Regulatory demands grow in buoyant market

As an established air conditioning distributor, in looking to expand into the higher-end commercial and VRF (variable refrigerant flow) sector in 2004, like any other business in this position we had to assess two key issues.
On the one hand, it was essential to partner with a manufacturer whose products offer real differentiation in the market and with whom there was business fit. As a result, we now have a successful relationship with MHI (Mitsubishi Heavy Industries).

Equally importantly, however, the market itself had to be viable and offer long-term growth prospects. And here, as in many other markets, regulatory and environmental constraints have in recent years had a dramatic and growing impact on manufacturers, building designers and operators alike in providing compliant solutions which also offer a more appealing living and working environment.

Regulation

There is arguably no subject which currently has a higher global profile than that of emissions. Under the European Union’s F-gas Regulation No 842/2006 in particular, which came into effect on 4 July 2006, the principal objective is ‘to contain, prevent and thereby reduce emissions of F gases (fluorinated greenhouse gases, including HFCs) covered by the Kyoto Protocol.’

The F-gas Regulations are in the main targeted at operators of stationary refrigeration, air conditioning and heat pump equipment. To ensure compliance, ‘operators of relevant systems…have a range of obligations, including prompt leakage repair, leakage checking and record keeping and ensuring appropriately qualified personnel are used’. The majority of measures under the Regulations will come into effect in the UK on 4 July 2007.

And, though the EU legislation does not ban the use of HFCs in such systems, there is tremendous pressure on all those working in the industry to put these measures in place, in order to ensure emissions are significantly reduced.

Air conditioning systems also come under the remit of other regulations aimed at minimising the environmental impact of potentially harmful components throughout their working life and beyond. In each case they determine an EU-wide standard for which member states will adopt their own enforcement and implementation policies.

The huge volume of electrical and electronic equipment waste created is increasing by an estimated 3-5% each year. In response, the RoHS (Restriction of Hazardous Substances) and WEEE (Waste Electrical and Electronic Equipment) regulations, among others, are designed to control the way manufacturers design, produce and dispose of their products.

The RoHS Directive and the UK RoHS regulations, which came into force on 1 July 2006, are designed to restrict the use of six hazardous materials, some of which are in near-ubiquitous use in electrical and electronic equipment – for example, in PCBs.

At the other end of the product’s life, the WEEE regulations, which came into effect in the UK on 2 January 2007, aim to minimise the impact on the environment, by increasing re-use and recycling of affected components, so reducing the volume going to landfill.

Manufacturers and their supply chains are responding positively to this. In the case of MHI, for example, all air conditioning products from 2006 onwards are RoHS compliant and the company is actively monitoring the adoption of WEEE in the UK. Similarly, as the distributor, at Shorts we have achieved the relevant ISO 14001 Environmental Management Standard accreditation for the correct removal and disposal of redundant equipment.

Building regulations

No product works in isolation, of course, and the selection of suitable air conditioning solutions impact directly on the overall energy efficiency of buildings. This has become much more important since Part L of the Building Regulations came into force on1 April 2006, designed to cut carbon emissions by 25%, with the result that architects are now directly responsible for producing energy efficient designs.

At this early stage there is still much further clarification needed as regards detailed implementation of the regulations, though it is already clear that this will impact both on the design and maintenance of air conditioning installations in contributing to the broader efficient use of energy within the building.

Manufacturers are already working on technologies to improve performance in this area. At MHI for example, all KX VRF outdoor units now incorporate twin invertors to ensure that the systems operate more efficiently.

In addition, in what is a complex and changing environment, architects, specifiers and installation contractors increasingly need advice from distributors and manufacturers. This includes specialist training to ensure equipment is not only installed but maintained properly in order to be compliant and operate efficiently throughout its effective life.

At the same time as putting in place the compliance ‘stick’ in meeting their obligations under new legislation, the Government has also made available the ‘carrot’ of 100% Enhanced Capital Allowances (ECAs) , to encourage investment in energy-saving plant and machinery.

This applies both to new builds and refurbishments and upgrades designed to reduce their energy use and so lower carbon emissions. It allows the costs of capital assets such as ECA-registered air conditioning products to be written off against the taxable profits of the business.

And there is growing imperative to reduce energy usage on a national basis, as it has been estimated that, by 2015, total UK demand for electricity will outstrip supply for the first time.

Reduced footprint

Other issues impact on energy efficient design. In city centre developments in particular where space is at a premium, it is important that air conditioning design increases the options available to the architect.

With MHI products, the ability to separate the indoor and outdoor units by as much as 500 metres provides increased design flexibility. Equally, less space is required as the footprint of the outside unit is reduced by up to 50% of other comparable VRF systems.

Buoyant market

The upside in having to come to terms with these increasing and diverse pressures is that they are taking place at a time of increasing market opportunity for manufacturers and suppliers of air conditioning equipment.

In the case of the top-end VRF market, for example, recent growth has been driven by two principal factors. On the one hand, in the case of new builds there is currently unprecedented demand in town and city centres as a result of regeneration projects in terms of both office blocks and living accommodation.

And this opportunity is further enhanced – both with new builds and existing upgrades and retro-fits, often as a result of change of use – as building operators have to respond to the demands of an increasingly sophisticated end-user community that is now more aware of the benefits which the latest air conditioning technologies can offer.

Looking ahead, manufacturers will continue to work on aesthetics and design units that are less obtrusive. Yet for the foreseeable future, the main focus is likely to remain on improving efficiencies and producing cleaner refrigerant gases. For one thing is certain: looking ahead, regulation will become even more restrictive in terms of the environmental impact of air conditioning systems.

Yet in the world of air conditioning at least, today’s desire to be comfortably green is not only appealing, but also fully achievable.

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