As we slowly rebound from the COVID-19 pandemic, things are starting to return to the way things were before March 2020. I don’t think it will ever be the same but I do see things starting to return. Business has picked up as new jobs are being released. Service and replacement business will always be there, regardless of the pandemic. Heat and hot water are necessities, not luxuries.
I do see some trends and changes on the horizon. Some are pandemic-related, others are the general evolution of things. Here are some industry trends I see coming down the pipeline.
Supply Chain Issues
Simply procuring equipment and materials to perform our work has been an ongoing issue for at least the past year and will continue into the near future. Stock-outs are a daily occurrence. Back-orders have wreaked havoc on construction schedules.
Some of this has been caused by pandemic issues. Factories cannot run at full capacity with COVID distancing guidelines. Some factories shut down entirely early in the pandemic. This has led to issues securing needed parts and equipment to perform our work.
I have seen this across the industry for it has been particularly acute with HVAC equipment. Multiple jobs have been pushed back and projects delayed simply because equipment and materials are not available. I have not had as much of an issue with boilers and hydronic equipment. That may change as it gets cold this fall and demand for boilers increases.
Jan Andersson, president of MrPEX, shared some of his insights on supply chain logistics: “COVID has directly affected production. Lines were shut down as there are not enough people to run them, causing a loss in production capacity. Material shortages have led to hoarding by manufacturers, similar to the toilet paper shortage early in the pandemic. This is suffocating the industry.”
Other issues have affected the supply chain. The cold snap in Texas over the winter greatly affected supply chain logistics. The oil refineries in Texas shut down due to cold weather and power supply issues. Some are still shut down. This has affected raw materials refined from crude oil, including PVC, PEX and PPS products.
Supply and demand also affected our industries. Prices for wood products skyrocketed over the past six months as demand has shot through the roof. People are staying at home and working at home. This led to record home improvement and renovation projects straining the supply chain.
Hopefully, this will be a short-lived phenomenon as it works its way through. I have seen several of our construction projects put on hold simply because of material costs. They decided to wait and see if prices drop before commencing work.
Higher-efficiency equipment has been a trend for years. The DOE has been considering raising the minimum efficiency of HVAC equipment and boilers. Aside from government intervention, the market has embraced high-efficiency equipment.
Bill Genes, regional sales manager for Velocity Boiler Works, echoed this: “Condensing boiler technology is on the rise. National numbers for the residential gas boiler market indicate condensing boiler sales have eclipsed cast iron sales.”
This is not surprising as we currently install for more condensing boilers than cast-iron boilers in my own company. I think cast iron will always have a place but high-efficiency condensing boilers are definitely leading the market at this point.
Bill also mentioned two technologies Velocity Boiler Works is introducing that caught my attention. One is a rate-based temperature reset control without an outdoor sensor. The boiler control looks at historical heating demands and adjusts setpoint temperature accordingly without the need for an outdoor sensor. This is attractive as it is not always easy to pull a wire to a north-facing outside wall.
The second technology Velocity Boiler Works is introducing is adaptive burner combustion technology on residential gas boilers that automatically adjusts air/fuel ratio to optimize combustion efficiency. I’ve always set up gas-fired equipment with a combustion analyzer but I must admit I like the idea of this technology that automatically sets and adjusts the combustion parameters.
Simply mandating high-efficiency equipment is not necessarily the answer. I certainly believe in higher-efficiency equipment where it is a good fit. Many variables must be taken into account such as venting, combustion air, condensate disposal and heating load. Low heating load areas in the south, for example, may not benefit as much from high-efficiency heating equipment as the load and run times will not offset the additional cost of the installation.
Steve “Wheels” Wieland is the Mid-Atlantic sales manager for NTI Boilers. He shared his unique insights on condensing boilers with me: “Condensing boiler sales are surpassing cast-iron sales for three reasons.
“1. Weight. Why wrestle a 700-pound cast iron boiler when two helpers can easily carry a condensing boiler into the basement?
“2. Efficiency and lower operating cost.
“3. Space. A wall-mounted condensing boiler takes up much less valuable space than a floor-mounted, cast-iron boiler. This is a very attractive feature to homeowners.”
Steve also mentioned supply chain issues: “Steel has doubled in price and supply is getting tight. Outside vendor components such as draft motors, gas valves and electronic controls have all suffered shortages.” It appears all manufacturers across the industry are facing the same challenges as we crawl back to a normal market.
We have had to wait two or three weeks for equipment that would typically be stock items. For the most part, our customers understood but have been impatient at times when they went without heating, cooling or hot water for extended periods of time. These are jobs we would respond to immediately if the equipment and materials were readily available.
This shortage has been across the industry, not just the lines we carry. Our workaround has been to rely on our reps and TMs to work overtime and track down backorders. This is where relationships with our suppliers forged over time has paid dividends. They have used their contacts with other branches and even other suppliers to do the impossible and get us what we needed to complete jobs.
In my market — the Washington, D.C., metro area — fossil fuels, primarily gas, still lead the market. I realize the shift to renewable energy technology is already taking place in other markets. This trend will only increase in the coming years.
We have already seen an increased demand for renewable energy systems. I recently looked at a project in D.C. where the client wants to remove a working gas-fired boiler in good condition and replace it with a water-to-air heat pump. This particular project had oversized, column-style cast-iron radiators that will still provide adequate heat at the lower supply water temperature supplied by a heat pump vs. a gas-fired boiler.
We also recently completed a solar-thermal project. This is the first one we have done in years as this market segment has all but dried up. I predict this market will see an uptick but I don’t see it going back to where it was 10 years ago when local, state and federal subsidies made solar thermal more affordable and attractive. Even though we don’t do solar PV, this is a different animal and will continue to increase in the future.
Geothermal continues to be strong in my market, even as federal tax credits have gradually dropped. We have several geo projects currently in progress. To be fair, this has not all been driven by higher efficiency or “green” technology. Many of our large mega-projects are driven by the architect. They love geo as you eliminate the visual disruption and noise of a bank of AC condensers, heat pumps or chillers outside the structure.
Even though many of these houses are tens of thousands of square feet, landscaping, hardscaping, pools and outbuildings preclude the placement of obtrusive and noisy equipment.
We recently completed a mechanical upgrade in a 30,000-square-foot home. We originally installed the mechanical system in 2006 when the house was built. We removed four 10-ton air-cooled chillers that were installed directly adjacent to the house. The owners always disliked the noise and appearance of these commercial chillers.
We replaced this with a bank of geothermal chillers installed in a newly constructed mechanical vault 300 feet away from the home. This was done at a cost of over $1.2 million. Never underestimate what a client is willing to pay to get what they want.
Increasing material prices, gas prices and insurance expenses have all directly affected our direct costs and overhead. Inflation is a concern moving forward. These increased costs must be passed onto the end-user.
Prices may be elevated for the foreseeable future. Al costs of doing business must be calculated into selling prices to remain a viable entity. Burying or eating these price increases are not the recipe for a long future in this industry.
Right now, high demand for building products is driving up prices. Hopefully this will settle out as the supply chain recovers and catches up with demand. Pent-up demand as well as homeowners repairing and upgrading systems in their homes will keep the industry busy for the foreseeable future. Let’s hope this trend continues and keeps us contractors busy through the fall and into 2022.