Pearl’s recent blog focused on the Five Disruptive Trends to Watch in the Solar Industry. But what does that mean for your contracting business if you don’t install solar? How does that impact your HVAC business? The answer lies in better understanding and predicting how the convergence of solar, battery, and other technologies will impact your business model.
Unfortunately, disruptive trends can easily go unnoticed by busy professionals and business owners for a few key reasons:
These disruptions occur rapidly
They come from outside your industry
They’re a convergence of different industries hitting an inflection point at the same time
So what are these disruptions “outside” your industry? These trends include:
The rapid growth of solar installations and new solar technologies
Changing utility rate structures that will focus less on how much energy a home uses, but rather when the home uses energy
Homeowner adoption of whole-home batteries
The rise of electric vehicles
Taken individually, each trend is relevant to your business. Taken together, these trends will have a transformative impact on you and your customers. Below, we’ll introduce each trend and explore its potential impact on your HVAC business.
The solar industry continues to grow rapidly and mature. Implications for your HVAC business include:
Competition for labor. The Solar Energy Industries Association (SEIA) explains that the biggest challenge facing the residential solar industry is lack of labor for installing. Sound familiar? While the required skills for solar, HVAC, and home performance professionals are not the same, well-qualified HVAC techs and comfort advisors make great additions to an expanding solar firm.
Countering these headwinds are real opportunities for collaboration. The best solar contractors take advantage of opportunities to lower a home’s energy use while adding solar. Do they do a full energy audit or Manual J to identify all of the home’s loads as part of designing and sizing the solar system? Probably not. But high-quality solar firms will at least educate their customers on how to improve their home’s shell, HVAC, and water heating systems and work with their customer to find an appropriate solution.
Establish relationships with solar companies could create opportunities for referrals, lead generation, and even integrated design and installation services. More on that below.
Solar and wind have made a substantial impact on how - and when - energy is generated. That has led to an increased push for utilities to adopt time-of-use pricing that is more closely tied to the wholesale price. As generation becomes more variable, your customers will be pulled (or pushed) into time-of-use rate plans. This presents two opportunities to your business:
There is a growing need for demand management. Grid-integrated water heaters (GIWH) represent a $3.6 billion market and can integrate up to 100,000 MW of wind and solar energy. The Rocky Mountain Institute suggests that GIWH manufacturers, installers, and solar companies (among others) can capture significant portions of that market share. Arizona Public Service, one of the more innovative utilities in the country, uses demand management controls to load-shift by using space cooling and water heating to manage peak loads. APS’s Cool Rewards program uses smart thermostats to pre-cool homes by up to three degrees below set points when energy prices are low, and then allows the homes to float up to three degrees above set point when energy prices spike.
Understand your customers’ needs for demand management, as well as which of your products offer smart capabilities to demand shift. Take advantage of local programs or utility rate structures to communicate the financial benefits of investing in the products you offer.
You can differentiate your company by engaging your customers in conversations your competition can’t. When the conversation focuses on energy savings, most HVAC, plumbing, and home performance contractors are focused exclusively on selling energy efficiency assuming a single utility rate. An HVAC unit that is 20% more efficient should reduce cooling costs by roughly 20%. Easy peasy.
In a time-of-use or variable rate environment, that simple message no longer works as well. Contractors that rely on selling the energy-savings benefits of “high-efficiency” equipment based on specs like SEER will fall behind.
Why? Because solar production makes energy cheaper in the middle of the day, and more expensive in the evening. While the value discussion is a bit different depending on whether your customer has solar (or is considering it) vs. does not, the bottom line is the same. Smart water heaters, smart thermostats tied to variable capacity equipment, and other features will drive energy savings because they can control when - not only how much - energy is used.
Match your product and service offerings to how your customers actually pay for energy. Any contractor can sell on SEER. Highlight your knowledge and expertise. Train your techs and sales people on these new technologies and how to communicate them to your customers with solar or with variable rate pricing. Start a conversation your competition can’t finish.
These opportunities grow when your customers have batteries or are considering batteries in the next few years.
According to a 2020 survey by EnergySage, one in five solar installations had a battery. And batteries aren’t only add-ons to solar installations - homeowners are installing batteries without solar, too. Recent weather and wildfire events in Texas, California, and elsewhere are accelerating demand for backup power. Along with Tesla and EnPhase, companies like Generac, known for diesel and propane generators, offer home battery backups. These companies know that residential fossil fuel generators will be obsolete in the next few years. No more noise, maintenance, fumes, and fuel delivery - at lower installation costs.
So what does that mean to you?
An inefficient home can destroy the economics of a battery, limiting its ability to energize specific circuits and keep the home safe and comfortable during power outages. Efficiency is still first when it comes to creating a high-performing home. A high-quality battery installer knows this principle and needs partners like you to meet their customers’ needs.
Additionally, while many homeowners think a battery will provide a “whole home backup” solution that will keep most or all of their home’s systems online during an outage, that’s rarely the case. For example, an inefficient, single stage air conditioner with a high start up draw (Locked Rotor Amps - LRA) will not work with most battery designs. For that matter, even a brand new, well installed single stage air conditioner with a high LRA will not work with most battery designs!
A contractor that knows how a highly efficient, variable capacity HVAC system with a low-LRA can 1) work with a battery and 2) maximize the battery’s ability to maintain comfortable temperatures during outages will have new opportunities to partner with solar and battery companies.
Engage your customers in new ways. Does your customer really want to buy the lowest cost, single stage piece of equipment that has a lifespan of 10-15 years and will not work with a home with solar and batteries? Or do they want to enjoy all the benefits of a high-performing system—including added comfort, lower bills, better indoor air quality, and less noise—while equipping their home for the future of batteries?
As an HVAC and plumbing business, you will soon see considerable cost savings by migrating your commercial fleet to EV. In the next few years, the price of batteries will drop below $100, which many in the auto industry consider the tipping point for EVs to create mass disruption. The tipping point has already occurred in commercial fleets like Amazon, FedEx, and many others.
But the real opportunity will occur in your customers’ homes. New construction codes are already starting to require a home’s electrical system to be EV-ready, in part because the cost to retrofit a home can be more than three times the cost to design and install EV-readiness into a newly built home. As more of the nation’s 80+ million existing single family homes have either solar or batteries or electric vehicles, these homes will need to upgrade their electrical system.
What does that mean for you? For many HVAC contractors, the electrical panel is seen as something to tie into, and a hassle if the home’s panel needs to be upgraded. But panel upgrades should be seen as opportunities. Smart electrical panels will be one important hub to monitor, manage, and distribute energy. Established names like Schneider Electric and start ups like Lumin and Span are developing whole home solutions to manage the home microgrid.
Understanding how your HVAC services impact a home’s electrical load profile is essential to keep you in the game, and a prime opportunity to expand value (and services) to your customers. Your expertise is not “only” a matter of understanding building science, energy and moisture flow, and diagnostic testing of the building shell and mechanical systems but can include how a home’s electrical system interacts with the home’s systems as well as the grid and to the homeowner’s vehicles.
As a business owner or as a qualified professional, you need to control your future. Understanding trends in the residential contracting industry - and in the minds of your customers - enables you to protect your business and exploit new opportunities. Remember:
Disruptions occur rapidly
They come from outside your industry
They’re a convergence of different industries hitting an inflection point at the same time
Solar, batteries, and electric vehicles represent such a convergence. A key challenge in the adoption of these technologies is customer engagement and buy-in . HVAC companies are well-positioned to have these conversations with consumers. You are engaging customers at very specific points in the decision making process, have access to financing programs, and have the design and permitting chops to handle the project.
As a high-quality contractor, are you in the business of simply selling and/or installing a specific product— or are you educating customers on their home, its energy use, and how your company can maintain and improve their home now and in the future?
If you’re already a member of the Pearl Network, the good news is your core competency will serve you well to survive - and prosper - in this rapidly changing environment.
Not a member of Pearl’s elite Contractor Network? See if you qualify today, and start future-proofing your business with the value of Pearl Certification — from now, on.
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