The global HVAC systems market was valued at $127.4 billion in 2020 and is expected to expand at a compound annual growth rate of 5.9% from 2021 to 2028. Of the various product categories within the industry, the cooling product segment dominated the global market with a revenue share of more than 54% in 2020. It is expected to continue to dominate the market in the near future due to growing demand for new cooling systems largely as a result of changing climate and weather trends in the Middle Eastern and Asia Pacific regions.1 In addition, the global commercial refrigeration equipment market size was valued at $33.53 billion in 2020.
It is expected to expand at a compound annual growth rate of 4.2% from 2021 to 2028. Growth is being driven largely by the rapid expansion of the tourism and hospitality sectors and the increased preference of end-customers for takeaway meals.2 Demand also is expected to escalate for new and improved ventilation units as part of the COVID response. Increased awareness around the value of maintaining a healthy and safe environment is driving unprecedented interest in air purifiers and other ventilation equipment designed to minimize air contamination.
Factors such as regulatory pressures, escalated environmental concerns, evolving consumer preferences and lifestyles, a tight labor supply, and the COVID pandemic are having big impacts on the market, influencing technological advancements and a shift in purchasing behaviors. At a high level, product segment growth is being driven by growing interest in products that are energy-efficient and those that can be remotely accessed.
The refrigeration side of the business is witnessing a shift to lower Global Warming Potential (GWP) refrigerants that is affecting how systems are designed and respond to stricter safety standards. Buzzwords dominating the marketplace include IoT-enabled heating and cooling systems, real-time monitoring, longer service life, connectivity, high efficiency, eco-friendly, ductless, smart and integrated. With the shortage of trained technicians, component manufacturers have needed to place a greater emphasis on designs that are easy to install, require minimal maintenance and can be remotely monitored and diagnosed.
Space also continues to be a focus, trending toward going smaller and more compact in unit size to enable cost savings. Software automation also is used more frequently to improve an array of business functions. Not only are building owners able to control temperatures, for example, but they’re also able to control the humidity levels and airflow…all from their desktops, tablets or smartphones. This same software is helping to collect system performance data and compile it into reports to identify, among other things, usage trends, system status and past performance, all of which can inform predictive maintenance programs and quickly flag malfunctions or repair needs. Some even self-diagnose to facilitate faster repairs and minimize downtime. Durable nameplates additionally allow technicians to quickly identify components, specifications, source parts for repairs and scan a barcode to document maintenance and repair activities. Of all the trends impacting the HVAC industry, however, the greatest is arguably the green initiative that is overhauling almost every facet of the market.
The focus on eco-friendly systems is changing the products being used, as well as how they power themselves. This includes the increased use of geothermal heating and cooling methods that reduce the need for petroleum based electricity, as well as the use of solar panels and wind turbines. Another option is to use the ground and water sources, such as ponds, to generate energy to heat and cool buildings. Using a combination of gas and solar sources allows building owners to alternate between multiple sources as a means to control power costs.
Cost considerations will always play a key role in driving buyer preferences and demand for technological innovations. To reduce costs, OEMs are investigating the use of less expensive materials, such as aluminum to replace copper. Cost-optimized valves and micro channel heat exchangers also have proven effective in saving costs. However, there are other trends that are significantly changing the market. These include:
In recent years, the commercial refrigeration space has seen a significant shift toward natural refrigerants thanks to new and proposed regulations.3 This shift impacts OEMS in a big way, as it necessitates a redesign of current systems to accommodate the new refrigerants. There has been a long history of various legislative initiatives focused on minimizing the environmental impact of HVACR systems. Most noteworthy is the Significant New Alternatives Policy Program (SNAP), established by the Environmental Protection Agency (EPA) under Section 612 of the Clean Air Act to identify and evaluate substitutes for ozone-depleting substances.4
Even though there is still uncertainty around SNAP’s enforceability, a number of states have adopted the EPA’s recommended phasedown, pushing the market toward natural refrigerants such as R-290 and R-600a. SNAP directly responds to growing concerns over the contribution of carbon emissions from hydrofluorocarbon (HFC) refrigerants to climate change. With more domestic and foreign focus on the phase-down of HFCs in recent years, the industry is shifting toward alternative refrigerants with lower GWP. While more environmentally friendly, these newer refrigerants are not without their challenges. Many alternatives exhibit more flammable properties than the refrigerants they are replacing, raising concern over large refrigerant charges. The industry remains somewhat on hold awaiting ASHRAE and UL to update their standards around HC refrigerants to allow OEMs to use increased charges.
One of the most common low GWP refrigerants in use today is carbon dioxide (CO2). As a natural gas, it is sustainable, energy efficient and not flammable— all benefits that help to explain its growing popularity. However, the use of CO2 creates multiple design challenges because of the higher operating pressure. The industry continues to struggle to balance the need to address ozone depletion and global warming while considering such issues as safety, compatibility of materials, cost of production and energy efficiency.
Cooling costs can account for up to 60% of total electricity consumption in commercial refrigeration facilities, according to the U.S. Small Business Administratoin. Walk-ins, reachins and display cases—essential elements in grocery stores— are among the biggest energy consumers.5
Energy costs for refrigeration, as well as air conditioning, continue to threaten the bottom lines of businesses in a multitude of industries—not just food retailers. In response, manufacturers are now building energy and heat recovery devices into air conditioning and refrigeration equipment. One example is a heat exchanger plumbed into variable-refrigerant flow (VRF) systems that transfers heat from hot refrigerant lines into a hydronic water circuit for space conditioning or tap use. Integrated energy recovery devices use cubes of paper-based or polymer-based membranes impregnated with desiccant materials that pull water vapor and heat from incoming air and transfer it into cooler indoor exhaust air using crossflow patterns of ventilation.6
IoT technology is a core part of many industries today, including commercial refrigeration and cooling. Among other benefits, it can provide:
As buildings continue to age, the challenge of updating their HVAC systems grows. It is difficult, if not impossible, to update buildings and add AC systems if there is not enough space to install ductwork. Even where space exists, the cost of redoing ductwork can be prohibitive. This reality has opened the door to ductless heating and cooling units (also known as mini-split systems).
As ductless technology has improved, these systems, which originated in the residential market, are becoming more popular in commercial applications. Not only have they proved to be more energy efficient than more traditional options, they are often less expensive to install and provide improved air quality, while also allowing customized control over temperatures in specific areas. This customized temperature control is especially beneficial in larger facilities where there are certain areas that are not routinely used and do not require constant cooling.
More than 70% of retail food establishments (such as supermarkets, grocery stores, supercenters and wholesale clubs) in the United States use what are known as centralized direct expansion (DX) systems or distributed systems to chill their products. Typically, centralized DX refrigeration systems are charged with 3,000–4,000 pounds of refrigerant and can leak in excess of 20% of their charge each year. Commonly used refrigerants in these large systems include ozone-depleting hydrochlorofluorocarbon (HCFC) refrigerants.7
With the use of the newer low GWP refrigerants, however, the retail food market is moving toward distributed systems that use multiple smaller units located close to the display cases that they serve. The proximity of the compressors to the cases and coolers allows the system to require considerably less piping and use a smaller refrigerant charge than traditional DX systems. This reduction in charge often results in a decrease in total refrigerant emissions.7 Despite the environmental benefits of using multiple smaller units, cost remains an issue and manufacturers remain under pressure to explore more cost-efficient designs.
In the wake of the COVID pandemic, the commercial HVAC industry is evolving to meet increased air quality and ventilation requirements from customers.8 School systems drove the greatest demand for enhanced HVAC and ventilation equipment in early 2021. In the United States, initial federal funding to address school HVAC and ventilation needs went to immediate mitigation measures, such as deep cleaning, filter replacement, and PPE. With those immediate needs met, demand for ventilation and HVAC products for schools is expected to keep rising.6
The U.S. Centers for Disease Control (CDC) advises that improving ventilation in classrooms and other buildings provides more protection against the COVID-19 virus. These increased ventilation requirements are creating a greater need to condition air coming in from the outside. Because this air may be hot, cold or excessively dry or humid, conditioning it requires more energy than treating straight room-return air. That’s why the industry is seeing a continued growth in the use of energy recovery devices in HVAC equipment to reduce operating costs. The most used energy recovery devices include plate heat exchangers or heat recovery wheels. These devices can be employed to recover about 60% of the energy cost of the preconditioned air being pumped outside. This can cut down on the size of the mechanical systems needed to adequately serve the facility, in addition to reducing energy usage.8
Beyond the increased focus on ventilation, other trends expected to continue influencing the design of HVAC systems include8:
As the market continues to demand higher indoor air quality and purification methodologies, manufacturers have responded with several innovative technologies. Two of the more promising approaches include short-wave ultraviolet light and plasma generators. The use of UV light for purification is not new. It has been used for years in highpurity applications, such as the medical industry. COVID concerns accelerated the use of UV light in more mainstream settings, however. It can be used to keep large evaporator coils free from mold and mildew. Or, more notably, UV purifiers can be used to inactivate airborne pathogens and microorganisms, such as mold and bacteria. Plasma generators produce a stream of ions in supply ducts that cause microscopic particles to clump and fall out of the air. These ions enter the conditioned space to kill bacteria and germs before dissipating.9
As is the case with other segments of the global HVAC industry, the market for heating products is focused largely on sustainability. Renewable energy is powering more and more heating products and, to a lesser extent, cooling products. HVAC products that harness renewable energy include10:
Variable air volume (VAV) systems are also growing in popularity because they represent a highly energy-efficient option for controlling temperatures in commercial buildings. Early VAV systems were used for cooling only with separate heating systems for perimeter rooms. Technology innovations, however, have now made VAV systems attractive for heating, as well. A VAV system’s fan delivers precision temperature control with a fan blowing air at variable speeds. The fan’s speed is determined by the zone’s temperature. Compared with the more traditional constant air volume (CAV) systems, VAVs provide a higher level of precision when it comes to keeping the temperature consistent in various zones of a building. They have been shown to save as much as 30% in energy costs.11
Innovations such as direct-drive fans, fan arrays, and improved motors create even higher efficiency levels while reducing maintenance costs. Design changes also have made heat pumps a more attractive option for commercial heating. Dual-source heat pumps, which draw heat from the air and ground, are being positioned as an ideal alternative for helping to decarbonize the planet (depending on the fuel mix used to generate the electricity being delivered to the commercial building).
Recent events and trends have challenged the HVACR industry to respond with technological innovations much more quickly than ever before. OEMs are facing increased pressure to deliver solutions that are good for the environment and the bottom line. As this white paper has demonstrated, however, the industry is well on its way to meeting those challenges with reimagined approaches, designs and technologies
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