Note: the following is a transcript of a podcast recorded on July 14, 2021. To listen, check out the SRC Podcast here or wherever you get your podcasts.
Hello and welcome to another SRC podcast. For this recording, we're going to be focusing on a proposed new rule from the EPA that's titled "Phasedown of Hydrofluorocarbons: Establishing the Allowance, Allocation, and Trading Program under the American Innovation and Manufacturing Act."
Rather than kind of break down the proposed rule line by line, today we're going to be offering some high-level takeaways from our perspective as engineers. And speaking of engineers, today I'm joined by my colleague Ken Allen. He's a senior sales application engineer for us here at SRC. Ken, why don't you go ahead and introduce yourself?
Ken Allen: Thanks, Nate, I appreciate that. As Nate said, my name is Ken Allen, senior sales application engineer here at Super Radiator Coils. When I started with Super almost 10 years ago, I brought a pretty good background in HVAC and refrigeration and I really have a love for it. One of the things that in the past couple years that I've really been trying to develop here is the natural refrigerants push. And so when you're thinking about HFCs, these hydrofluorocarbons, they're synthetic refrigerants. And so this is really exciting what's going on in the marketplace right now. We're seeing growth in these natural refrigerants, but also we're seeing finally where the US government is getting on with the rest of the world in phasing down HFCs, so I'm excited.
Nate Budryk: Yeah, cool. Well, thanks for that, Ken. First things first, I guess let's kind of outline what we're talking about here. This rule – correct me if I'm wrong – is the first proposed such rule that invokes EPA's new authority to regulate HFCs. And I believe that it was the American Innovation and Manufacturing Act, also known as AIM, that was the legislation that granted them that authority.
So, for the purposes of just kind of outlining what we're saying here, according to the EPA's website, the goal of AIM, of which this proposed role is a part, it provides EPA new authorities to address HFCs in three main areas. Phasing down the production and consumption of listed HFCs, maximizing reclamation, and minimizing releases of these HFCs and their substitutes in equipment such as refrigerators and air conditioners, and also facilitating the transition to – Ken, like you're talking about – the next generation technologies by restricting the use of HFCs in particular sectors or subsectors.
So, under this third authority, EPA recently received five petitions from industries, states, and environmental organizations to address HFC use in refrigeration, air conditioning, and other applications. All right, Ken, what we just kind of explained there, from your point of view, just kind of translate that and let me know what you understand this proposed rule to mean.
Ken Allen: Yeah. Well, first I'd like to jump back a few years ago, back in, gosh, maybe five years ago, the EPA proposed Rule 20 and 21 which would begin phasedowns of HFC refrigerants in the United States. The EPA was subsequently sued by several refrigerant manufacturers who said they didn't have the authority to do so, and the courts agreed. The EPA functions with authorities granted to it by Congress.
So, in December of last year, a bill came to President Trump's desk called AIM, which you've already spoken about, and it was signed and approved. That law gave EPA the right to start regulating HFCs here in the United States. So, this new rule that they're going to propose will be a phasedown. And what I understand of it, it'll be year over year, but it'll be a phasedown approach to reducing the amount of HFC refrigerants used in the United States probably something by like 85% over a baseline, and that'll take several years to do that.
I think here in June, they're going to start having hearings, so there'll be some timeframe put forth that will be used to establish this rule. And then, of course, once it's approved, it'll start being rolled out on a yearly basis.
Nate Budryk: Sure, yep. I think we outlined or explicitly stated what AIM said, I think we said the title too. The goal of this proposed rule is to establish the HFC production and consumption baselines based on historical data, like you just said, Ken, establish the allowance allocation program to phase down HFC production and consumption, determine an initial methodology to allocating allowances and allowing for the transfer of those allowances, establish provisions for the international transfer of allowances, establish requirements to support compliance with phasing down HFC production and consumption, establish recordkeeping – and it's a lot to get through here...
Ken Allen: Yes, it is.
Nate Budryk: ...establish recordkeeping and reporting requirements, release certain data to provide transparency and support implementation of the program, and address certain other elements related to the effective implementation of the AIM Act. So, basically, I read that, understand it to mean we're setting up a process by which to begin a phasedown.
Ken Allen: Correct.
Nate Budryk: We're understanding as much as we can before we get to that point.
Ken Allen: Correct. That basically authorizes the EPA to do something. Now it's up to the EPA to work with stakeholders and figure out what it is exactly they're going to do. And I expect they're going to work within framework of like the Kigali limit.
Nate Budryk: Got it. Okay. Which brings me to my next point is they released a list of the affected HFC refrigerants and I guess we'll just run through those too. I can kind of get your take on some of those as well. So, we've got HFC 134, 134a, 143, 245fa, 365mfc, 227ea, 236cb, 236ea, 236fa, 245ca, 43-10mee, HFC-32, HFC-125, 143a, 41, 152, 152a, and HFC-23, so there's 18 in total. Ken, any of those that jump out at you that are kind of glaring?
Ken Allen: People will likely recognize some of these refrigerants, a lot of those refrigerants you just named are components to use to make other refrigerants. And what I mean by that is back when R-22 was phased out and R-410A came out – you might recognize it by some of the name brands, Carrier started using it and called it Puron – R-410A is a 50/50 blend of R-32 and R-125. So the majority of, in fact I would say almost all home air conditioners that are built today are R-410A. So this law would affect that. This law would affect R-410A that used in your air conditioner at home, so those manufacturers will have to start looking for a new type of refrigerant to use.
Now, 134a is also another big one. That was primarily used in automotive production but most of the automotive manufacturers have already moved to HFO, so newer-type refrigerants. But there's lots and lots of cars out there that use 134a. But you know the other thing that uses 134a is your refrigerator at home. Most home refrigerators use 134a, so they'll be looking for newer refrigerants to use for those type of appliances. Some of those appliances have already started changing, some of them have already started using – not for home use yet – but commercial have already started using propane. I think you'll see a bigger rollout on propane later.
But just back to that list you had, that's a pretty impressive list of HFC refrigerants that you're going to see phase down. And the reason they're phasing down is because we know that we're going to have to use some kind of HFO/HFC blend for most of the new refrigerants. The point is to get the global warming potential number, the GWP, down below a certain level. So, if you look at the GWP of 410A and – I'm going off memory so please allow me to be a little bit wrong – but I think it's like 2800, 2810, something like that is the number. It's actually higher than the R-22 it replaced. But the R-22 had an ozone depletion number, 410A does not.
So, I think what we're shooting for long term is a GWP of 750 or below. So, 410A is obviously three times that. But they will be able to use some of those HFCs to blend with HFOs to get those GWP numbers. That's lots of three-letter terms, sorry. But they'll be getting those numbers down below those permissible levels so that future use and future refrigerants have a much lower GWP.
Nate Budryk: Yeah, and the phaseout and the specifics around exactly what's being reduced, and the level to which the consumption and production is being affected, the language they use I think speaks to what you're talking about. How it's a critical component of a lot of these refrigerants that, in most people's eyes, are doing a good job of fighting this anti-global warming fight as well. And you mentioned, so the R-22's of the world, the R-12's that had the ozone depletion issue, those were phased out. And it sounds like now, the next step in that mission is to phase out some of the higher-GWP ones.
Ken Allen: Right. I think as a group of people, as a community, we don't ever have something that's the final, you consider, "Oh, this is the final," it's just the final for now. So, we continue to move and try to revise our impact on the world by coming up with methodology and components and chemicals that are better for our long-term mission, and that is to leave a planet here for our children and our children's children, right
Nate Budryk: Yeah.
Ken Allen: So, when you take a leap of changing major refrigerants like this, you have to consider the direct emissions of the refrigerant into the space and how that affects you, but also the indirect. And what I mean by that is if you have a very efficient refrigerant, it takes less energy to run that. If you have a less efficient, it takes more energy. Anytime we make energy, we make pollution. Whether you're burning coal or you're burning natural gas, there's some kind of pollution that comes from that.
Not only are we trying to reduce GWP, we're also trying to make sure that we are coming up with very efficient refrigerants so we're energy-efficient as well.
Nate Budryk: Yeah, it's that efficiency game of balancing the two the best you can.
Ken Allen: It is. And some of the natural refrigerants have a great energy efficiency.
Ken Allen: I mentioned propane a few minutes ago, we use propane all the time, nobody's scared of propane. In a refrigeration appliance, you may have 50 grams or 100 grams, we're talking about a couple of ounces. But it's more energy-efficient, it's safer for the environment, it has a GWP of like 3, so it's almost zero.
Nate Budryk: Negligible, yeah.
Ken Allen: Right. Exactly. So, if a little bit escapes... Some escapes every time you charge your grill tank. I mean, that's just how it goes. But it's just not a big deal because it's so low. I think we'll eventually go that way, but for big systems like your home air conditioner, you're not going to have four pounds of flammable refrigerant in there. I don't know that we'll ever get to that point.
Nate Budryk: Got it. All right. You've kind of touched on this a few times but in your opinion if this rule were to be adopted, which to be clear, this is still a proposal, there's that. We'll get into what's next for this rule as it moves forward. But if it were to be adopted, what do you see the impact being to the average person? We mentioned some of the residential stuff, but what about somebody that's a mechanical contractor or stuff like that? Is there a new skillset that's going to have to emerge? Is there new equipment to learn? Help me understand.
Ken Allen: Oh, yeah, yeah. Back when I started in the heating and air conditioning business, you could have your HVAC truck and you had three refrigerants in the truck and you could service almost everything out there, right.
Nate Budryk: Yeah, you've told me that, yeah.
Ken Allen: You had R-12, R-22, and 502. There's your medium temp, your high temp, and your low temp refrigerants right there. That was the '90s, it's no longer the '90s. If you look at the variety of refrigerants, you would need a tanker truck, a flatbed, to carry all the refrigerants that you could encounter on any given thing. So, it's just going to be another tank of refrigerant they're going to have to have. R-410A is not going away. There's millions and millions and millions of air conditioners out there that are going to be in the population for another 15 or 20 years, so you're still going to have to have that on your truck. But now, it's going to be another refrigerant that you're probably going to have to have.
Now, we don't know what the manufacturers are going to settle on. Some manufacturers are going with R-32. Now, you mentioned that that was in the phasedown, but the interesting thing about R-32 is the GWP is only 675. So, while it may be phased down – and that's yet to be seen, that's part of the rule – maybe they don't phase it down for specific uses. Maybe they phase it down for use in production of R-410A, I don't know. I think that's what EPA has to figure out, how they structure that. But a lot of the manufacturers in Asia have already switched to R-32. It's been around a long time. If you look up the makeup of 410, remember I said it was 50% R-32 and 50% of 125, I believe that's correct.
Nate Budryk: I think you're right.
Ken Allen: The reason they put the 125 in there in the first place is because R-132 is an A2L, which means it's slightly flammable. Now, it's not flammable like propane or like gasoline, it's different. It takes more energy to light it and when it does burn, it doesn't burn fast and it doesn't burn super-hot. But A2L's have that designation because we know that under certain conditions, they are slightly flammable. And that's been one of the holdups here in the US, is how you deal with that A2L slightly-flammable refrigerant.
So, while it's worked in Asia and other countries across the globe, I don't know if it's going to be allowed here in the United States, that's yet to be seen, as strictly R-32. I think one of the other up-and-coming that you may see is R-454B and that's an HFO/HFC blend.
Nate Budryk: And Carrier recently announced that they were moving...
Ken Allen: You're exactly right. Carrier announced that that's the direction they'll go. So, what will Trane do, what will JCI do? I don't know. I don't know but I have a feeling that they're already doing something. They just haven't made such an announcement like Carrier.
Nate Budryk: Yeah. And I'm sure they're poring over the details of this legalese in this proposal too.
Ken Allen: They have to be.
Nate Budryk: Oh, yeah.
Ken Allen: Right? It's a big deal.
Nate Budryk: I think that's important too. This is kind of sweeping change rather than kind of incremental. It will be incremental in terms of execution and implementation, but the roadmap that this proposed rule outlines is pretty drastic departure from where we're at now, if that's fair to say.
Ken Allen: It is fair to say. Imagine that you have this huge momentum of production of thousands and thousands of air conditioners every day and you need to change refrigerants. You've got to change over all your lines, you're no longer using this compressor, you got all these different compressors you're no longer using, this expansion valve, you got to have all these new expansion valves. It's like making a sharp right turn on your freight train that's going 90 miles an hour. Well, I think it's limited to 70 miles an hour, but anyway, you get my drift.
Nate Budryk: I thought Trane right away, not T-R-A-N-E, T-R-A-I-N.
Ken Allen: Yeah.
Nate Budryk: Something with a lot of momentum behind it that's been operating in a way that has worked for them for a long time.
Ken Allen: Yeah, it's a big deal. So, they've got to have a lot of resources, not only doing the evaluation phase, which I can almost bet you they're all in currently. But then when you go to make that change, it's a lot of work, it's not something that anybody can go into lightly. So, that's why the EPA has to do their due diligence and bring in all the stakeholders to come up with what's right. Not just what's right for the EPA but what's right for the American people, and the world as a whole, honestly.
Nate Budryk: Yeah, absolutely. All right. So, the last area of this proposed rule that we wanted to talk about today, Ken, is what the next step is. I understand that the EPA will be accepting comments on this proposal for 45 days after publication into the Federal Register, after which time a public hearing will be held. I understand the agency plans to finalize this rule later this year barring some unexpected outcome of that public hearing or something like that. I guess just help us understand maybe the timeline or where you see things being for the near term/mid term/long term.
Ken Allen: Sure. I think part of how long this term will be and how much effort it will take the EPA to get this rule approved, when they brought this up four or five years ago with Rule 20 and 21, there was a huge backlash, right? The refrigerant manufacturers sued them and they weren't allowed to put those rules into practice.
Nate Budryk: They don't want to stop their train.
Ken Allen: Right, it's expensive to stop the train, that's exactly right. But several states went on to push those through. California, I think New York did it, several other Northeastern, there's maybe 12 or 13 states, I'd have to look it up to remember, that basically put through some kind of similar state legislation to Rules 20 and 21. The reason I'm telling you this is because a lot of these manufacturers have already had to face that this is coming.
I mean, 404A used to be one of the medium-temp refrigeration go-to's. If you bought a new drink cooler for your grocery store, it probably had 404A in it. And California started phasing 404A out because it had a high GWP. Well, imagine you're a manufacturer of drink coolers for a grocery store and you sell all over the United States. You want to be able to sell to people in Virginia and people in California the same drink cooler without having to consider which refrigerant you send. Wouldn't that make sense? You only want to use one refrigerant if possible.
Nate Budryk: Oh, yeah.
Ken Allen: California's like the world's sixth largest market. So, obviously, you want to be able to sell there, but you can't sell them 404A. So, do you have a Virginia model and a California model, or do you just switch them all so they're compliant in all 50 states? If it were me, I would say, "Hey, let's just make it compliant in all 50 states." Then I can sell to California, and the people in Virginia don't care. So, I think most manufacturers have already faced that music, they've already started making switches. A lot of these guys have already switched to R-448a or 449a, so that they're California-compliant, and then they can sell in the rest of the United States. So, they're kind of ahead of the game already.
Nate Budryk: Well, it sounds like that it's probably something similar that will happen again this time.
Ken Allen: Yeah, yeah, exactly. It'll just be a national law instead of this patchwork thing for every state. And see, I guess that's the other part they've got to consider is if a state already has tougher regulations enacted, you're still required by that state, if you want to sell or make that product there, that you have to not only meet the federal requirements but also the state requirements.
Nate Budryk: So some standardization, uniformity of policy, and some...
Ken Allen: Would be really helpful.
Nate Budryk: Yeah. It seems like this is kind of setting that path for that.
Ken Allen: Yeah, I think long term. It's going to take them a little while to get this through. And that's good, because you really need to consider all of the people that are going to be affected by it.
Nate Budryk: Oh, yeah. The ripples are going to touch just about everybody.
Ken Allen: Yeah. And it's going to be costly for a lot of people. It seems like every time that we make something new, it's a little bit more expensive than the last solution so they have to take that into effect. If it were to double the cost of your home air conditioner, what would that do to people? I'm not saying that, I'm not saying that at all.
Nate Budryk: ...potential ramifications.
Ken Allen: ...think about. Yeah. Absolutely. You have to make those considerations.
Nate Budryk: Yeah.
Ken Allen: The law, the way it's written, it says they have 45 days after publication and then they're going to hold a public hearing. Obviously, it'll fall along those lines and either you can choose to be part of those public hearings. Once they publish it, you can look it up. Probably we'll look it up and see if there's any comments that we should make. But I guess that goes for anybody that's really a stakeholder in this situation. But they should review it and make a comment because once it's approved, it's a little bit too late.
Nate Budryk: Yeah, and this is coming. It's kind of the job of folks like us to do our homework and to understand what it means.
Ken Allen: If you're going to be affected by it, you might as well have a say in it.
Nate Budryk: Absolutely. All right, sir. Well, with that, I think we will wrap up. So, we will kind of be following this as it progresses through the steps that we talked about and maybe be coming back to you in the next few months to give you an update, or when it passes, something like that. Yeah, keep visiting superradiatorcoils.com and with that, I'll say Ken, appreciate you joining us.
Ken Allen: Nate, always good to see you.
Nate Budryk: Yes, sir. You too.
Ken Allen: Thanks for setting this up.
Nate Budryk: Appreciate you taking the time to do this for us. Thanks everyone for listening and we'll see you on the next one.
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