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Business

The Switch Is On For Refrigerants

HCFCs will be phased out under the Montreal protocol, but the change isn't smooth

by Alexander H. Tullo
April 24, 2006 | A version of this story appeared in Volume 84, Issue 17

GEARING UP
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Credit: Arkema photo
Arkema is investing $45 million to build an HFC-32 plant in Calvert City, Ky.
Credit: Arkema photo
Arkema is investing $45 million to build an HFC-32 plant in Calvert City, Ky.

Refrigerant producers have been gearing up for the phaseout of their most popular product, hydrochlorofluorocarbon-22 (HCFC-22, chlorodifluoromethane), by investing in environmentally friendlier hydrofluorocarbon (HFC) alternatives. Though suppliers scrambled to get ready, the frenzy around HFC alternatives may have cooled down. A substantial transition by customers, suppliers say, may not happen until the hard regulatory deadlines at the end of the decade.

The driver for the refrigerants sector is the Montreal Protocol, a treaty under which industrialized nations agreed to phase out ozone-depleting chlorofluorocarbons and HCFCs. Because of the treaty, the U.S. will eliminate the production of HCFCs by 2030.

The Environmental Protection Agency has already banned the production and importation of HCFC-141b (1,1-dichloro-1-fluoroethane), used as a blowing agent in polyurethane and other foams. The next milestone will be in 2010, when HCFC-22, also known as R-22, will no longer be allowed for use in new refrigeration and air-conditioning equipment. Similar regulations will also apply to HCFC-142b (1-chloro-1,1 difluoroethane), sold in much smaller volumes than HCFC-22 and used as a refrigerant and as a polystyrene-foam blowing agent.

HCFC-22 production in the U.S. is already limited. On the basis of historical production rates, EPA established an allocation program in 2003 that put caps on how much virgin HCFC-22 manufacturers such as Honeywell, Arkema, and DuPont can make, import, or sell in the U.S. The total cap for all manufacturers is about 110,000 metric tons per year, roughly the same amount as refrigerant demand.

After 2010, HCFC-22 will be used only to service existing air-conditioning and refrigeration equipment. Subsequent demand for HCFC-22 as a refrigerant is expected to gradually decline as older equipment is replaced by HFC-based systems. At the same time, EPA will keep lowering the production cap allocated to HCFC-22 suppliers.

According to a preliminary report prepared for EPA by Washington, D.C.-based ICF Consulting, an estimated 66,300 metric tons of HCFC-22 will be needed in 2010 to service existing air-conditioning and refrigeration equipment. Of this need, about 29% will be met by refrigerant recovered from equipment and recycled. By 2015, 49,600 metric tons will be needed for servicing, about 61% of which will come from recovered refrigerant. By 2020, all of the demand of 25,600 metric tons will be met with recovered refrigerant.

Several HFC-based refrigerants meant to replace HCFC-22 are already in commercial use in the U.S., Europe, and Japan. The major replacement for HCFC-22 is R-410A, a blend of HFC-125 (pentafluoroethane) and HFC-32 (difluoromethane). Honeywell and DuPont developed R-410A about a decade ago in response to the Montreal protocol.

What these companies came up with, according to David Diggs, Honeywell's business director for refrigerants, is actually better than HCFC-22. "Pound for pound, 410A is a more efficient refrigerant," he says. "You can use less 410A to make an air conditioner with similar efficiency."

Randy Stone, North American business manager for refrigerants at Arkema, agrees that R-410A has its advantages, but he attributes some of them to the refrigerant's use in newer, more efficiently designed air-conditioning units. "When you combine the equipment with R-410A, you get more efficient performance," he says.

Another common replacement is R-407C, a blend of HFC-32, HFC-125, and HFC-134a (1,1,1,2-tetrafluoroethane). Diggs says it has properties similar to those of R-22 and is thus regarded as a transition material for an industry that will ultimately settle on R-410A, he says.

Refrigerant makers have been investing heavily in HFC production. In February, Arkema announced that it was spending $45 million to build an HFC-32 plant in Calvert City, Ky. The plant, which the company says will be the largest of its kind in the world, will be completed in 2007.

Honeywell has invested about $250 million in HFC production at its Geismar, La., unit, including a $100 million HFC-125 plant that started up in 2003.

In 2004, DuPont completed a joint venture in Changshu, China, that produces R-410A, R-407C, and R-404A, the latter a blend of HFC-125, HFC-134a, and HFC-143a (1,1,1-trifluoroethane). Most of the HFCs necessary for these blends are being supplied by DuPont's joint-venture partner Shanghai 3F New Materials Co. DuPont is importing HFC-134a from its plant in Japan. DuPont already makes R-410A, R-407C, R-404A in the U.S.

Although China isn't required under the Montreal protocol to phase out HCFC-22 until 2040, demand for HFC-based refrigerants already exists regionally. Mark Baunchalk, global business manager for DuPont Refrigerants, says the new partnership is selling refrigerants to original equipment manufacturers (OEMs) in China, Thailand, and Malaysia that are making air conditioners for export to Japan and Europe. "It is one of those situations where the air-conditioning OEMs have moved their production sites to low-cost countries, and they're actually exporting their equipment back into developed countries where the HFCs are being used," he says.

The use of HCFC-22 is actually still growing in China, however. Arkema recently announced that it is expanding its HCFC-22 plant in Changshu by 50%. The company says the capacity increase is a response to growing demand for the product as a refrigerant in China and also as a raw material for polytetrafluoroethylene.

Honeywell's Diggs doesn't find it unusual that HCFC-22 demand would be expanding in developing countries even though most industrialized countries are in the midst of phasing it out. "In places where they don't have to move from 22 to the next generation-places like China—we are seeing a growing middle—class population that buys air conditioners," he says.

In contrast to the developments in China, Arkema closed an HCFC-22 plant in Wichita, Kan., in 2002. Similarly, DuPont shuttered an HCFC-22 unit in Japan.

Arkema's Stone sees strong growth for R-410A in North America as air-conditioning and refrigerator makers introduce more systems based on HFCs. "It is gaining significant momentum," he says. "A lot of the major air-conditioning producers have a strong emphasis on R-410A systems."

But Stone adds that volumes of R-410A don't yet compare with those of HCFC-22. "There is certainly double-digit growth," he says. "The exact amount of R-410A is hard to determine at this point, but it is certainly in the millions of pounds and will be in the tens of millions of pounds in the future. When R-410A will pass R-22 in terms of volume is hard to predict, but that will take place in the next couple of years."

Other observers say the transition from HCFC-22 to R-410A has been a little sluggish, and significant progress won't be seen until the regulations kick in. DuPont's Baunchalk says the move hasn't gone as quickly as refrigerant makers expected a few years ago. "We're pretty much waiting for the marketplace to decide when it wants to make that significant transition," he says. He adds that this transition will happen no sooner than 2008, just before the regulations go into effect in January 2010.

Jay Kestenbaum, president of Long Island City, N.Y.-based refrigerant distributor Refron, agrees that the transition to HFC refrigerants has been slow: "410A usage is going up, but we find it going up much, much slower than was originally predicted," he says.

According to Kestenbaum, OEMs have been slow to introduce R-410A-based systems without a mandate. "We find that while it's true that there are certain manufacturers like Carrier that are pushing 410A equipment very strongly, there's a significant amount of industry that is not proceeding with major 410A pushes but is rather still producing a significant amount of R-22-based equipment," he says.

A change in air-conditioning energy-efficiency regulations earlier this year was seen by the refrigerants industry as an opportunity for the transition to HFC-based refrigerant to gain momentum. But over the short term, these new regulations may, in fact, increase demand for HCFC-22 instead.

The Department of Energy has issued new Seasonal Energy Efficiency Rating (SEER) standards for residential air-conditioner manufacturers. A SEER is based on the ratio of how much the air conditioner cools to how much energy it requires. Since January 2006, air-conditioner makers have been required to increase the SEER ratings of new units from 10 to 13, a 30% increase in energy efficiency.

New designs based on R-410A could meet the stiffer requirement, but instead of coming out with such products, many air-conditioner manufacturers have retrofitted older designs to use 30 to 35% more HCFC-22, Refron's Kestenbaum explains. "Many of the manufacturers have decided that the way to get the extra efficiency is really to redesign some of their R-22 units to be able to use more R-22 with a larger coil capacity," he says. "They can get the same energy efficiency that way, as opposed to scrapping the design and building a completely new unit."

DuPont's Baunchalk anticipates that demand for HCFC-22 will skyrocket this year because of DOE's new standards. DuPont projects that HCFC-22 consumption in stationary air-conditioning could increase by up to 35% this year alone as a result of these regulations.

Because the EPA cap limits HCFC-22 supply, the new demand is pushing up prices, which, according to Kestenbaum, have increased by more than 30% in only the past several months. He says the situation will lead to HCFC-22 shortages over the next several years. "There is no question that in two or three years, there will be a significant shortfall in R-22," he says.

DuPont's Baunchalk notes, however, that escalating chlorocarbon raw material costs have also driven the HCFC-22 price run-up.

Honeywell's Diggs hopes that the scarcity of HCFC-22 will prompt air-conditioning makers to switch to R-410A. "All of the companies changing their lines from 10 SEER to 13 SEER is a big step forward from an energy consumption perspective, and we think it will bode well for helping the change from 22 to 410A going forward," he says.

Kestenbaum says prices of the HCFC-22 refrigerant alone probably won't influence the decision to switch to HFC refrigerants. "The price of the refrigerant is a very small percentage of the overall cost of the unit," he says.

Observers say, however, that outright shortages of HCFC-22 could provoke an earlier switch to R-410A. They also note that the unexpected surge in demand for HCFC-22 in these years before its phaseout will probably increase the amount of HCFC-22 that will be needed after 2010 to service existing equipment.

Despite questions over the details, Honeywell's Diggs says the switch to 410A is certain to happen. "The way the regulations are written, you have to be on R-410A anyway by 2010," he says. "The energy standards may influence the rate of change, but at the end of the day, everybody will have to be there."

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