Electrification of the HVAC Industry

How will this policy impact contractors’ businesses?

By Jonathon Harp

Electrification: a policy initiative to transition energy generation and end uses in sectors such as heating and transportation from fossil fuels to electricity; a cleaner energy option that reduces greenhouse gas emissions (GHG) and the effects of climate change. A highly controversial policy, which some experts and stakeholders believe should be a hybrid plan blending electricity and natural gas.

What impact is the electrification policy going to have on HVAC contractors? On the surface, complete supply and demand electrification appears difficult to achieve for the foreseeable future without maintaining natural gas as a transition heating option. HVAC contractors need to get up to speed on the policy, stay informed of how it is unfolding, and consider how it may impact future business strategies.

The electrification initiative will have a significant effect on the HVAC industry over the next 10 years. At present, the large majority of HVAC contractors have little or no understanding of what electrification means. This information gap needs to be bridged considering the majority of Canadian HVAC contractors have a significant portion of their business in the natural gas sector and this policy initiative is proposing the elimination of fossil-fuelled heating products.

A key barrier to electrification is reluctance in the HVAC and general contractor communities to move their installation and service models away from fossil fuels. “Contractor training on the various equipment options is vital to the success of the electrification policy on the demand side,” stated Dan Curwin of Stash Energy, a new company in New Brunswick that manufactures mini-split heat pumps with energy storage capability. “Contractors need to understand the opportunity that these options present and be in a position to offer them to their customers.”

According to Kelly Hearnsberger, vice president, residential products at Daikin North America, “Contractor training on the ‘big picture’ concerning electrification policy and the net societal benefits of offering heat pump technology is particularly important. It is not an issue of simple cost comparative between natural gas and electricity. Contractors need to understand the importance of the policy and differentiate themselves with their customers by offering products that meet its environmental objectives.”

Other barriers include electric service upgrades to handle systems in homes with insufficient capacity, finding more qualified technicians to meet the potential increase in demand, and low consumer awareness of the electrification initiative, as well as clean heating options.

The timeframe for implementation of electrification policy will vary. Electricity generation decarbonization began decades ago as provinces moved away from coal fired generators. As it is within provincial jurisdiction, timelines for changing to low carbon heating products may be different in each province. Most importantly, electrification of heating is coming and contractors need to know how it will affect their businesses.

Contact provincial authorities, keep an eye on where electrification is heading and prepare to respond to the potential new market as it unfolds. “Electrification is part of a rapidly evolving public policy landscape to reduce the effect of climate change,” said Sarah Petrevan, policy advisor for Clean Energy Canada. “HVAC contractors need to stay abreast of the changes to this landscape so they can make informed decisions about their businesses.”

 

What will electrification look like?

Canada’s electrification policy is based on decarbonizing emissions from electricity generation and moving the intensive energy industries from fossil fuel (coal, oil, and natural gas) to electrical equipment and technologies. According to the federal government’s Climate Actions for a Healthy Environment and a Healthy Economy released in 2020, reducing emissions from generation and key energy using sectors is critical to meeting Canada’s GHG emission targets.

The Climate Actions plan also states, “Canada’s electricity grid is over 80 per cent emissions free − one of the cleanest in the world − and is on track to meet its goal of having 90 per cent non-emitting electricity generation by 2030.” The report goes on to say electricity generation will become even less carbon intensive as the percentage generated by renewables increases. The plan’s initial focus is on decarbonizing electricity generation and electrification of the heating and transportation sectors.

“Canada is in good shape in regards to clean electricity generation,” stated Petrevan. “The main challenge to growing Canada’s clean electricity grid and reducing emissions is having the provinces and federal government work in partnership on this national policy.”

 

Heating residential and commercial buildings

NRCan Energy Fact Book 2019-2020

According to Natural Resources Canada’s 2018 estimates, the residential and commercial building sector in Canada created 12 per cent of Canada’s GHG emissions. These buildings rely on fossil fuels for space heating, water heating, and cooking. By changing from fossil fuel to readily available electrical technologies, significant carbon emission reductions can be achieved.

A key part of the government’s electrification heating strategy is the use of heat pump (HP) technology; particularly cold climate HPs that work effectively for both air and water heating in the country’s extreme winter weather. Initial air-to-air HPs brought into the country were not designed to meet Canada’s heating design temperatures and required supplementary heating. This was a barrier to using only HPs to heat buildings. Now most heat pump manufacturers serving the Canadian market are or have already focused on developing cold climate HPs to meet consumers’ needs under the electrification initiative.

“Our company is committed to participating in the electrification initiative in Canada,” said Hearnsberger. “Electrification has altered our product planning to provide more cold climate heat pumps to meet the needs of the middle segment of our market.”

 

PUSHING FOR HYBRID SOLUTIONS

 Implementation of the electrification policy is not without opposition from sectors such as the natural gas industry, which disagrees with the direction this policy is taking. Heading the list of concerns are the forecasted cost of the policy and whether completely “electrified” energy supply and demand in Canada is feasible.

The Canadian Gas Association’s study on The Impact of Policy Driven Electrification in Canada states, “Policy driven electrification could increase the total energy cost by between $580 million and $1.4 trillion over the 20-year period from 2030 to 2050.”

These sectors also feel strongly that electrifying Canada’s major energy uses is not feasible and the only realistic approach is a hybrid plan that includes natural gas in the mix because of its overwhelming use in many parts of the country. “Electrification is an essential and viable first step towards meeting GHG emission targets for 2030 and 2050,” stated Ken Ogilvie, an environmental policy consultant who served on the Expert Review Panel for the 2016 Trottier Energy Futures Project.

“However, achieving electrification that significantly reduces emissions also requires finding cost effective approaches, recognizing that, initially, natural gas (including renewable natural gas and carbon capture and storage) will be part of the energy mix.”

 

Bridging the cost difference

Low-cost natural gas is a serious barrier to electrical heating equipment in many parts of the country. To bridge the cost difference in the new construction sector, high energy-efficiency building standards such as LEED and Passive House are being used. These efficient building designs require minimal heating and use extremely low energy use heating systems that can compete with natural gas. As a result, LEED and Passive House designs are getting more uptake in this sector.

The existing building sector is a different story. Though energy retrofits can achieve significant savings, these upgrades will typically not reduce carbon emissions without changing the building heating system to electricity − a costly retrofit decision. Electrification has a number of challenges in the buildings sector: owners need to be educated on the benefits of electric alternatives; incentives should be offered for fuel switching; and new HP applications such as air-to-water hydronic systems must become better known. Government regulations must also clearly outline electrification requirements and timelines for reduction of the use of fossil fuel equipment. Education of building owners on electrification should be spearheaded by government, the HVAC industry, and electric utilities.

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