Regulatory Challenges and Opportunities in 2022

By Eric Truskoski, Sr. Dir., of Government and Regulatory Affairs for Bradford White Corp

The major economic challenges facing the PHCP industry have been headline news over the last 18 months. A range of disruptions related to COVID-19, from supply chain interruptions and materials and labor shortages to unexpected consumer demand for durable goods, have had an enormous impact on current operations for manufacturers, suppliers, distributors and contractors across the PHCP space.

Many of the adaptations made in response to the unpredictable conditions of 2020 and 2021 will likely be permanent. More robust inventories, diversified sourcing and stronger domestic supply chains are just some of the strategies that PHCP professionals have identified as ways to support and strengthen the industry’s existing infrastructure.  As our industry continues to evolve, those ideas will shape the way we do business.

Impact of Electrification

Among the significant drivers of change for the industry in 2022, however, is a surge of local, state and national regulations related to energy resources and electrification. While this coming wave of unprecedented oversight on the horizon had been largely overlooked by the media until a few months ago, it promotes a radical, long-term transformation of commercial and residential water and space heating products and services.

In response to growing concern about the climate, many states and cities are looking to reduce carbon emissions in the built environment. California’s state energy agency is implementing an updated building code to discourage appliances like stoves, furnaces, boilers and water heaters powered by natural gas in new construction. New York City has approved legislation banning natural gas in new buildings as early as 2023, and New York state is exploring a statewide ban to be in place in the coming years.

A host of other states, municipalities and regulatory agencies around the country are implementing or considering policies that require electric-exclusive new construction. It’s possible that electrification mandates for existing buildings will follow soon after.

At the national level, the Biden administration has introduced a variety of new initiatives that will directly impact the PHCP industry, including:

·      New federal building performance standards.

·       A $61 million Department of Energy program to fund 10 residential and workplace energy technology pilot projects focused on decarbonization, demand flexibility, energy storage and renewable generation.

·       A plan to accelerate the efficiency and affordability of heat pump technology in cold climates.

·        Federal support for the Advanced Water Heating Initiative’s nationwide campaign to increase adoption of heat pump water heater technology.

Diversified Energy Networks

While the goal of these proposals is admirable, many experts inside the industry recommend alternative plans. Incorporating phased adoption would allow business and homeowners flexibility and security in the face of potentially complex, expensive, and in some cases still highly theoretical disruption. Many experts also favor climate plans that protect consumer choice. In fact, several states have taken steps to protect consumers and business owners from regulations with proposals that mandate energy choice or prevent local governments from imposing natural gas bans.

Just as diversified sourcing has emerged as an essential future strategy to strengthen supply lines, a robust, diversified energy network delivers affordable, reliable power that is resilient in the case of equipment breakdown or failure, human error or natural disasters. A robust power supply is critical to public safety and affordable energy policy.

Remarkable Opportunities

As daunting as these regulatory hurdles appear, these challenges also present remarkable opportunities for the water heating industry. The evolution of heat pump technology over the last several years has made electric heat pump water heaters a viable option for residential and commercial new construction and renovation projects.

As media coverage of electrification continues in 2022, this will open the door for contractors to educate their customers on a range of important products. Effectively communicating product information will be more essential than ever, and contractors who can continue offering exemplary service amid rapidly changing circumstances will be able to distinguish themselves from competitors. 

Heat pump technology stands to gain significant attention in the coming year as an emerging alternative for customers facing strict gas bans. Heat pump water heaters, in fact, have been specifically promoted by the Biden administration as part of a new initiative with the U.S. Department of Energy.

Discussing the potential benefits and drawbacks of electric heat pump water heating products creates opportunity for new sales and markets and supports contractors, distributors and manufacturers facing an unpredictable and uncertain economic climate.

Electric tankless water heaters offer another alternative and could see a rise in demand in the years ahead. Electric tankless water heaters can be the right solution in a lot of situations, but in a number of circumstances they still don’t match the performance or value of traditional natural gas or propane-fired storage and tankless water heaters. Working with customers is the only way to determine the right solution.

Rising to the Challenge

Recent events have demonstrated both the resilience and the essential nature of our industry. Driven by innovation and based on strong relationships, PHCP professionals have continuously responded to economic, technological and regulatory challenges. By continuing to base business choices on the principles of communication, education, training and service, industry leaders and innovators can meet the challenges we face in 2022 and open doors of opportunity. 

Eric Truskoski is senior director of government and regulatory affairs for Bradford White Corporation.