HVAC Industry: Who wins with High Warranties?

During the sales process, it is inevitable warranty periods will be raised.  I remember raving about how the latest and greatest HVAC product led the industry with the longest warranty period.  Very often this only lasted a short period of time as other Manufacturer’s would continue to match warranties with their line.  Things often got out of hand as warranties have reached ‘limited lifetime’ on parts like compressors or heat exchangers.  So, who wins when things reach the extreme?

Let me tell you a quick story as an example.  Let’s say Eleanor Rigby calls Joey Bag O’Donut's HVAC to install a mechanical system. Eleanor, being an elderly and lonely homeowner, was wooed into the solution that would provide the most comfort in her twilight years.  Since she spends a lot of time at home, and every summer seems to be warmer than the last, Mrs. Rigby spared no expense on her new multi-zone ductless heat pump.  She wanted to make sure her comfort was protected with the industry’s highest 12 year limited warranty, and keeping her electric bills low were her priorities as she is on a fixed income these days.  Joey did a great job; his workmanship is second to none! They should really consider re-branding his company; the name gives a bad impression…

Let’s fast forward 10 years.  Mrs. Rigby took great care of her system, having Joey’s service department return every year for maintenance.  This kept her unit under manufacturer warranty and operating at its peak efficiency.  Unfortunately, something happened last night with the system and Eleanor had to call for emergency service.

Contractor Perspective

When Joey’s service tech showed up, he knew exactly what happened.  Eleanor was a great customer and he wanted nothing more than to tell her it was going to be an easy fix.  This time it wasn’t.  The control board failed after 10 years of impeccable service, due to the compressor shorting out.  This was a long time for a heat pump that ran almost continuously year round!  Joey’s tech knows this type of work will take some time, and labor (along with the older R-22 Refrigerant) is not covered under the manufacturer warranty.  So, he delivers the bad news to the homeowner.  This is a tough conversation for the technician, particularly since he knows they will not make any money on parts.  When covering Mrs. Rigby’s options, he explains replacement of the system makes the most sense as technology has come a long way in the last 10 years.

•  The contractor is not able to make any money on the parts under warranty, time on paperwork, nor the sale of a new system if repaired, which could be the best option for Mrs. Rigby.

Homeowner Perspective

Mrs. Rigby is always on top of things.  This includes scheduling maintenance and paying her bills.  How could she do everything right and still have this problem?  She was so frustrated, she only bought this system 10 years ago and the unit is still under warranty!  How can Joey’s tech be saying she should replace a system that has 2 years left from the manufacturer?  She knows she should weigh her options, but realistically she has to go with the cheapest, and this is to fix the system.  Eleanor just wasn’t budgeting for such an expense.

• An expensive repair gets the now ‘low efficient system’ operating once again.

Manufacturer’s Perspective

An unhappy customer can be a lot to handle.  The system is under warranty, installed to their specifications, and has been maintained every year.  Looks like the brand needs to supply a compressor and control board for this old unit.  Let’s hope the distributors are able to locate old stock in their warehouse because shipping these parts from overseas or cross country can take weeks!  A loyal customer like Mrs. Rigby should not have to wait weeks to be comfortable.  Warranty parts are a tough thing to budget, even when failure of these systems are so rare.  After all, 10 years of operation is hardly a manufacturer defect!  Is the Contractor sure this is what was wrong – hate for this to come back and bite them if the repairs now show another larger issue.

• Another lost opportunity to install the latest design in Mrs. Rigby’s home, who could have undoubtedly touched many leads when she talks about it at her church.  How many years before this consumer is presented with a repair vs. replace option again?  Will she blame the brand for the recent service costs?

So, who wins in this story?

We could argue all sides come out on the losing end with higher warranties, a perspective that I never had when selling systems.  Although this may help in the sales process, is every factor considered when presenting the ‘highest warranty in the industry’?

The #1 Item Missing from High-Efficient HVAC Installations

     Imagine this: you go out to your local entertainment big-box store and purchase the top of the line “HUMONGOUS” television.  When you get home, you don’t think anything about it and just go ahead plugging it directly into the wall socket, right?  What’s that you say, ludicrous?  Of course, we would only plug that piece of beautiful technology into a UL rated surge protector!

     So, I gave it away in the first paragraph: a UL rated surge protector.  But, don’t you want to know why?  Or what happens if you don’t?  Anyone that knows me has heard me say that I usually ‘learn the hard way – at least once!’  So, when a top-end ductless installation went wrong after months of perfect operation, I had to ask the question, why this one?

     You see, poor Mr. Jones’ house lost power during an electrical storm.  The fact his cable box and other minor electronics failed should have been a giveaway as to what happened.  Everyone knows when these electronic boards are put together in the factory they come with little canisters attached.  In these canisters is a specific amount of smoke, and power fluctuations have a way of letting this smoke out.  No smokey = No worky.

     Unfortunately (depending on the view here), this high end ductless system was resilient.  The unit would turn on, operate for about a minute or two, and then shut down with no error codes or reason.  Frustrating, right? So, we call the tech support line from the house and they determine I must replace the main control board – parts and labor (my generosity as part of the install) warrantied.

     Two days later, yes it snows in New England and it would have been longer if this was in 2015, I return with the part.  Install the latest and greatest control board, smearing white heat sink paste all over anything within eyesight, and…no luck!  Another call determines a combination of control boards should be replaced together.  Thanks for that one OEM Rep!  Another few days later, replace the boards, and once again the same symptoms.  This time, I have to offer the customer a new condenser.

     

My Preference: The Intermatic AG3000

So I start to think, what could I have done differently to avoid an act of god?  Boy, if I had a solution to all of those questions.  But then it hit me, a surge protector!  In order to pass the electrical inspection, and my anal electrician, said surge protector must be UL listed (this adds to the price).  There are many models that attach to either the outdoor disconnect (weather tight casing) or into the main panel.  I prefer the models that have an indicator light, telling the homeowner if they are still protected.  Either way, this would take the surge and not your new high-efficient HVAC equipment.  This is not a code requirement, so often gets overlooked.  Besides, your equipment that just cost you at least three times your big screen television is not sexy and tucked away in some basement or behind the overgrown shrubs.  Spend the extra few dollars and protect the investment in your comfort!  I think I may start tying my labor warranties to the installation of a surge protector, or just make it part of the installation price.  Just like condensate traps on furnaces, or liquid line filter driers in condensers, if this becomes commonplace why would an OEM not just install these at the factory?  Imagine how many ECM or condenser control boards they warranty over the years?!

How Low Should I Operate my Heat Pump?

UPDATED: Break Even COP’s for MA

How do you know if you should install a ductless mini-split, or upgrade your air-conditioner to a heat-pump and create a dual-source application during replacement this Winter?  I have been asked this countless times over the past week!  I personally always prefer the option of multiple fuel sources, particularly since energy prices have been all over the place during the last decade.  Fortunately, using averaged energy prices, there is some simple math to figure out if an aggressive assessment should be made for a dual-source heat pump application, based on equations from ACCA's Manual H: "Heat Pump Systems: Principles and Applications".  First, you will need the average energy costs for the selected fuels, and then plug the information into the equations below.  This will provide your "break-even COP", or the point where operating the heat pump will cost the same as the other source.  You can then take the calculated Coefficient of Performance (COP) and see what temperature the heat pump will be operating at; the lower the better!

I completed a little research for you, so let us insert the recent average prices into the Natural Gas, Oil, and Propane equations to see if the investment in a heat pump will make sense during replacement, or become your primary source of heat – and to what temperature.

As you can see, if installing a 96% Natural Gas furnace, the Break-Even COP would be 3.9.  Based on the Heating Performance Data for Fujitsu’s most efficient 12K RLS2 Heat Pump, it would need to be above 60F outdoors for the cost to operate the heat pump to be cheaper than the Natural Gas Furnace (see data at bottom, assuming 70F Indoor Temperature).

Not all homes in MA are lucky to have access to a Natural Gas supply.  There are more than enough Oil Tanks out there to keep the hundreds of delivery companies busy during most New England winters.  As you can see in the equation for oil, a resulting break-even COP of 2.6 indicates a significant savings can be realized. Based on installing an extremely efficient 87% oil furnace and the same heat pump performance data, the heat pump would still be cheaper to operate as low as 20F.  Of course, you must worry about the output of the heat pump at that low ambient, and in order to feel comfortable you will need to calculate the Thermal Balance Point.

If you decide to install a Propane tank you could realize the same efficiencies as the natural gas furnaces out there, but the increased costs in fuel/delivery is currently higher than oil, particularly when including a recent oil price plunge.  As you can see, the break even COP for installing a heat pump add-on above a 96% Propane Furnace is only 1.45.  This is even lower than the Oil application, resulting in a break-even COP of -15F, proving the recommendation of a more thorough calculation into the Thermal Balance Point and investment costs for going to Dual Source.

          With the recent technological advancements in the HVAC industry in controls and conventionally ducted VRF's like the Carrier GreenSpeed, break even COP's and Thermal Balance Points can be driven even lower.  This makes Dual Source Heat pump applications more attracting to New England homeowners, despite recent electric rate hikes.  Some contractors are still installing electric supplemental heat, hopefully in stages, for low-ambient operation.  Although not any more efficient than the heat strips it replaced, the new heat pumps could save more than enough above the temperature of the defrost cycle to still be worth it.  I would still prefer dual-source, you know these energy companies will not be leaving any money on the table over the long run!