UPDATE: What does the carbon tax repeal in Australia mean for natural refrigerants?

“The carbon tax and the HFC levy were excellent policy. It is well recognised by economists worldwide that price incentives are an efficient and effective way of shifting behaviour. The F-gas levy served to make the HVAC&R industry aware of the need to transition from high GWP refrigerants to low GWP refrigerants and caused them to reconsider their HVAC&R operations and investment options.” said Tim Edwards, President of the Australian Refrigeration Association (ARA). He believes that scrapping the levy has been counterproductive, but is convinced that the industry and other players will make it clear that they support strong climate change policy.

On the other hand, Mario Balen, General Manager of HyChill Australia is concerned about the Australian government’s stance on climate change. “The decision to repeal the levy and at the same time continue providing payments for recovered gas is inconsistent. More importantly, it sends wrong signal about government directions regarding environmental outcomes and objectives”, he said.

Electricity prices to drive progress towards natural refrigerants

According to Stefan Jensen of Scantec, the impact of the HFC levy repeal on the natural refrigerant business is not going to be significant.

“The most significant driver for the progress of natural refrigerant based solutions will be the rapidly escalating electricity costs. The carbon tax repeal will have about $0.025/kWh (€0.017/kWh) impact straight up, but the so-called death spiral that causes electrical energy cost rises will swallow that saving in 8-9 months and refrigeration plant users will be back to where they started,” Jensen pointed out. “We see a factor three difference in electricity cost between a state of the art DX NH3 system and a similar HFC based air cooled system located in the same suburb and owned by the same end user,” he added.

Tim Edwards of ARA also regards electricity prices as a key factor that will accelerate the transition towards natural refrigerants. “High energy prices will remain regardless of the carbon tax repeal and serve as a strong incentive to transition to high energy efficiency HVAC&R. Natural refrigerant-based technologies have a major role to play in this regard,” he said.

It will be hard to determine the immediate effects of the HFC levy repeal and according to Edwards this will to a large extent depend on the pricing actions that will be taken by synthetic refrigerant suppliers. “If synthetic prices are significantly reduced there will, of course, be a tendency for HVAC&R buyers to be less concerned about the selection of refrigerant from a cost point of view. However we know that refrigerant price is not a key driver. Because high energy prices continue to provide a strong incentive to consider natural refrigerants we believe this will remain the key driver regardless of refrigerant prices,” explained Edwards.

In the same vein, Balen believes that it is rather “premature to make a fair assessment regarding the impact the repeal might have on our business and the industry sector.” He explains that “many resellers and distributors will have been caught with stocks of refrigerants purchased at the premium including the levy, unable to compete with new imports of significantly cheaper refrigerant. At this stage it is unclear as to what/how significant reaction from the synthetic refrigerants industry will be and pricing strategies have only just started to emerge.”

HFC levy brought greater focus on natural refrigerants

When asked about the impact of the HFC levy on the uptake of natural refrigerants within the 2 years it was in force in Australia, many industry representatives agree that it increased awareness of refrigerant selection and brought greater focus on natural refrigerant-based technology.

“During the last two years there have been significant initiatives taken by the HVAC&R industries as a whole to work towards a lower emission future,” said Jensen. “We have been building low charge, NH3 DX systems that gradually become smaller and smaller, include more and more new features and become more and more competitive compared with standard HFC solutions,” he added.

Speaking from an end-user perspective, Dario Ferlin, refrigeration engineer at Woolworths pointed out that, “the introduction of the levy provided a price shock to the industry and triggered some very positive outcomes. These include a focus on best practice in terms of refrigerant leak mitigation in the field and renewed interest in HFC free refrigeration systems at a corporate level. Now that the levy is being removed many of the positive behaviours have nonetheless remained. Hence the overall outcome was certainly beneficial.”

CO₂ cascade systems have reached world’s best practice levels

“Australia's climate reality is very different to that of most other OECD and developing countries. The climate here can get very hot and is typically very dry,” Ferlin explained. “This poses many challenges when considering CO₂ as the refrigerant. However the two main players in the retail space have converging natural refrigerant strategies which has in turn influenced (and driven) cascade R134a/CO₂ technologies to world's best practice levels. There is much interest now in full CO₂ systems (hence transcritical) and I believe it won't be long before we see at least some pilot systems out,“ he noted.

Raising awareness of future proof natural refrigerants is the main challenge

“It is vitally important that from now on Natural Refrigerants (NRs) leapfrog the use of HFCs and HFOs as much as practicable. To achieve that the first requisite is to educate and train a complete cadre of qualified personnel from the shop floor to the design office in the application of natural refrigerants across the board. There is absolutely no doubt that the portfolio of the five natural refrigerants is able to perform virtually all refrigeration duties,” said Klaas Visser of KAV Consulting.

“To achieve that we need a much accelerated train-the-trainers programme. Herein lies an essential responsibility of all stakeholders to agree on a national, and indeed global, level that such a vast training and education programme entails,” he added.

According to Jensen “we need to address our enormous information, education and training problems in the general HVAC&R areas. The HFC Levy could have provided the Government with an income stream to finance some of the work that needs to be done.”

Edwards argued that “right now there is little evidence that the government is willing to address and develop an integrated strategy or provide a forthright program to facilitate transition.”

According to Ferlin, Australian policy-makers should look at what Europe has done in terms of limiting the use of HFCs. “I think the Europeans have a head start on the rest with F-gas regulations. I believe policy writers would "naturally" be looking at Brussels for ideas before re-inventing the wheel on the other side of the world,” he said.

Background

The HFC levy formed a part of the Clean Energy Future (CEF) legislation as one of the 19 bills implemented by the previous Labour government as of 1 July 2012. Since its introduction, the HFC levy met with strong opposition and its scrapping became part of a campaign in the run up to the national elections in September 2013 by conservative opposition leader Tony Abbott.