19. June 2020 | CEO SpotlightIndustry Insights

An Industry in Upheaval: Why Nothing in the Refrigeration Industry Will Remain the Same

Environmental awareness and sustainability are no longer nice-to-haves. Climate change with all its consequences has reached the heart of society and everyday business life. Green deals have nothing to do with the mere appeasement of conscience, but rather have become an integral part of economic decisions. Even in times of crisis such as the COVID-19 pandemic, sustainable investments are more promising than traditional investment portfolios. The Asset Management Firm BlackRock puts it very clearly: “Sustainable investing rises amid market volatility.

The dawn is also breaking in the refrigeration industry. This seemingly inconspicuous industry contributes significantly to global climate change and environmental pollution. This is mainly due to energy-intensive refrigeration processes that release a lot of CO2 due to their enormous power consumption. In addition, there is the problem of considerably harmful substances that are used as refrigerants in refrigeration machines and air conditioning units.

This blog post explains both the risks and current challenges that conventional refrigerants and technologies pose to the refrigeration industry. It also shows how future-oriented players are proactively shaping change with CleanTech solutions. In addition, we look at how they can contribute to making refrigeration technology climate-neutral and thus become pioneers for a sustainable future.

Relying on What Used to Work: How Is the Refrigeration Industry Dealing with the New Era?

One thing is certain: all signs are pointing to change. Global climate targets have been agreed which simply cannot be met with the current technical standards in the refrigeration industry. In addition, governments worldwide are calling for the gradual limitation of harmful refrigerants so-called F-gases and HFCs.

These legal requirements have already been adopted globally (see the Kigali Amendment and Montreal Protocol) and for the most part are being implemented locally (e.g. in the form of the F-Gas Regulation or Regulation (EU) No. 517/2014 on fluorinated greenhouse gases).

This means that the refrigeration industry faces a huge challenge: it must reinvent itself to meet the sustainability requirements of governments and investors. Fewer CO2 emissions, more climate-neutral refrigerants and increased energy efficiency are being called for – and all at once. What is at stake here is nothing less than that every manufacturer must find new, sustainable technologies and future-proof business models to ensure their long-term survival. So, how is the refrigeration industry dealing with this?

Reactions have been mixed. As is so often the case in times of uncertainty, the sector is marked by an adherence to old, supposedly proven practices. Although the industry cannot achieve the new goals using old technologies, the burden of previous investments weighs heavily. In the past, large sums of money were invested into the refrigeration technology being used today. Manufacturers are merging and cooperating to develop synthetic refrigerants instead of looking for long-term alternatives. This creates large monopolies, which, among other things, still have the power to conceal environmental damage from legislators.

In addition, these past few decades have seen some significant mergers and acquisitions. Manufacturers of synthetic refrigerants have increasingly been taken over by large manufacturers of refrigeration equipment. The Japanese company Daikin, for example, only bought the synthetic refrigerant business units of Solvay Special Chemicals with its 75 employees in 2015. This is an investment that first has to pay for itself. Would anyone like to turn the clock back?

The majority of shareholders would probably not want to do so. The emphasis on sustainable investments is of little consequence if competing with short-term profit maximisation. The focus on making a quick profit, which is derived from stock market trading, tends to obscure what is essential in the long run and makes processes sluggish. This is inhibiting innovation in the refrigeration industry. Truly sustainable solutions and innovative technologies are indispensable, but in the here and now they still seem too risky. Focussing on predictions for the next quarter still dominates a large part of the refrigeration industry’s thinking.

It’s all about running out the clock. On the one hand, there is no longer any possibility of finding a legally-compliant solution to the phase-down requirements within the synthetic refrigerant chemical construction kit. On the other hand, implementation of the phase-down is not at the same stage everywhere – and pressure from the EU market alone is not great enough for the refrigeration industry and its investors.

Dangerous Traditions: Obscure Business Practices in Refrigerant Trading Instead of Technological Innovations

Switching is easier said than done. What’s more, an additional regulation is currently strengthening the somewhat hesitant attitude towards new technologies and refrigerants. Since the reuse of recycled F-gases is legal until 2030, recycled F-gases can in principle continue to be used despite the phase-out. However, new challenges are emerging even with legal reuse. For example, there is little knowledge about or capacity for recycling refrigerants.

Even more dangerous than the industry’s reluctance, however, is another phenomenon that is currently emerging in the refrigeration industry: a few market players have recently bought F-gases on a large scale in order to resell them for a large profit. As a result, the prices for HFCs rose sharply at the beginning of the phase-down.

High prices and lax control of F-gas quotas are allowing the illegal selling of harmful refrigerants to flourish. HFCs obtained from uncertain sources already account for 20-30% of currently available refrigerants, and their sale and use are increasingly hampering the refrigerant market. This not only poses numerous risks; it also threatens to come to an abrupt halt as soon as a better monitoring process is in place.

In concrete terms, this means that if controls work better, about a quarter of the refrigerants on the market will disappear because they are imported illegally. Within a very short time, this will make the shortage of F-gases extremely severe and drive up prices even further. In the long term, companies will also face penalties whilst serious damage to the environment will be caused by outdated technology and the continued use of HFCs.

On the one hand, the major players are still exercising restraint and questionable business practices continue to prolong the use of harmful refrigerants. On the other hand, there is a growing urgency for a better energy balance, environmentally-friendly refrigerants and a sustainable plan for the future. The refrigeration industry is in the middle of one of the biggest transformations in its history and keeping up with it is anything but easy. Only real, widely available innovation using natural refrigerants can solve this dilemma.

Transformation of the Refrigeration Industry

The Potential of Tomorrow’s Refrigeration Industry: Energy-Efficient, Clean and Climate-Neutral Thanks to Innovative Technology

The good news? Specialised technology companies anticipated change early on and are developing CleanTech solutions that work with much lower power consumption. Climate-neutral Bluezero Technology saves 20% or more in energy, which in turn leads to much lower CO2 emissions in the energy required for cooling.

Along with a greatly improved energy balance, next generation refrigeration technology works with natural refrigerants. However, the current state of the art in refrigeration technology is still refrigerants with both high GWP and low GWP (Global Warming Potential), but also serious side effects. Natural refrigerants such as ammonia (NH3), hydrocarbons (HC) or carbon dioxide (CO2) are characterised by their very low global warming potential and therefore pose little danger to the climate even if they escape.

The most natural refrigerant, namely water (R718), has a GWP of 0 i.e. no global warming potential, and is also neither toxic nor flammable. Imagine the refrigerant R718 escaping from a defective refrigeration system. Of course, the leak must be repaired, but a cloth is sufficient for wiping it up. This makes water the only natural refrigerant that is completely safe for humans.

Using water as a refrigerant has also solved another of the refrigeration industry’s problems since it’s available everywhere and on a large scale. The technology and chillers can be mass-produced and thus offer a real alternative to the widespread HFCs and low GWPs.

Initiate Change Instead of Being Changed: Proactively Shaping Change Is Worthwhile

Despite their long tradition, it’ll not be long before we bid farewell to existing refrigeration technologies and harmful refrigerants. At the moment, we can still see in many places that the refrigeration industry is barely prepared for this, is sometimes reluctant or has not yet sufficiently addressed this topic.

However, the world and especially the EU have drawn up a clear roadmap for the future of the refrigeration industry. It should finally give up its role as a silent climate offender, because its responsibility in the overall picture of a sustainable future is far too important to be neglected. To achieve this, natural refrigerants are increasingly being used and will replace synthetic refrigerants in the coming years.

Energy-efficient, natural, climate-neutral and future-oriented: this could soon be how we describe the refrigeration industry. This will be gradually prescribed by law, but does not mean that the industry cannot use it as an opportunity to invest in new technologies at an early stage. It’s now up to manufacturers, users, partners and investors to decide how quickly the refrigeration industry will adopt a pioneering role in the global CleanTech market. Incidentally, investing in this change is more worthwhile than ever: the market value of the refrigeration industry is estimated to be 170 billion US dollars by 2030.

The Refrigeration Industry in the global CleanTech Market