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Contractors and buildings optimizing their ACs without incentives. (Yes, you’ve read this correctly)

It’s tough figuring out how to work around the Joe Crash Bangs.

Over the past six years, my colleagues and I have sweated time and effort to figure out how to break through the generations-old business condition of HVAC contractors selling poor quality, barebones minimum on service, and building owners accepting it as “best price”. In our recent work, we developed a simple-to-follow business model for these market players that allow for regular, consistent energy efficiency to be integrated within any type of HVAC system. Our initial work focused on rooftop air conditioning units (RTUs) because they remain a primary source of commercial air conditioning – about 60% of all US commercial square footage. While the system we’ve been testing and developing is targeted towards RTUs, it can be applied towards any type of HVAC system.

The system called Sustainable Quality 3, or SQ3 for short, coined by my HVAC colleagues during our recent work for the NYSERDA HVAC Business Partners initiative. SQ3 combines the intuitive pieces of solid, well-grounded operations management with online tools, informational resources, case studies, and templates provided through the Advanced RTU Campaign (www.advancedrtu.org), a DOE funded effort designed to support commercial building portfolio and retail chain owners to assess and pursue high efficiency RTU replacements. This campaign began in 2014, which we’ve collaborated alongside to support.

In a typical building scenario, as each RTU ages over time the contractor and building owner do not have any historical, systematic insight on repairs made, the unit’s condition or remaining lifespan. As the RTU gets older it requires more frequent maintenance. Eventually, when a system fully dies and cannot be restored, an emergency replacement is made. These add up to wasteful energy use as well as owner costs for service repairs and labor.

In our work with HVAC contractors during the first half of this decade, my colleagues and I found that while many contractors and building owners are difficult to motivate to do more than the basics, there is a segment of them who quite care about what they offer. We’ve estimated that segment of the HVAC service market – whom we call “the good guys” – to be about 15%~20% of the HVAC service world. Their largest and ongoing challenge is competing effectively with contractors they call “Joe Crash Bang,” “Chuck in A Truck,” “Freddy Freon,” and other pet euphemisms: generally smaller owner/operators who provide the most minimal type of services for RTUs at rock bottom prices.

Here’s where we break into this cycle. The three elements of SQ3 are Quality Inventory, Quality Maintenance, and Quality Replacement. Quality Inventory establishes a firm record of repairs and their costs; the maintenance records to date; the current operational efficiency based on diagnostic testing; and the current condition. Quality Maintenance follows an industry standard for proper maintenance with a thorough checklist, along with pre- and post-testing using diagnostic tools. Quality Replacement is a planned replacement path where each aging unit is slated for replacement, with the economic justifications established for cost savings over time and calculated payback.

The owner benefits are clear: operational cost savings from reduced repairs and lower energy use; greater assurance of indoor air quality through proper inspection, cleaning, and testing; increased comfort levels for tenants, customers, or staff, and likewise lower probability of enduring total system breakdowns during the worse possible times of the year.

This approach is desirable to contractors as well. One big benefit is reducing the all-hell-breaking-loose scrambles to keep up with customer emergency repair service calls during heat waves, where technicians endure 50- to 60-hour workweeks. Scheduling preventative maintenance events in the spring and fall reduces those fire drills. For system replacements, a contractor can plan for a crew and proper commissioning during the shoulder months (i.e. March-April and September-October) when emergency service calls are at a minimum.

The social benefit for the grid is, of course, the ability for both parties to assess, plan, purchase, and properly install high efficiency units along with desirable advanced controls.

Our SQ3 demonstration pilot was conducted in the summer of 2016 in targeted locations in upstate New York. We secured a funding grant from National Renewable Energy Laboratory, with a primary intent of testing the SQ3 business model with retail chain accounts. The project’s goal was to engage and encourage building owner/operators to adopt—and HVAC service firms to offer—SQ3 as a complete package for optimizing RTUs.

The project aimed for 15 buildings and 100 RTUs with at least one element of SQ3. We initially sought to create pilot partners out of national retail accounts as well as regional HVAC service firms who currently contract with these national accounts. But prospective national retailers proved unable to commit within the project timeline, and we shifted our focus to local commercial portfolio accounts, shopping malls, and regional retail accounts. Combined with a renewed effort to engage HVAC service firms with regional service areas, we engaged 10 participants to test the SQ3 model with 16 buildings, impacting 169 RTUs.

Participants and potential participants in the program universally approved of the idea of SQ3, and valued all the benefits of SQ3. However, they also overwhelmingly expressed reluctance to embrace SQ3 due to the lack of direct financial incentives offered for participating in SQ3, and the perceived time commitment involved in learning and using the SQ3 business model.

To overcome these two primary objections, we learned that SQ3 can be adopted and used by “the good guys” and their accounts by:

  • Giving exposure to the tools and resources from the Advanced RTU Campaign to contractors and building owners, and having them try them out
  • Allowing contractors to sell the concept to their accounts, but in their own way
  • Acting as an unbiased third party “agent” to informally mentor both building owner and contractor on the SQ3 concept, and so reducing their concerns that it’s only window dressing for increasing sales

Based on the experiences and learned lessons from this pilot effort, we recommend the next step of testing the SQ3 concept would be through a behavioral program in support of an established utility RTU incentives program, or a willingness-to-pay test proposition for providing SQ3 services among contractors and building owners. In such a test, SQ3 would be proposed to either property owners with large portfolios or to regional HVAC service contractors that manage customers with commercial portfolios, such as mall management firms, national retail accounts, college campuses, and non-profit institutions.

I’ll be presenting more on this March 29 at the regional AESPMARCh event in New York City, and as an AESP Brown Bag webinar on April 13.

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