INTRODUCTION TO THE HVAC/R DISTRIBUTION INDUSTRY

The HVAC/R distribution industry established itself with the advent of affordable central air conditioning and heating systems for residential applications just after World War II. Today, the industry is largely undercapitalized and highly fragmented with over 1,300 distribution companies around the country.

The estimated $26 billion market is subdivided into new construction and replacement markets. The replacement side of the market has increased in size relative to the total market over the past several years as a result of: the aging of the installed base of residential central air conditioners and furnaces, the introduction of more energy efficient models, additions to existing systems, and the consumer’s overall unwillingness to live without air conditioning or heating products. The mechanical life of central air conditioning and furnaces varies by geographical region due to usage and is estimated to range from 8 to 20 years.

Legislation

The HVAC/R industry is very sensitive to changes in legislation related to energy efficiency and ozone emissions. As “green” issues gain recognition and support, the HVAC/R industry will need to continue to find new ways to increase efficiency to standards set by US and international mandates. In recent years a number of new regulations have impact the HVAC/R industry.

2006- The US Department of Energy mandated that the minimum efficiency rating of new air conditioning systems increase from 10 SEER to 13 SEER

2009- The American Recovery and Reinvestment Act provides tax credits for consumers choosing more energy-efficient products.

2010- The “Montreal Protocol” signed in 1989 outlaws the production of ozone-depleting HCFC refrigerants by 2010, forcing the industry to shift to more eco-friendly refrigerants such as 410A refrigerant.

On the Horizon- “Energy Independence and Security Act of 2007” sets regional minimum average efficiency rates for HVAC products in 3 national zones. The rates become effective on new construction starting in 2013, and replacements of existing equipment in 2015.

Current trends indicate that future industry regulation will continue to focus on increased energy efficiency and cleaner emissions. With Watsco’s diverse brand base and established vendor relationships, it is well positioned to quickly adapt to any future regulatory changes.