Catalyst with Shayle Kann - Fixing the refrigerant problem

Episode Date: November 7, 2024

The bad news: The refrigerants we use in air conditioners, fridges, and vehicles absorb hundreds to thousands of times more heat than carbon dioxide does. The good news: We’re in the middle of a global effort to replace them with lower impact alternatives.  Will we replace them fast enough to hit climate targets? And in the meantime, can we prevent them from leaking into the atmosphere? In this episode, Shayle talks to Ian McGavisk, senior advisor at RMI for carbon-free buildings. An industry veteran, he recently co-authored a report on recovering residential AC refrigerants in the U.S., which have the carbon equivalent of 1.7 million cars. (Ian also works in business development at Transaera. Energy Impact Partners, where Shayle works, invests in Transaera.). Shayle and Ian cover topics like: The sources of emissions in the refrigerant lifecycle  The economics of recovering and reclaiming refrigerants Alternatives with low global warming potential and their tradeoffs, such as efficiency, flammability and concerns about forever chemicals Recommended resources RMI: Refrigerant Reclamation Project Drawdown: Refrigerant Management Project Drawdown: Alternative Refrigerants EPA: Transitioning to Low-GWP Alternatives in Commercial Refrigeration UN Environmental Programme: Montreal Protocol On Substances That Deplete The Ozone Layer, Report Of The Technology And Economic Assessment Panel, May 2024  Catalyst is brought to you by EnergyHub. EnergyHub is working with more than 70 utilities across North America to help scale VPP programs to manage load growth, maximize the value of renewables, and deliver flexibility at every level of the grid. To learn more about their Edge DERMS platform and services, go to energyhub.com. On December 3 in Washington, DC, Latitude Media is bringing together a range of experts for Transition-AI 2024, a one-day, in-person event addressing both sides of the AI-energy nexus: the challenges AI poses to the grid, and the opportunities. Our podcast listeners get a 10% discount on this year’s conference using the code LMPODS10. Register today here!

Latitude Media, podcast at the frontier of climate technology. I'm Shail Khan, and this is Catalyst. You're starting to get, you know, 30 to 50 gigatons of CO2E over the next 20 to 25 years. And that's a big number, right? Like that's... It's a huge number. I don't remember the number offhand, but that's on the order of aviation, right? It's about the same...

It is. You know, you just think about it. If you get it down to a U.S. context, I mean, you know, just the residential sector, in the United States is, you know, the equivalent of 1.7 million cars on the road annually. So they are big numbers. This week, the greenhouse gases that are 2,000 times more potent than CO2. We're talking to refrigerates. When utilities need flexible capacity they can count on, they turn to Energy Hub.

Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility built for the moments when utilities can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale. Predictive, verifiable, and designed to perform when it counts. Learn more at energy hub.com. Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital, and by the institutions that connect them.

I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy. Tune in as we unpack how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. Catalyst is supported by Fish Tank PR, an award-winning PR firm focused on climate and energy tech, renewables, and sustainability. Fish Tank is known for generating prominent and effective media coverage for the brands they work with. If you want a PR partner that's thoughtful, shoots straight, and gets results, you'll like

Fish Tank PR. To learn more about Fish Tank's approach, visit fish tankpr.com. That's F-I-S-C-H-Fish-Tankpr.com. I'm Shale Khan. I invest in revolutionary climate technologies at energy impact partners. Welcome. them. All right. You know those types of things that you know are important, you've heard about for years, but you've just never had the time to really understand. That's me with refrigerants. Like, refrigerants are in aggregate, actually a huge source of global greenhouse gas emissions from a climate impact standpoint. They are roughly on par with aviation, which is big. We talk a lot about aviation, and the industry is obsessed. It's sustainable aviation fuel and all this other kind of stuff. And for all the rhetoric in climate and climate tech world, I hear much less about

refrigerants, despite the fact that in aggregate, they contribute about the same amount of global warming potential. I think that's in part because, you know, they're this component in HVAC systems that is this little bit of material that we use. It seems like it should be solvable. And in fact, interestingly enough about this sector, we've solved a big environmental problem to do with refrigerants before. This was the ozone hole that we were creating and solved it with the Montreal Protocol, replaced all the refrigerants.

Why don't we just do it again? And maybe we will, but it's sort of complicated, as always. It's harder than you want it to be when it comes to reducing greenhouse gas emissions. And also, you know, refrigerants are not one thing. There are many different kinds used in many different applications, including, by the way, and maybe this is the thing that will bring refrigerants

back to prominence. data centers, which require a lot of cooling and thus a lot of refrigerant. So it's a good time to talk about refrigerants, talk about their climate impact, and try to figure out what the solutions might be. This is, as I said, a category I haven't spent enough time in yet. So this one's valuable as a learning tool for me. And the right guy to do it is Ian McGavis. Ian is a senior advisor for carbon-free buildings at RMI. He's an expert on refrigerants. He wrote a good report recently on reclaiming high GWP refrigerants in residential HVAC. And I use this as a sort of refrigerant 101 for me.

So hopefully it'll be the same for you. As a disclaimer, also, Ian works in business development at a company called Transera in the HVAC space, which EIP, my firm, is an investor in. Okay, on to the conversation with Ian. Ian, welcome. Thanks for having, Michelle. Let's talk about refrigerants, starting with what are refrigerants? What do they do? What's the purpose? Yeah, refrigerants are used to make sure you can complete a refrigeration cycle.

So, you know, in any air conditioner, for example, and I'll use a residential because that's probably the easiest one to describe, you need to take refrigerant and change it from a liquid to a gas over and over again to be able to collect heat inside the space or inside your home and then reject that heat outside your home. So refrigerants or substances that are used in that cycle, and they repeat the cycle over and over by going from liquid to gas phase to collect and reject the heat. They've been around for a long time, and they're basically the working fluid for any refrigeration or air conditioning type of application. You mentioned they've been around for a long time.

I would be interested in a brief history of refrigerants. When did we start using them, and then how have the actual refrigerants, the materials that we've used as refrigerants, how have they evolved over time? Yeah, so you go back to, you know, the original refrigerants were all the natural refrigerants, ammonia, carbon dioxide, were the first ones that were used. And that's, you know, goes back well over 100 years. And they were used primarily in the refrigeration industry. I mean, ice makers were kind of the first, were the first uses of some of those refrigerants.

You know, Willis Carrier is the one who gets credit for using the, those in kind of air conditioning systems is the father of air conditioning. And then they've migrated since then to, you know, to all sorts of different, you know, applications, whether it be transport refrigeration or, you know, residential refrigeration and air conditioning, you know, industrial process cooling. Today, the biggest consumer of cooling is data centers. So as we talk about AI and all the AI applications, all that doesn't exist without a significant an amount of cooling to keep those servers warm and keep those data centers operating.

So it's been a real evolution from basically some minor comfort cooling and food process all the way now to every industrial process pretty much requires some sort of cooling to make it to make it viable. So you mentioned we started long ago with ammonia and carbon dioxide. What are the predominant refrigerants that we use today? I know it varies by application, but high level. It does. And those refrigerants are still around today.

since then, a whole family of synthetic refrigerants has been created. And I say synthetic, they're made through a chemical process. And we've had an evolution through those as well. The original synthetic refrigerants were found to have significant ODP or ozone depletion potential. And so that was the first problem with these synthetic refrigerants. They're fluorinated or chlorinated. And they were causing holes in the ozone layer. So the Montreal Protocol was the first major treaty.

to reduce the use of these gases, and come up with a second generation of refrigerants, let's call it, that were a little more environmentally friendly. Now, while we solved the ozone depletion problem, we created a global warming problem. The refrigerants that were developed to replace the original set, then had a significant global warming impact. And as we learn more about climate science

and we learn more about what impacted the climate, this second generation of refrigerants were found to be significantly, a significant contributor to the global warming. And so now we're in the process of changing out those refrigerants to a third generation, let's call it, of lower GWP or global warming potential refrigerants. Yeah, I want to talk more about the climate impact of refrigerants and what the next, you know, Gen 3 might be. But just to harp on it for one second, is one thing I think folks who maybe weren't around

or weren't paying attention at the time have maybe forgotten, which is it's actually a pretty impressive feat that we pulled off on a global basis here, which is we had all these refrigerants. They were causing ozone depletion. There was the Montreal Protocol, was a, was a UN treaty that phased all that stuff out, and it worked, right? Yes. I mean, the Montreal Protocol is probably the single most effective global treaty that's been put in place, you know, through UN sponsorship. And that's been the basis now for, you know, kind of next generation, the Kagali Amendment. And as you go through, you know, the number of updates to that and technical committees that have been formed around it and

constant evaluation and measurement that's put in place. So it is probably the gold standard in environmental treaties and it continues to be that today. And it continues to grow and evolve today is we learn more and we understand more and then we go take action. Okay, so let's get to the climate impact. How much emissions are refrigerants responsible for today? You know, it's, the data is not exact, but it, you know, the best estimates are it's between, you know, between one and a half and two gigatons annually of CO2E or carbon dioxide equivalents. And so, you know, when you look at, when you kind of run that out over the next, you know,

when you run that out toward 2050, you know, you're starting to get, look at, you know, 30 to 50 gigatons of CO2E over the next 20 to 20, 25. five years. And if we got that target one and a half degrees C, that can't be met without dealing with this refrigerant issue and being able to minimize the impact of refrigerants on the environment. And that's a big number, right? Like that's, I don't remember the number offhand, but that's on the order of aviation, right? It's about the same. It is. Yeah. And, you know, you just think about it. If you get it down to a U.S. context, I mean, you know, just the residential sector in the United States is, you know, the equivalent of

1.7 million cars on the road annually. So they are big numbers. And that's just the direct portion, right? Which we kind of put refrigerant emissions into the direct and indirect categories. The direct portion is refrigerant that escapes from equipment. The indirect portion, which is three or four times, the impact is the carbon emitted by producing the energy to run the equipment. So you've got, you know, you've got two impacts direct and indirect, but that indirect impact is also an important consideration in the air conditioning and refrigeration industries.

Virtual power plants are becoming a reliable way for utilities to manage capacity, but enrolling devices is just the start. What really matters is confidence, knowing those resources will perform when dispatched and being able to prove it, from the control room to the living room. Energy Hub's platform handles the full picture, from near-real-time forecasting, locational dispatch, and the kind of rigorous verification that holds up when regulators, grid operators, or leadership ask, did it deliver? Easy enrollment creates momentum, proven performance builds trust.

That's why more than 170 utilities rely on Energy Hub to manage over 2.5 million devices delivering 3.4 gigawatts of flexible capacity. See what that looks like at energy hub.com. We're living through a profound economic shift, and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers, but the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that

connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital, as I talk with people deploying capital, shaping policy, and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital Capital on Spotify, Apple, or wherever you get your podcasts. Are you tired of overpaying for big-name PR firms, but not really knowing what they're delivering? Is your comms team wasting time reviewing lengthy messaging briefs and decks, instead of engaging journalists or producing content? Are you wondering why your competitors are getting press and you aren't?

Fish Tank PR is an award-winning climate and energy tech, renewables, and sustainability-focused PR firm dedicated to elevating the work of both early stage and established companies. Whether you need to position yourself as a thought leader in between project announcements or translate complex ideas and technologies into tangible, compelling stories that resonate with the media, fish tank can help. Check out fish tankpr.com. That's f-i-s-c-h-h-fish-tankpr.com. And for a minute, let's just talk about why there are emissions from refrigerants, right? Because you could imagine, like, let's just say you're using CO2 as refrigerant. I think people obviously understand CO2. 2 has global warming potential. But if it was sitting there in a closed loop and it never escaped in the atmosphere, then you would have no climate impact.

So what is it that's actually causing the emissions here? Yeah, and I think that's the most important point here is that until a refrigerant leads to the atmosphere, it doesn't have a negative impact on the environment. So if you could, in the ideal world, if you could keep all the refrigerant in the piece of equipment that it was designed to operate with, and then recover that refrigerant at the end of life and then either properly recycle it or destroy it, you really don't have any environmental impact. So all this impact that we're talking about is 1.5 gigatons annually is coming from that refrigerant being released into the atmosphere, either intentionally by technicians who are

unaware or untrained or unintentionally by equipment that fails and then releases the refrigerant into the atmosphere. So do we have data on, it sounds like there's, you know, there are multiple categories, of these emissions, there's the leaking from an operating unit, whether intentionally or unintentionally, and then there's end-of-life equipment, whether if you don't do sufficient reclamation or recovery, then it leaks in the atmosphere. Do you know how much is coming from each of those categories? You know, I would say that there's not real good data here. It's one of the areas that there's, I think, a significant gap. And one area for additional research is to understand, you know, I think we have a pretty good understanding of what occurs from leaking equipment because there's a record there,

right, of refrigerants that have been purchased and installed in equipment. You know, the single biggest emitter is the refrigeration sector, and that's primarily what I'd call the commercial refrigeration sector. That's supermarkets, convenience stores, and that's the single largest emitter. What we don't have real good data on is, you know, end-of-life residential air conditioning equipment. So when a homeowner's unit, when it comes time to replace, for whatever reason, you know, how much of that refrigerant is left in that unit? And then is that refrigerant, you know, collected, recovered, reclaimed or recycled or sent for destruction? So that to me is a gap in the data set and one that, you know, would require some research to close,

but I think it's research that would be important to do. Okay, so let's, we're going to set aside replace. of the existing refrigerants. We'll come back to that in a minute. Assuming we were stuck with the refrigerants that we've got right now, in your mind, how much of the problem is a technical problem versus a sort of, I don't know, market problem? Like, is the problem of leakage, for example, or lack of recovery? Is it actually just a difficult technical challenge to avoid leakage or to recover? Or is it just that, like you said, we need to train technicians better, we need to mandate a certain end-of-life process, et cetera?

Yeah, it's really not a technical problem. The technology exists. Nothing has to be developed to be able to successfully recover, reclaim, and refrigerants. It is more of a, frankly, it's more of an economic problem right now. The market price for reclaimed refrigerant is more expensive than it is to use virgin refrigerants. So when I say virgin refrigerant, it's refrigerant that has not been used previously. So today, the primary driver for a lot of the venting is economic.

The technician or the contractor's time is worth more than actually collecting the refrigerant and selling it into the reclamation market. Now, that will change over time. We've seen this in the past as new refrigerants, as old refrigerants are being replaced with new refrigerants, the market for the aftermarket price for these reclaimed refrigerants goes up, then it becomes economical for contractors to recover and reclaim those refrigerants. So it's interesting because I guess now we should talk about like the next gen 3 refrigerants, but the implication of the fact that there are, there is an effort toward Gen 3 refrigerants

and replacing existing refrigerants of the low GWP ones sort of implies that like we generally don't believe we're going to solve those market problems. Yeah, so the market problems will not be solved. It's unlikely the market problems will be solved without some intervention, and that's government intervention. And we've seen kind of best practices globally where the governments have intervened. They've actually stepped up to pay that premium to contractors in order to make that recovery economically viable.

Over time, as the existing refrigerant supply starts to dwindle, then we will start to see the economics become more favorable, and then some of that will naturally correct as part of the supply demand cycle. But there will always be a challenge, I think, on the economics here for contractors. Okay, so talking about lower GWP refrigerants for a minute, I guess the one thing we didn't talk about is what is the GWP of the existing refrigerants? Because, like, you know, I mentioned it's an aggregate,

it's about the same global warming potential as aviation. But of course, it comes in a very different fashion, which is that aviation has way, way, way more volume of emissions, but it's emitting CO2, whereas refrigerants, way, way, way, way, way lower volume, but extremely high GWP. Yeah, so the refrigerants primarily in use today, the GWP is around 2000.

And, you know, I'll use R410A as an example. It's what's most common in the residential market around the world. And so the GWP there is roughly 2000. So the replacement refrigerants kind of for this round of replacements, going to R-454 and R-32, we're in that 6-700 GWP range.

So this is a transition, but it's not the last transition. There are another set of replacements or transition that we're going to have to go through to get to what's known as the ultra-low GWP refrigerants. And there we're down into single digits, right, where a pound of refrigerant is about equal to a pound of CO2 from an equivalency standpoint.

So this is, you know, This is kind of the second transition. There's going to be one more, and the best practices we develop today will help us when we get to that third and final transition when we go to the ultra-low-GWP refrigerants. Okay, so let's talk about the most promising next-generation low-GWP refrigerants. What are they? And I guess the other question here is like, what is the challenge with introducing new refrigerants? What are the metrics that determine whether they are good or not?

You know, I come, my lens for this is kind of from a product developer. And so we use refrigerants in our applications. And when we evaluate refrigerants to put into new pieces of equipment, we look at a couple things. But the two primary, well, I'd say three primary considerations are one, how does it perform in the equipment? Is the equipment more efficient or less efficient when you transition to refrigerants? And as we talked about earlier, you know, 80% of the CO2 impact from a piece of

of equipment is that energy efficiency or the energy that's created to run the equipment. The other 20% comes from the refrigerant. So when we evaluate refrigerants, the ability to operate very efficiently is probably the number one impact, or the number one metric that we look at. The second thing we look at is safety. Is there a safety concern? Is there a refrigerant toxic? Is it flammable?

So safety is always a concern. efficiency, I would say, is what we start with, then we look at safety. And then the third thing is it available in the market. Are there ample sources? Does that mean the price is lower or higher? Now, different refrigerants operate better in different applications. So if you look at really low refrigeration temperatures, so things for fast food freezing or food processing, you know, ammonia is an ideal refrigerant for those kind of applications. When you look at air conditioning temperatures, for example, then ammonia really isn't a very good refrigerant. Thermodynamics, it doesn't perform very well. So then you get into, you know, maybe more of a synthetic refrigerant, the 454s,

the R32s that perform very well in those applications. What I'd say is we move to these ultra-low GWP refrigerants, the primary issue is flammability. And so they are slightly flammable, and so those issues have to be addressed. You know, what some of the best natural refrigerants are R290, which is propane, and R-600, which is is is isobutane, excellent refrigerants, but obviously they have a flammability challenge. It has to be met. From a cost perspective, is that important? Like in the context of an AC unit, is the refrigerant a significant portion of the overall cost, or is it kind of de minimis? It's not a significant portion of the cost. I think what the cost reflects is how available

it is in the market. So, you know, you don't want to put equipment into the marketplace, and then there's an aftermarket requirement, right? A unit does leak and you need to get refrigerant. Is it readily available so that you can get customers back online quickly? So I think the cost is more a reflection of availability, but no, it is not really a significant cost driver in the cost of the equipment. So where are we in the adoption of these new loaded GWP refrigerants at this point? So we're going through a transition right now, kind of as we speak,

the first of the year, R410A, which is kind of the most common refrigerant used in the commercial refrigeration residential, the residential markets won't be available to ship a new equipment. And so as we, you know, we're going to go through a couple years here as we transition out of one of these 2000 GWP refrigerants down to these six or 700 GWP refrigerants. we're going to see this market dynamic now of the only and there will be a phase down in what is available to be produced so the manufacturers have been set limits as part of the AIM Act so there will be a decreasing supply of refrigerant available

for people who have R410 in their residential units for example and so that will by 2030 that the source of refrigerant for service will have to come from reclaim and recovered refrigerant that will have to be the primary source as these manufacturing quotas go down year over year. Who are the major players here? I mean, is it, you know, so we have obviously the HVAC OEMs, companies who make the air conditioners and so on, cooling systems for data centers, whatever it might be. Are they producing their own refrigerants?

Are they buying refrigerant? No, they buy refrigerants. So I'd say there's kind of three parts to this market, right? there's the large chemical companies who produce the refrigerants. There's the air conditioning and refrigeration OEMs who use the refrigerants in their product. And so they design product to operate with these refrigerants. And then there's the service side of the business, once the equipment's installed. So those are contractors and refrigerant reclaimers who service the equipment,

who will actually take the equipment out of equipment at end of life and get it into either the reclamation cycle or the destruction cycle, depending on what the use for that refrigerant is or what the state of it is when it comes out of the equipment. So, again, three primary parts of this. One, there's a refrigerant manufacturer. Two, there's the OEM who uses the refrigerant in their device. And then third, there's the service side of this,

which takes care of the equipment after it's installed. I know one other component to throw into the mix here, at least in some places is PFS, forever chemicals, is they're called, which I think is an issue with some of the newer refrigerants? It is, and it is going to impact the transition to the ultra-low GWP refrigerants. In Europe, for example, they are moving back towards, I shouldn't say back towards, they are moving towards natural refrigerants. So, you know, propane and CO2, because they are restricting the use of these ultra-low

GWP refrigerants because of the PFAS concerns. So it is going to be a variable in the refrigerant transition. As regions of the world deal with the PFAS issue, it will impact the transition to ultra low GWP refrigerants. All right. Well, so I guess to wrap it up, what is your level of optimism here? I mean, in some ways, relative to a lot of the big thorny climate challenges that I talk about, this one feels surmountable. We've done it before in the sense that we've replaced a bunch of refrigerants with a bunch of other refrigerants that have lower environmental consequences. This sounds like we're making progress here and there's a bunch of new refrigerants that have some issues to work out, but real promise that are lower GWP. So should I be considering this like,

you know, not a solved problem, but we're on the path toward it? Or is it harder than that? I think that's a good question. And I think I'm not. optimistic. You know, the technical solutions are all there. New refrigerants have been developed, a product to use the new refrigerants have been developed. But this transition phase, what we really have to focus on is making sure we recover as much of the refrigerant that's out there being used today as possible. What we really can't afford to happen during this transition period, and when I say the transition period, say 2025 to 2040 or 2050, we can't allow all the refrigerants that's in use today to be vented and to be released to the atmosphere.

That will be an environmental disaster. And the reclaim rates are very, very low. And that's for economic reasons we talked about briefly. That's for training reasons. That's for awareness reasons. So, you know, I would encourage any homeowner who's having a piece of equipment replaced to make sure their contractor, you know, comes and reclaims and recovers the refrigerant. You know, that refrigerant recovery is the first step from a piece of, equipment that's being replaced or a piece of equipment that's being serviced.

But it's critical that we recover and either reclaim or destroy the refrigerant that's out in the field today being used in this equipment. Because if we don't, the impact is going to be with us for hundreds of years. So that's a real, that's the part that scares me. That's the part I worry about is this refrigerant recovery during this transition period. All right, Ian, this was illuminating. Thank you so much. All right, Shail, I'm glad to do it. for having me.

Ian McGavisk is a senior advisor for carbon-free buildings at RMI. This show is a production of Latitude Media. You can head over Latitude Media.com for links to today's topics. Latitude is supported by Prelude Ventures. Pralood Beck's visionary is accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at Praludadventures.com. This episode was produced by Daniel Waldorf, mixing by Roy Campanella and Sean Marquan,

theme song by Sean Marquan. Stephen Lacey is our executive editor. I'm Shail Khan, and this is Catalyst.