Future Impact of Rising Temperatures on the HVAC Industry

Source: National Oceanic and Atmospheric Administration (NOAA); map courtesy of the EPA. *Not all regional figures are statistically significant

Since 1901, the average temperatures in the US have increased at a rate of 0.17 degrees Fahrenheit per decade (an average of 2.04F increase over 1901-2021). While this number may seem small, the rate of increase over the last 50 years has accelerated to approximately 0.32-0.55 degrees Fahrenheit per decade according to data from the National Oceanic and Atmospheric Administration (NOAA). The map above shows the rate of temperature change across the US on a regional level since 1901 (1925 for Alaska). Temperature changes are greatest in the Northeast and Western states and least in the Southeastern US. Seasonally, the greatest changes have been in winter and spring temperatures according to the National Climate Assessment (NCA).

Source: U.S. Global Change Research Program (USGCRP 2009)

The maps above show the projected temperature change for mid-century (left) and end-of-century (right) in the United States under higher (top) and lower (bottom) emissions scenarios. The brackets on the thermometers represent the likely range of model projections, though lower or higher outcomes are possible. Across both scenarios, more northern regions in the US are expected to see the largest increase over the next several decades.

Impact of Rising Temperatures on the HVAC Industry

With data from multiple sources showing increased temperatures and models projecting these trends to continue over the coming years and decades it’s important to examine the potential short- and long-term effects that rising temperatures have on the HVAC industry.

Regulations

Due to the nature of HVAC technology and the refrigerants used, our industry often finds itself at the forefront of climate change discussions with policymakers all over the world pushing for climate friendly technology and regulations. This effort has resulted in many regulatory changes with significant impacts on the HVAC industry. These changes include:

1. Efficiency standard updates like the SEER2 efficiency changes

2. Rebates and other monetary incentives (Such as the Inflation Reduction Act Rebates)

3. And policies centered around emission reductions to stem off future global warming (e.g. the HFC phasedown).

Consumer and Technology trends

As temperatures increase, global cooling demand will also rise and as a result units will need to run longer and at a higher level. This increased load will incur more wear and tear on a system leading to an accelerated replacement cycle as well as driving up building-owners’ and homeowners’ costs. The likely response from these increased costs is that consumers will increasingly demand more and more efficient systems and other technological advancements.

Effect on Industry Demand and Sales

The most straightforward impact of rising temperatures is, of course, on seasonal demand. Rising temperatures are correlated with an average increase in cooling degree days (CDD). In a post I wrote last summer, I showed the relationship between cooling degree days and data from our Trends Report where spikes in cooling degree days tended to accompany short term spikes in distributor sales. As a result of increasing temperatures, especially as temperatures trend upwards earlier in the year, many parts of the US can expect cooling seasons to grow longer and longer while heating seasons potentially suffer.

Source: National Oceanic and Atmospheric Administration (NOAA); Chart courtesy of the EPA

Indirectly, global warming influences heatwave frequency, length, and intensity. A post from Service Titan states that the first heat wave of a season can increase daily revenue by 55% percent for contractors with diminishing returns for each subsequent weather event. With temperatures increasing and heatwaves becoming more common, distributors should prepare for more of these demand shocks during cooling season as well as having these earlier into the calendar year due to disproportionate increases during spring as opposed to summer.

Data shows that average temperatures are increasing at a faster rate than ever. Due to the nature of the HVAC industry distributors need to be aware of the pressure this puts on policy makers and consumers and how these pressures translate to their long-term planning. Demand for cooling is projected to triple by 2050 according to the International Energy Agency (IEA). By staying on top of regulatory changes, technological innovations, and changing regional climates, distributors can hope to capture more and more of this increasing market.

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