On October 24, 2023, Environmental Protection Agency (EPA) published its final rule regarding the transition to low-GWP refrigerants in new refrigeration, air conditioning, and heat pump (RACHP) systems. The EPA initially faced industry backlash over the sell-through mandate of January 1, 2025 for certain HVACR systems; however, on December 20, 2023, the Agency revised the provision to address concerns raised by stakeholders.

The narrowly amended provision now allows one additional year, until January 1, 2026, “solely for the installation of new residential and light commercial air conditioning and heat pump systems using components manufactured or imported prior to January 1, 2025.” The Agency believes this provision will help alleviate worries about stranded inventory, especially in new residential construction projects.

According to EPA, “There is good cause for this rule to take effect without prior notice and comment. EPA is still accepting public comment for 45 days after publication in the Federal Register (at www.regulations.gov, Docket ID# EPA-HQ-OAR-2021-0643). Unlike a direct final rule, EPA will not withdraw this interim final rule if it receives adverse comment; all comments will be addressed in a subsequent final rule.”

The rule in question addresses subsection (i) of the AIM Act, entitled “Technology Transitions,” which provides EPA with the authority to restrict the use of regulated HFCs in sectors or subsectors where they are used. This final rule sets a maximum GWP limit on the HFCs or HFC blends that can be used, and in a few subsectors, EPA has listed specific HFCs or HFC blends that are restricted.

Compliance dates and GWP limits vary based on the sector and subsector, but for residential and light commercial air conditioning and heat pump systems, the final rule now calls for a 700 GWP limit, starting January 1, 2026. For VRF systems, the compliance date was initially January 1, 2026; however, that date is being reconsidered, and EPA will address this issue in a separate notice and comment action.

For most new commercial refrigeration systems used in supermarkets and convenience stores, the rule mandates a 150 or 300 GWP limit, with compliance dates ranging from 2026 to 2028, depending on the size of the equipment.

For new RACHP systems, many in the industry were expecting the rule to include a sell-through period of at least a year for most types of equipment, so that distributors and contractors would not be left with inventory that could not be legally installed. Instead, EPA unexpectedly included a “date of install” requirement for some types of equipment, which would mean that complete, new, split-system air conditioners and heat pumps, for example, would have had to be installed no later than January 1, 2025.

“We did not expect the lack of a sell through-period for essentially any field-charged HFC systems,” said Chris Czarnecki, director of government relations and advocacy at ACCA. “This is because the rule did not provide any discrepancy between the date of installation and date of manufacture for systems charged in the field. Manufacturing was considered ‘complete’ once the system was charged and completely ready to be turned on by the rule's definition.”

Indeed, the rule divided almost all sectors into self-contained “products” and field-assembled “systems,” with vastly different compliance schemes, which was unexpected based on the proposed rule, said Jennifer Butsch, regulatory affairs director at Copeland.

“While ‘products’ have a three-year sell through period, ‘systems’ did not have any sell-through provision,” said Butsch. “For those ‘systems’ that are rated and sold as a matched set, such as in residential HVAC, this could risk stranding inventory in the channel unless they can be used as components for service.”

To further clarify the distinction between a product and a system, EPA states that a RACHP product is considered to be functional upon leaving the factory, and examples include window air conditioning units, refrigerators, and stand-alone display cases. On the other hand, a system is assembled and charged in the field using multiple components.

“Products are something that can be plugged in, like a window air conditioning unit or a refrigerator. These have compliance restriction dates that are associated with the fact that they are products,” said Allison Cain, environmental policy analyst at EPA, in a recent GreenChill webinar. “Systems are those that are assembled and charged in the field and would need to be installed by a technician, such as a supermarket direct expansion system with a centralized compressor room.”

Differentiating between self-contained products and field-assembled systems definitely came as a surprise and added a level of complexity, as well as some challenges that the industry wasn’t prepared for, said Butsch.

“Managing installation dates is inherently challenging for all parties through the channel,” she said. “Traditionally this was only required for larger field-erected systems such as chillers, large rooftops, supermarket refrigeration racks, and industrial scale systems. Under the [initial] rule, any connection of the refrigerant loop appeared to trigger the field-assembled provision, throwing unitary split and any refrigeration applications that need field connection of refrigerant circuit — even when pre-charged in the factory — into this category with a compliance date based on installation.”

A silver lining for some in the HVACR industry is that under this rule, a product or a system may be serviced and repaired throughout its useful life, which includes replacing components as needed. Under the rule, components required to repair existing RACHP equipment may continue to be manufactured, imported, sold, distributed, or exported indefinitely.

SERVICE AND REPAIR: Under EPA’s final rule, a product or system may be serviced and repaired throughout its useful life, which includes replacing components as needed. (Staff photo)

“We were pleased to see EPA follow through with their inclusive posture towards the repair of HFC systems and the manufacturing of replacement parts,” said Czarnecki. “This rule was written to let existing systems be used until the end of their useful life, and that is something we appreciate EPA taking into consideration.”

This means for outdoor split air conditioners and heat pumps, EPA would allow the replacement of the outdoor R-410A condensing unit followed by the indoor coil at a later date, essentially allowing these split systems to be partially replaced indefinitely, said Butsch.

“This is different from other regulation such as in California, where if a condensing unit is replaced in a split system, this would necessitate compliance with the requirement to use a <750 GWP refrigerant,” she said. “Customers will be forced to comply with the most restrictive requirement — state or federal.”

Still, the separation of products and systems is a serious issue, said Glenn Haun, general manager of refrigerants at Arkema, and while EPA’s subsequent guidance clarified the definitions, there is confusion as to how this can work in the marketplace.

“It appears that under this rule, components for R-410A system repairs can be produced and installed indefinitely, as well as imported already charged without expending allowances, thereby providing additional supply of HFCs, bypassing the phasedown requirements,” he said.

While many in HVACR are cheering the amended sell-through provision, Alex Ayers, director of government affairs at HARDI, cautioned at the recent HARDI meeting in Phoenix, Arizona, that the industry should not look at this as another year to sell R-410A equipment. “Manufacturers are already planning to transition to low-GWP equipment in 2024, and they do not want to supply R-410A equipment for an extra year,” he said.

Article courtesy of ACHR News: By Joanna R. Turpin
https://www.achrnews.com/articles/153927-epa-extends-sell-through-period-easing-inventory-concerns