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United Fresh News > Synthetic Refrigerant HFC Phase Down is coming – plan now or pay the costs.

6 June 2017

Synthetic Refrigerant HFC Phase Down is coming – plan now or pay the costs.

If you are making decisions around refrigeration assets you need to know significant change is happening in the Heating, Ventilation, Air Conditioning and Refrigeration (HVAC&R) industry that will affect your investments, impacting on compliance and health and safety systems. Global environmental initiatives could make the money you spend now wasted, as systems become outdated, or simply inoperable, due to changes in legislation and as a result, refrigerant cost and availability.

The world of synthetic refrigerants is undergoing significant change. Increasing global pressure from consumers and regulators on fluorinated or F-Gases has meant significant scrutiny of the effect of these refrigerants on the environment. These gases have been identified as depleting the ozone layer and a lot of focus has been on removing refrigerants with a high Ozone Depletion Potential (ODP) from the environment. CFC’s and HCFC’s are both identified as ozone depleting and both are now banned. Attention has now focused on the Global Warming Potential (GWP) of refrigerants and increasing global regulation is seeing these synthetic gases experience on going price increases and shortages.

F-Gases used as refrigerants are broken into:

CFCs - Banned

(Chlorofluorocarbons)

E.g. R11, R12, R113, R502

HCFCs - Phased Out

(Hydrochlorirfluorocarbons)

E.g. R22, R123

HFCs - Phasedown starts 2019

(Hydrofluorocarbons)

E.g. R134a, R404a, R407F, R438A, R410a, R507

What’s happening in New Zealand?

The Paris Climate Agreement has recently become international law and New Zealand, along with 93 other nations representing 2/3rds of the worlds global emissions, have joined together with the dual goals of holding the increase in the global average temperature to below 2°C and achieving net zero greenhouse gas emissions by 2050. New Zealand has committed to a 30% decrease from 2005 levels by 2030 with the goal of achieving this by 1) reducing greenhouse gas emissions, 2) planting more trees and 3) buying emission reductions from overseas markets to shore up any shortfalls.

The biggest impact in HVAC&R is in response to New Zealand’s commitments to the “Kigali Amendment” of the Montreal Protocol. Described as “monumental”, the deal caps and reduces the use of Hydrofluorocarbons (HFC’s), synthetic refrigerants identified as key contributors to greenhouse gases, with the hope of reducing warming of the planet by an entire half a degree.

The New Zealand phase down begins in 2019 and consultation on how to achieve targets has begun. Though the phase out itself will accelerate global commitments, New Zealand refrigerants are already being affected by global response of manufacturers and suppliers of equipment and refrigerants. The Emissions Trading Scheme has done an effective job of driving up refrigerant prices.

While the Paris Agreement drives lower emission outcomes and energy efficiency initiatives that offer cost savings opportunities, carbon taxes and rising synthetic refrigerant costs offer potential risks.  The value from your HVACR provider will come with ensuring your business opportunities outweigh risks.

Impact on refrigerant availability and price increases.

New HCFC’s are now banned from being imported into New Zealand, though it seems the phase out and its impacts are not yet widely understood. The phase out of R22, a commonly used refrigerant, seems to have caught many unaware, as regulations did not impose a use ban. Many of those that have not moved from R22 systems were unprepared for the change and now face costly ongoing bills or unscheduled investment in new systems as the reality of high prices and unavailability of R22 has come to bite.

The New Zealand government has encouraged a trend away from synthetics by using the Emissions Trading Scheme to increase costs of F-Gas refrigerants. In 2015 the cost of a carbon unit was $6.45kg, it currently sits at $18.00. That makes the carbon cost alone of R404a $70/kg. This will continue to rise at annual rate of 33% per year over 3 years as the 2 for 1 subsidies under the current ETS policy were removed in January 2017.  To achieve emission targets and the 2° temperature rise ceiling under current policies alone, most scenarios forecast a need for carbon pricing at $120 to $170.

Additionally New Zealand supplies of high GWP refrigerants are being affected by our reliance on global supplier decisions to meet phase down requirements. For example, Honeywell, one of the world’s largest suppliers, has announced it will stop selling common high GWP F-Gas refrigerants R404A and R507 from 2018 in anticipation of European phase down requirements. 

How does the GWP of a refrigerant affect its cost?

How much added cost you can expect will depend on three things:

  1. A Refrigerants Global Warming Potential (GWP)
  2. The cost of carbon credits and
  3. The amount of refrigerant you use (and leak)

GWP is used to calculate the amount of carbon credits required to offset its emissions impact, relative to Carbon Dioxide (CO2).  1 carbon credit = 1,000kgs of CO2 equivalent, the higher the GWP, the more credits needed.

For example:

1 kg of R404a has a GWP of 3,922kgs of CO2. For every 1kg of R404a 3.92 carbon credits are required to be surrendered. For a 700kg site with an average leak rate of 20% that’s around $9,880+GST on top of the cost of the refrigerant if the cost of carbon is around $18 per unit. That’s about $70 per kg of R404a more than usual without the subsidy removals.

Increasing use of flammable refrigerants - health and safety compliance.

Chemical manufacturers have been working on lower GWP HFC replacements, though as these are still HFC’s they too will eventually be phased down. If considering the retrofit of your system to an alternative HFC make sure that the lifetime value of the asset is understood as this is a short-term strategy reliant on global supply.

The chemical nature of refrigerants means that those refrigerants being used as alternatives to meet new lower GWP criteria over longer time frames will be flammable. Common alternatives such as ammonia, hydrocarbons and carbon dioxide have long histories of use within New Zealand though their design, installation and servicing has typically been limited to specialists within the wider HVAC&R industry.  Significant advancements in technology, particularly charge size, has enabled these to become practical, safe and reliable alternatives, often providing energy and operational cost savings for sites.

The development of a new F-Gas refrigerant by suppliers – HFO’s, is expected to be offered within New Zealand soon. These new low GWP synthetics are also flammable and like all flammables are not suitable as a retrofit option under HAZNO regulations, but is a new build option. There is currently no known build of HFO systems within New Zealand and further training and information on HFOs will be available with their introduction. 

New Zealand’s historical reliance on non-flammable synthetic refrigerants over alternatives has meant knowledge and understanding of the use of these types of refrigerants for the HVAC&R industry and end users now requires upskilling, particularly on health and safety requirements. As flammables become common place the safe handling and management of these refrigerants will need to be integrated into health and safety planning, including disaster recovery management.

New Zealand is one of the few places in the world where the HVAC&R industry does not require compulsory registration or licensing. The HVAC&R industry associations have worked to develop voluntary schemes but uptake has been low. With the move to a flammable refrigerant landscape understanding whether HVAC&R suppliers are working towards having the skills and capabilities to make recommendations and provide solutions and services is incredibly important. One way to ensure the professionalism and credibility of suppliers is to look for membership to the Climate Controls Companies Association of New Zealand (CCCANZ) and accreditation of individuals with the Institute of Refrigeration Heating Air Conditioning Engineers (IRHACE) – suppliers who are members are listed on both organisations websites.

There is a clear signal to industries within New Zealand that rely on refrigeration to start taking notice of the changing landscape and potential bottom line impacts the phasedown of “F-gas” refrigerants will have. Organisations in New Zealand have not yet understood the sweeping implications of the changes and the need to assess their implications.

Start talking with your HVAC&R professional today about the impacts and if you are looking at new build options and the issue hasn’t been raised, ask why. Don’t get caught out investing in systems that will not see you through to a practical end of life – take a step back and look at what the total cost to your operational and compliance costs may be in the future and all the options that exist in the market today.