The balance of 2022 and all of 2023, our industry was met with unprecedented challenges caused by political influence. I often refer to three pain points that an HVAC/R retail can be faced with that can significantly alter the way they do business — economic, environmental, and political influences.
If we look back on early 2023, our industry was turned on its head by the introduction of the Greener Homes Grant (GHG) program. At no time did the people who introduced the GHG program understand our industry, the supply chain, qualifying equipment, or even understand what qualifying means.
Let us go back to previous government programs that were introduced without warning. The air conditioning requirements for rebates was set to 15 SEER. At this point, manufacturers had prepared for the products of 13 and 14 SEER air conditioners. Distribution filled its network with inventory in that lower SEER tier. So, when the program launched, there was an inadequate inventory of qualifying products.
The wholesale chain was flooded with these lower SEER air conditioning products that were now collecting dust because of consumer demand watching the higher SEER units. By the time the industry was able to catch up, the supply chain was flowing smoothly with higher SEER units. It was at this time that the program came to a halt, and the industry itself reverted to a low SEER marketplace. The higher seer units were discounted to move products through the system and damaged the industry’s profitability for yet another year.
Playing the “wait and see” game
Fast forward to January 2023 and the introduction of the GHG program. Again, our industry found itself in turmoil due to a very limited supply of qualifying products.
From a consumer standpoint, there was a limited amount of information to make informed purchasing decisions.
There were early adopters, there were naysayers, and there were wait-and-see in a few years. Thankfully, the early adopters were prepared to wait for the equipment to come into availability.
Once again, the manufacturers were caught off guard. Add on the fact that there was a lack of necessary components to build the approved equipment and our industry was put on hold. Many overseas manufacturers saw the opportunity to fill the void that was left within the North American market.
As the year progressed, there was another group of early adopters that were driven solely by the rebate and, as such, increased the demand for products. North American manufacturers found themselves in a situation where the products they were producing didn’t qualify for the rebates, and therefore, demand fell. This led to potential layoffs.
From a contractor standpoint, we were already battling labour shortages. This created a very treacherous position for companies.
They didn’t want technicians standing around with no equipment available to complete the jobs. But then again, they also didn’t want to lay off workers as they would simply move on to a competitor at a moment’s notice. I can’t remember a time when we went into the heating season with almost zero inventory available.
Heading overseas
To combat these product shortages, manufacturers and distributors turned to products from overseas. Many quadrupled their order to mainland China. Better late than never, but at least the equipment was on its way.
By mid-November, we were informed that the GHG program would be ending, ironically around the same time that inventory was now showing up in the supply chain.
All through December, conflicting reports of timelines and dates for the consumer to take advantage of this program hit the newspapers. With the deadline drawing near, there was an incredible drain on the energy home auditors. At the time of publication, the program put a hold on new registrations so that energy home auditors could catch up for the remaining funding under the GHG.
Once again, our industry found itself in flux. Many are concerned about what effect this will have on workflow, inventory management, and staffing requirements.
One man’s opinion
I suggest that your first and immediate reaction should be to do nothing but sit back and wait. Most, if not all of you, have enough work to carry you through till the March deadline.
The announcement doesn’t mean that the work will dry up for the next nine to 12 months. There are thousands and thousands of people who have registered for the program and are waiting for the audits to start before taking action. This should mean that we will continue to have a high demand for our sales staff, office staff, and installers to fulfill the remainder of the program.
Moving forward into 2024, I suspect that the political influence on our industry hasn’t come to an end. Instead, the introduction of new programs will only ramp up.
There continues to be a commitment to carbon reduction in every country across the globe. This would only lead one to believe that the shotgun approach in the earlier programs requires a more focused target.
As our homes become less dependent on fossil fuels to provide energy, there will be more demand put on our electric energy grid.
If we remind ourselves of the end goal, which is to produce net zero accommodation for future generations, it will only make sense that we need to transfer the demand on the grid to self-sufficient electrification of each individual home.
It would make sense then that the next generation of rebate programs will continue to look at ways of reducing energy consumption. Products focusing on solar, wind, and water for energy production may finally get their time to shine.
Next steps
How do we recession-proof our companies? How do we prepare ourselves for any economic, environmental, or political challenges?
First, build a database of repeatable customers that are going to look to you first when it comes to their home comfort. How? By following the example of the big box players and building a large database of maintenance and service customers.
Next, start preparing to bring on qualified electrical technicians. They can assist you in the transfer of fossil fuel equipment to electric products and equipment.
Lastly, look to train yourself and your people on new products in the energy-generating sector. As for today, focus on the work ahead, support the balance of the GHG program as it stands, and prepare yourself for new programs in 2024.