,” said Danielle Wright, executive director of NASRC.

NASRC member Source Refrigeration has also collaborated with the California Air Resources Board’s SBEAP in the production of a leak inspection video and fact sheet. NASRC has analyzed whether financial incentives could help promote more immediate transition for small- and medium-sized markets. In addition to this incentive program, it is helping to establish best practices for natural refrigerants, providing education resources and online training opportunities.  

The SBEAP/SBO NSC Awards are the premier environmental awards for recognizing outstanding environmental performance, programs and individuals. The awards honor and recognize small businesses, individuals, trade associations and others who have made significant contributions to protecting the environment. 

About the Small Business Environmental Assistance Programs (SBEAPs)

The Small Business Environmental Assistance Programs were created under Section 507 of the Clean Air Act Amendments of 1990.  For more than 25 years, the SBEAPs have provided extensive, hands-on technical assistance to small businesses across the country to help them understand and comply with complex environmental regulations. SBEAPs recently launched a new website, https://nationalsbeap.org/, which is a resource for program participants and small businesses. Find state-specific contacts at https://nationalsbeap.org/states