To meet the highest unmet cooling demand in the world, India’s installed stock of room ACs is expanding.
For the room air conditioners market to grow sustainably, climate-friendly room ACs – those that are both energy efficient and use climate-safe refrigerant gases – are needed. During the 2016 Montreal Protocol Meeting of the parties, countries around the world agreed to a global phasedown of HFCs called the Kigali Amendment. Decreasing HFCs by phasing down their use and production is the single greatest opportunity to stave off the worst effects of climate change. Industry leaders, government officials, and key stakeholders emphasized the importance of improving the energy efficiency of ACs to reduce the impact of the energy needed to keep them running. Leading AC manufacturers recognize this market and climate opportunity and are aggressively working to increase the market share of AC models that are both more energy efficient and use climate-friendly refrigerants. Manufacturers that are not first-movers to such climate-friendly technologies are looking for opportunities to enter the market economically.
Energy efficiency in air conditioners is achieved by maximizing the cooling delivered per amount of electricity input. As with many large AC markets, India has minimum energy performance standards (MEPS) that require room ACs to pass a test certifying that they meet or exceed the minimum standard for energy efficiency. In India, room AC MEPS are part of a broader standards and labeling system called the 5-star rating program, administered by the Bureau of Energy Efficiency (BEE) within the Ministry of Power. In the 5-star rating program, 1-star energy efficiency is the minimum level of energy efficiency allowed. Stars 2 through 5 correspond to higher ISEER scores, culminating in the top-rated 5-star level.
Air conditioners create a cooling effect by using refrigerants – gases that change phase as part of a refrigeration cycle to transfer heat away from a room. Refrigerants are chosen for their favorable thermodynamic properties (e.g., a low boiling point), but often have undesirable characteristics such as the tendency to destroy ozone molecules (high ozone depletion potential – ODP), exacerbate the global greenhouse effect (high global warming potential – GWP),
toxicity, flammability, corrosivity, hazardous atmospheric fate, and more.
Global environmental policy has been most concerned with ODP and GWP: the Montreal Protocol, which was agreed to in 1987, has worked to phase out ozone-depleting chemicals such as chlorofluorocarbons (CFCs), halons, hydrochlorofluorocarbons (HCFCs), and more. In 2016, the Kigali Amendment added the phasedown of HFCs to the agenda of the Montreal Protocol, based on the GWPs of 19 HFCs now controlled by the treaty.
The room AC industry in India is beginning to leapfrog outdated, high-GWP refrigerant technology. Industry experts estimate that of the room ACs sold in 2017, almost twice as many used lower-GWP refrigerant alternatives compared to HFC-410A, which until recently was the de facto refrigerant choice as companies convert away from ozone-depleting HCFC-22. By comparison, in Japan, nearly all new room ACs use HFC-32, reflecting stakeholder consensus that HFC-410A is inferior.
More sales of lower-GWP room ACs could propel India’s transition beyond HFCs ahead of schedule under the Montreal Protocol. However, without GWP-based refrigerant labels, regulations, or incentives promoting the use of lower-GWP refrigerants, high-GWP HFC-410A may continue to grow market share.
Strategies to Expand Climate-Friendly Room AC Market
Strategy 1: Opportunities through the Montreal Protocol
Manufacturers and stakeholders agree that the Montreal Protocol is an effective vehicle for refrigerant market transformation, including for room ACs. A major co-benefit of the Montreal Protocol has been improved energy efficiency after upgrading refrigerants. Stakeholders see an even bigger opportunity as the Kigali Amendment, and subsequent decisions, provide a clear directive to consider energy efficiency improvements while phasing down HFCs.
Room AC manufacturers phasing out HCFC-22 should continue leapfrogging traditional high-GWP HFCs in favor of the lower-GWP alternatives with funding support from the Montreal Protocol.
Manufacturers improving room AC designs to be more energy efficient should consider coordinating that work with refrigerant-related redesigns and can urge the Ozone Cell and United Nations (UN) implementing agencies to facilitate co-funding and/or financing for those energy efficiency upgrades.
Strategy 2: Energy Efficiency and Low-GWP Standards and Labels
Manufacturers and stakeholders agree that the BEE star labeling program has succeeded in strengthening AC efficiency standards and labels by about 35 percent since 2006, representing major cost and energy savings in India. Several stakeholders also see the opportunity for BEE to develop voluntary low-GWP refrigerant labels and, together with the Ministry of Environment, Forests and Climate Change (MOEFCC), to develop GWP-based refrigerant standards in support of the HFC phasedown under the Montreal Protocol.
Leading manufacturers are encouraging BEE to consider advancing the rate at which the star rating program is strengthened to foster competition and help consumers identify the most efficient room ACs. One immediate opportunity, consistent with the flurry of efficient room ACs entering the market in India, is to advance the minimum ISEER to 4.0 in 2020.
Market and civil society leaders also suggest that BEE incorporate voluntary low-GWP refrigerant labels to the star rating program.
Strategy 3: Bulk Procurement Programs
Bulk procurement programs are revolutionizing the landscape for high-efficiency products in India, according to manufacturers and stakeholders. EESL’s program for room ACs began in 2017 and resulted in a contract for 100,000 highly efficient room ACs (ISEER 5.2 for 1.5-ton units), awarded to Godrej and Panasonic through a competitive bidding process.
Leading manufacturers and stakeholders suggest that bulk procurement programs could be even more ambitious in their requirements for climate-friendly room ACs and at the same time simplified for broader participation by Indian companies. Looking forward to future procurement tranches, several expect that EESL will steadily increase the minimum ISEER requirement beyond ISEER 5.2 to reward further innovation and benefit the consumer. Civil society stakeholders and leading manufacturers recommend that EESL add a requirement for lower-GWP refrigerants, considering both the direct, refrigerant-related and indirect, electricity-related climate impacts of room ACs.
Strategy 4: Raising Consumer Awareness
Room AC manufacturers are increasingly using energy efficiency as a key feature in advertising and communications. This emphasis is a result of the BEE star rating program’s success in raising consumer awareness about energy efficiency. Yet, the star rating scale does not differentiate among ACs above ISEER 4.5, and the program does not give consumers information about the climate change impacts of HFC refrigerants.
Differentiating among room ACs above ISEER 4.5 would help consumers identify the most energy efficient room ACs. Adding GWP-based refrigerant labels to the star rating program would help consumers recognize and purchase ACs using climate-friendly refrigerants. Raising awareness of the benefits of cooling-friendly architecture, better cooling behaviors, utility and distribution company incentive programs, as well as proper room AC sizing would help reduce the environmental impact of cooling.
Strategy 5: Localizing Supply Chains and Research and Development
Room AC manufacturers report that about 40 percent of the components in room ACs are imported which increases costs and reduces design flexibility. Opportunities to localize supply chains and develop in-house and national research and development platforms exist in India.
Leveraging programs such as Make in India, the AC industry can work with the Indian government to increase the fraction of domestic components used in room ACs. Financial incentives for high-efficiency components and private buyers clubs could be used to reduce costs of imported components like inverter/motor/compressor modules that are required for highest efficiency. Parallel efforts to expand in-house and national research and development platforms can build on nascent government plans to strengthen domestic research and development, by working together with civil society groups, technical experts, and others.
Strategy 6: Bringing it All Together: National Cooling Action Plans
Many countries, including India, plan to formulate national cooling action plans that focus on integrating strategies to advance supply of and demand for climate-friendly room ACs, and to position manufacturers for success domestically and internationally. Convening the room AC industry, government officials, nongovernmental organizations, energy service companies (ESCOs), and consumers serves as an excellent platform to leverage synergies between different energy, climate, and market policies. For, decisions today on manufacturing conversions and policies will position Indian-based manufacturers to compete in the growing South-South market.
India’s national cooling action plan work that brings together these stakeholders can promote synergies between different types of AC policies, such as those that support use of low-GWP refrigerants and high energy efficient designs, so that they are integrated, most effective, and reduce the costs to manufacturers. More so relevant, with the availability of technologies and better understanding in handling flammable low-GWP refrigerant alternatives that are more energy efficient, particularly at high ambient temperature conditions like those prevalent in India. This co-benefit of improving refrigerants will provide additional design flexibility and allow manufacturers to reach higher energy efficiency levels economically – an important consideration when updating star rating levels.
The Indian market can be a front-runner in improving the climate and energy performance of air conditioning, given the tremendous demand for cooling. The Kigali Amendment on HFCs elevated the climate impact of refrigerants as a major driver for improving air conditioners. Strengthened energy efficiency standards and a nascent bulk procurement program for highly efficient variable speed ACs are together moving the market toward the best ACs India has ever seen.
While these policies and programs have spurred progress, it is ultimately the industry that has delivered the technical innovations that have resulted in ground-breaking room ACs reaching the Indian market. In preparing this report, we have sought to work with champion members of industry to identify ways to encourage wider adoption of emerging climate-friendly, high-performance room ACs. The strategies identified in this report can accelerate the AC market transformation already underway in India and elsewhere. While many of these strategies are already in use, greater ambition and better integration can still make a big difference.
Based on Improving Air Conditioners in India: Cooling India with Less Warming Series – Affordable and Efficient Room Air Conditioners – TERI-NRDC-IGSD report.