Welcome to Did You Know, the ESCO HVAC podcast,
the show where we explore the cool, the hot,
and the everything in between of the HVACR industry.
Each week, we dig into the innovations, the insights,
and the inspiring stories that power our trade
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As well as AGAS, together we can. Whether you're
just getting started or you've been turning wrenches
for decades like myself, there's always something
new for us to learn. I'm Clifton Beck, and this
is Did You Know? The ESCO HVAC Podcast. Let's
dive in. Well, hello, everyone. Thank you so
much for joining us on Did You Know? The ESCO
HVAC Podcast. We spend a lot of time discussing
heat pumps and technologies and refrigerants
with our equipment manufacturers, with our trade
organizations, with... technical educators with
contractors. There's a lot of conversation to
be had in the industry, and we're starting to
see a lot of changes in equipment statistics,
which I really enjoy. When we start looking at
transitions, we can actually officially start
to say that heat pumps are starting to outsell
gas furnaces. There's a lot of shift to the industry.
We try to do a lot of education on that, and
we love spending time with our equipment manufacturers.
So today, we're spending some time with Eswar
Sengar. How are you doing? I'm good, Clifton.
How are you? I'm doing fine. You are the Senior
Product Marketing Manager for Allied? Yep, correct.
Yeah, I'm the Senior Product Marketing Manager
for Allied Air Enterprises here based in West
Columbia, South Carolina. My primary responsibility
is air conditioners, heat pumps, and package
units. So that's the category I manage, but been
in the industry for a long time. Been in the
industry for about 13 to 14 years now. Spent
the bulk of it down in Texas at a major OEM.
Then took a little bit of a break and the break
didn't last very long. Took a little bit of a
break in the automotive industry for about six
months and then came back to the HVAC industry
with Lennox and then onto Allied Air. So once
bitten, twice shy. I tell everybody I know that
I'll never, never ever leave the industry again.
It is. It's interesting. And many of us. find
our way into the HVAC industry. And then when
we're here, we realize that you have a lot of
impact within an industry that seems massive,
but it really is managed by a fairly small community
of dedicated professionals like yourself that
are really very forward -thinking, very... consumer
conscious as well as contractor conscious even
a manufacturer i mean you manufacture products
but yet your heart is in making the connections
with those that are on the front lines doing
the installations working with the products and
allied air does a lot of training i just you
know spent some time with you all at the allied
air training conference and got to you know meet
hundreds of technical trainers from around the
country And everyone had the same common theme.
They were very passionate about communicating
the changes in the industry to those that are
working with the equipment. So I applaud our
manufacturers that are really stepping up the
game in education and understanding. And you've
got the kind of background that I love conversing
with. Because you're working with the products,
you know the products and technologies, but yet
you also have a master's degree in mechanical
engineering. Correct. So I follow. I try to learn
as much as I can about my friends in the industry
because not everyone realizes the dedication
and the passion and the commitment to education
that happens in our industry. And so I really
enjoy spending time talking to you about how
our industry is changing. I think it's important
for us to just have a conversation about heat
pumps. I've actually had people come up to me.
When are you going to stop beating that? that
dead horse about heat pumps. I'm like, I'm not,
it's going to continue. So let's look at this
from a manufacturer's perspective. Yeah. From
a manufacturer's perspective, like how does the
market stand today in comparison to say five
years ago? yeah so the mark the heat pump market
in the us is expanding rapidly right i think
over the last five years we've seen high single
digit keggers um in both both including ductless
and inducted um and and inducted uh heat pumps
right like you mentioned um heat pumps have outsold
furnaces over the last few years and i think
they're getting very very close to you know meeting
the meeting air conditioners as well um i think
about 10 years ago we sold almost 2x as much
ACs as we did heat pumps. But now I think that
number is much more close to 30 % more air conditioners
than heat pumps. So we're seeing growth predominantly
over the last... 10, 15 years, we saw a lot of
growth in sort of the Sunbelt region, very sort
of milder climates. But then over the last few
years, especially as heat pump technology continues
to evolve, the heat pumps itself, they've been
around for several years, right? It's not a new
technology, but the technology has evolved to
keep up with what the requirements in today's
day and age is, right? So we're seeing a lot
of growth, mainly in the Northeast, Midwest,
and also in a lot of mixed fuel territories,
right? where dual fuel is becoming sort of the
safe choice. To me, I kind of equate dual fuel
to sort of like the hybrid car analogy to the
automotive world, if you know, to make it easier
for people to understand. Perfect analogy. So
we're seeing a large scale adoption in all of
the United States and even in Canada, as far
as heat pumps are concerned. You know, when we
look at that growth in heat pumps, we really
have two categories that we can discuss. I'm
a big fan of our ductless heat pumps. A heat
pump performs the best when it has adequate airflow.
And we all know that in the United States, we
are predominantly ducted systems and they are
predominantly inadequate for proper airflow for
high efficiency heat pump, only because of the
transitions we made over time. Our original ducted
systems were designed for lower efficiency heating
systems with PSC motors, so they could handle
lower airflow because we had higher temperature
rises, not so much when we get into heat pumps.
And so we're having to rethink ductwork and airflow
when we get into ducted. heat pumps but are you
seeing an increase in ducted heat pump systems
as well yeah we're seeing we're seeing a large
increase in ducted heat pumps right not so much
so in buckless um you know i think i think ductless
is probably one of the main you know, major growing
categories in the U .S., but I don't think it's
ever going to get to a point where it's going
to replace ducted systems, right? I mean, before
the recording, you and I were talking about how
much the air conditioning industry in the U .S.
is far different from what it is in the rest
of the world, right? I mean, whole home heating
and cooling here is very important, just because
of the type of construction here, the homes that
are built in the U .S., and also, given the weather
here, I think whole home heating and cooling
becomes very, very important um so and then and
then you know people typically don't like to
see you know some sort of a wall -mounted unit
in in their um in their in their house either
and americans love comfort right so i think ducted
systems are are here to stay and and we're seeing
a predominant growth in ducted systems as well
uh that's kind of where the you know the whole
dual fuel conversations comes into play all of
that dual fuel growth is happening you know only
in the ducted space Yeah, I've done installations
of both. Just within this last year, I've done
a couple equipment manufacturer installation
videos. One of them for myself with an ultra
low temperature ductless unit that had a 100
% capacity at minus five degrees Fahrenheit.
I did a two stage dual fuel application for my
son. And that was really my concern looking at
something that I wanted to have some redundancy,
you know, young family. I like the idea of going
straight heat pump, but I also have to be realistic
about, you know, the American household that
was built around fossil fuel fired ignition systems.
And so I am a big fan of a dual fuel. If it's
a ducted system, I truly believe it should be
a dual fuel, at least in the Midwest. And it's
changed the market. And a lot of that market
is driven by incentives that we've seen. Now,
some of those are. like that 25C federal tax
credit right now. Where do we stand in the realms
of heat pump incentives? Yeah. So, I mean, obviously
you mentioned that the 25 -seat tax credit that
provided up to $2 ,000 for a qualifying heat
pump install was sunset at the end of last year.
So in 12 -31 -2025, the big beautiful bill sunset
the tax credits for heat pumps. That said, I
mean, if you go back and look at the data, right,
the IRS published data in 2023 for heat pump
adoption. If you look at how many people utilize
the 25 -seat tax credits, it's only about...
less than 10 % of overall heat pump sales. I
think the tax credits and in the way that they
were structured were mainly for people that were
probably putting in, benefited people that were
probably putting in high efficiency equipment
to begin with anyway. Just because the tax credits
are gone, and like I mentioned before, I don't
know that the penetration of tax credits and
driving heat pumps was significant anyway. We
don't expect this demand to disappear, right?
I think there's going to be a mild shift towards
regions that have strong state and or utility
support. You know, incentives accelerate adoption,
but they don't create it out of thin air. So
once homeowners kind of experience the comfort
and contractors gain confidence, I think adoption
is going to continue to grow, even in the absence
of initiatives. That said, I mean, we're seeing
that there are several states that are starting
to take action now that the 25 -seat tax credits
are sunset. There are several utilities that
are offering rebates that are upfront and are
usually larger than tax credits, which makes
the decision very easy for the homeowner. Tax
credits is a post -payment that they have to
bear that $2 ,000 charge up until they get it,
depending on when they install the equipment
and when they file taxes. That could very well
be a 15-, 16 -month gap, right? So I think there's
many utilities and several other states that
are sort of stepping up. to offer more rebates.
Now, when a lot of this activity starts going
towards state and utility level, the market becomes
very fragmented, right? And from an OEM standpoint
and the contractor standpoint, I think it becomes
very important that contractors who understand
selling and stacking these incentives and that
are familiar with incentives that are offered
in that area, I think they have the opportunity
to close much more sales than folks that are
not keeping up with this. Yeah, completely. You'd
mentioned the automotive analogy earlier. I use
that a lot on educating on inverter technology,
how transitions that we've made in internal combustion
engines are very similar to controls that we
use for managing a lot of our inverters. So there's
a lot of analogies we can use. I really like
the way that you brought that up with the 25C.
Think about from the automotive. Are the federal
tax incentives enough to drive someone from going
from a fossil fuel vehicle into a total electric
vehicle? Probably marginally. I think overall,
it's the consumer looking at the change in life
and looking at their own carbon footprint and
making that decision. typically just looking
at a product going, oh, I think I'll take the
incentives and I'll go a different route because
of them. It's typically they've made that internal
decision that I'm looking for high efficiency.
I'm looking for less utility cost. I'm looking
for ways to improve my impact upon the world.
So in doing that, do you see consumers looking
at heat pumps and dual fuel systems kind of like
a risk management scenario? Yeah. I mean, at
the end of the day, the economics have to make
sense, right? Incentives accelerate adoption.
But again, like I mentioned, they don't create
it, right? They only accelerate it. But to your
point, dual fuels are definitely a risk management,
you know, a way to manage risk, in my opinion,
because it becomes a, you know, dual fuel system
becomes a hedge against long term. volatility
of, you know, we see in several areas. I mean,
if you look across the country in South Carolina,
I pay 14 cents a kilowatt hour. Right. If you
go to California, that price could all go all
the way up to 57 or 60 cents. And on the flip
side, we're also seeing gas rates go up, too.
I mean, if I look at my gas bill today and I
compare it against what my gas bill looked like,
maybe five, you know, five, six. several years
ago, I see that my gas bill has grown significantly.
And a lot of that goes towards paying for infrastructure
costs. And as cities and states start looking
at gas bans, now you're thinking about paying
for that same infrastructure with a smaller number
of users. So that's only going to increase the
amount of surcharges or fees that are applied
to your bill. So I think that It's not really
about electric versus gas, but I think it's more
about a risk management. And dual fuel is a very
rational bridge. And the term that we use mainly
at Allied Air is that dual fuel gives the homeowner
utility insurance. It is. So regardless of...
So, you know, regardless of which way you go,
you can kind of play, especially if you pair
a furnace with a cold climate or a, you know,
high efficiency heat pump, you have the option
to throttle that balance point. And, you know,
there's depending on what that economical balance
point is for you. I think there's two lens of
looking at it, right? There's a thermal lens
and there's also the economical lens. Thermal
balance is based on equipment. Economic balance
point is based on... what you're paying for utilities
and what makes sense for you. In most cases,
especially with a cold climate heat pump and
a furnace, you could set it to where that heat
pump runs 90 to 95 % of the time. And that one
day in Indiana, when it gets down to negative
five degrees, that furnace maybe comes on every
once in a while, right? I think there's a lot
of operating costs really depends on the market.
What's really changing is predictability. So
as electricity pricing and gas pricing vary,
I think homeowners want to have more control.
So I really see dual fuel as sort of that bridge
between now and a fully electrified future. Yeah,
completely agree. And I'm glad you brought up
the term cold climate heat pump. It's one of
those terms that I've struggled with for a long
time. I put together a curriculum for ultra low
temperature heat pumps. And in that, I had to
struggle with, well, it's really just a high
performance heat pump. It's a heat pump that
could operate in cold climates, but there's nothing
saying that it can't operate in a warm climate.
It's another It's another product that we need
to understand, not just its capability, but how
it's doing it. Because even if we look at heat
pumps and we look at some of the highest performing.
heat pumps, cold climate heat pumps that operate
down into the minus teens and minus 20s. Well,
how do they do that? And many of them are using
technologies like vapor injection. We're using
a lot of modulation. Sometimes we're designing
compressors that can run at very high RPMs to
be able to manage higher compression with the
vapor injection and higher speed so we can move
more volume. Any addition of technology, we're
going to add additional cost. And so I think
it's very important for consumers and contractors
to understand it's exactly like you said, it's
finding that balance point of economics and efficiency.
Because I can see both routes. I could see, well,
if I'm going straight heat pump and I'm using
no auxiliary. it might be worth me looking at
investing in a heat pump that can go extremely
low because there's going to be a higher upfront
cost. Or I could look at a dual fuel application.
Maybe I don't need to invest as much into that
heat pump and get a nice mid -tier heat pump,
like a two stage or even an entry line inverter.
And then my balance point becomes very realistic
for both efficiency and for comfort. And I've
got a nice combination. So like in the instance
that I put the system together for my son, I
did a two stage gas furnace. and a two -stage
heat pump now that heat pump was not it was uh
it had the cop rating you know which would classify
it as a cold climate heat pump i mean we're really
talking about 1 .75 cop at five degrees talking
about seventy percent of its you know heating
capacity that it had at a hundred so five degrees
is really kind of that dividing factor and i
look here in the midwest there's not a lot of
days that i'm going to be going below five degrees
So that two -stage heat pump works great here
in the Midwest. And then, like I said, on those
days where it gets below that, I'm just going
to bring on that additional gas furnace. And
I've even seen, like in that particular matchup,
it was actually kind of an unusual one. I hadn't
realized until I was doing the installation that
we're now even looking at dual fuel systems that
can run simultaneously. That particular heat
pump could actually run low stage heat pump and
low stage gas furnace at the same time. And I
go, wow, that's how creativity and that's how
technology is allowing us to rethink that whole
balance point. And it's not just about the structural
load balance point anymore. The economic balance
point is just as important. Absolutely. And one
of the things that, you know, to go along with
what you said, right, internally here at Allied,
we actually call it an all climate heat pump.
We call all of our cold climates all climate
heat pump. Because if you live in a somewhat
of a moderate climate, take South Carolina or
North Carolina, for example, right? If you live
in a climate like that, you could technically
put in this cold climate heat pump that operates
at. you know, down to 70 % capacity, like you
mentioned that five degrees outdoor ambient,
you could put this in and never have to rely
on auxiliary heat to ever come on. I think the
real strategy there is how do you limit that
auxiliary heat from ever coming on? Because a
heat pump is always going to be several fold
more efficient than using electric resistance
heat, which all, you know, you know, it runs
at a COP of one. So I think that's, you know,
I don't know that the cold climate heat pumps
don't just mean it's for the north, right? That's
kind of why we use the term all climate heat
pumps. I think it belongs everywhere. I mean,
funny story to add along to that. point. Before
I moved to South Carolina, I used to live in
Macon, Georgia, which was a small city in middle
Georgia. I had two single stage heat pumps and
fairly older heat pumps that didn't have very
good low ambient performance. The last two out
of three years that I lived there, my heating
bill in the winter was actually more expensive
than my cooling bill in the summer. which to
think about in in middle georgia all the way
south to i -16 is is like unheard of right you'd
never i never thought that i would see something
like that but it's it's more of a combination
of you know trying to pick the right balance
point and you know and running electric heat
is simply very very expensive yeah you know a
um Another example that I like to use regularly
on these cold climate heat pump or all weather
heat pump is take like Florida. Most of the heating
and cooling systems in Florida traditionally
have been a straight air conditioner with an
electric resistive heat. That's all. Well, we
could take one of these. All weather, cold climate,
these higher performing heat pumps, we can completely
remove the electric resistive and we can just
use a heat pump that has 100 percent capacity
at whatever temperature it gets, because it's
always going to have 100 percent capacity in
Florida. And now we have a single heat pump that
has replaced that air conditioner and electric
furnace. And it's not in the north. It's in the
south. Exactly. In that application, the unit.
because of its performance, provides all the
heat that you would ever need. Just very similar
like you're talking about. Now, we are going
to see some transitions that many people are
unfamiliar with, or if they've heard it, they
think that it's a decade out. But let's talk
a little bit about some of the... One of the
reasons that we're pushing into higher performing
heat pumps is you mentioned gas bans. But also,
let's talk a little bit about the 95 % AFUE rule
that is out there for gas appliances. Yeah. So,
you know, you're obviously familiar with it,
Clifton. So there is a ruling that's going to
happen here in the next two years and a few months,
a little less than three years, that right now
is set to go into law. make 95 percent afue the
floor right so that's basically the minimum efficiency
today we produce two different types of furnaces
um and most most manufacturers do as well we
make 80 efficient furnaces or non -condensing
furnaces and then we make 90 plus afue furnaces
and they vary in efficiency levels from all the
way from 92 to 99 in some cases right so those
are condensing furnaces um just if you think
about it just broadly uh non -condensing furnaces
are more common in the south where heating days
are much more much less and then condensing furnaces
are more common up north where heating days are
a lot more than than than in the south condensing
furnaces are as the name suggests uh they're
some infrastructure that you have to put in place
because of the fact that the furnace itself condenses
so it raises you know it adds some venting complexity
because now you have to introduce plastic venting
instead of using a steel vent and you also have
to have to factor in condensate management right
um so when all of this happened across the country
where especially in the south where uh non -condensing
furnaces were the norm now you have to think
about adding this infrastructure in order to
replace a 80 furnace with a 95 or above furnace
so when when that happens it reduces the installed
cost gap between a furnace and a heat pump so
that that get cost gap shrinks dramatically um
so um i think that that in and of itself the
higher furnace minimums is indirectly going to
favor heat pumps and it's going to become you
know replacement options are going to become
more open -ended and i think there's a lot of
opportunity for the contractor to sort of reframe
reframe the conversation there right so um it
not just it just doesn't become hey i'm going
to take a furnace out and i'm going to put a
furnace back in i think there's a lot of opportunity
there to actually you know save money by going
to a heat pump Yeah, I do, too. I see a lot of
contractors relooking at their business model
currently, even here in the Midwest. You know,
I've got contractors that I work with that five
years ago, you know, they were a traditional
blended contractor. They worked on heat pumps
and they worked on gas furnaces and they sold
both. And today they only. sell heat pumps. Now
they will sell a dual fuel application, but they
will not sell an air conditioner. And so they
work with mid -tier heat pumps and up. And because
of that, they became an even more successful
contractor than they were five years ago. We
just have to be open to thinking about that change
and understanding how it can affect our business
model and the way that we market the products
that we're looking at. Yeah. I mean, the other
thing that we see a large scale adoption across
the U .S. and I think it's going to happen more
and more as lot sizes sort of shrink and home
sizes tend to grow is side discharge products.
Right. Oh, absolutely. If you look at predominantly
across the entire industry, side discharge products
are mainly offered only in heat pumps. um and
one of the main reasons why contract a lot of
the a lot of the manufacturers are investing
only in heat pumps is because i think everybody
understands that that's the future and that's
where uh that's where they go right so um you
know we're seeing we're seeing a lot of adoptions
um a lot of adoption even in that that sort of
form factor as well i mean if you look at overall
i mean heat pump adoption is just not driven
by a single force right it's sort of an intersection
of technology economics policy and of course
installer confidence which i think is a big is
a big deal right and i think we're at a point
where all of those are sort of aligning um and
the future is simply just upward from here yeah
i agree You know, before this podcast, we'd mentioned
a product that not everyone is familiar with.
I am very familiar because I've worked on a lot
of them in the past. You know, one of them with
a brand name of Magic Pack or a group name of
Magic Pack. You know, a smaller self -contained
unit that is installed on the side of the building.
A lot of mobile offices here in the Midwest use
those. Now back in, oh my gosh, here I'm going
to start dating myself. Back in my days, a lot
of our Magic Pack was a straight. AC with like
a two or three KW electric resistor backup. Now,
do we see even products like MagicPak starting
to move into heat pump designs? Yeah. So we're
seeing, we have a MagicPak product today that
has a heat pump in it, right? So it's a slightly
larger form factor in what we call the M -series
MagicPak. So we make everything. We make like
a straight cool unit. We make a heat pump and
we also make an 80 and a 95 FU furnace version
as well. So as I talked about before, as we see
more penetration of that product in sort of the
sunbelt area, we really expect that heat pump
to really take off. I love it. We're prepping
for that across the board in every single product,
be it packaged or split, and or even commercial
applications for that matter. I think we're seeing
adoption across the board. I'm sure you've seen
the cold climate heat pump challenge that was
organized by the DOE, both in residential and
the commercial categories. Lenox International
was the first manufacturer that to win both sides
of that challenge. So we're very, very invested
in this technology and we feel that there's plenty
of potential for us here. I do too. Iswar Sankar,
where can we learn more about allied products
and the heat pumps that we've been discussing?
Yeah, so alliedair .com is our company website.
Obviously, we sell under several different brands.
We sell under Armstrong Air, Concord, Duquesne,
Airese, and Magic Pack, and also Allied Commercial.
So all of these brands are also available, usually
followed by the name and then .com. So you can
find our information there. We sell direct to
distributors. That's sort of the business model
that Allied Air follows. Of course, you're familiar
with that with our distributor service representative
meeting that you were part of. So that's kind
of where you can learn all about Allied Air.
We sell a variety of everything from a single
stage AC to a large rooftop commercial unit.
All right. Thank you so much. Changing world.
And we're grateful that our manufacturers like
Allied Air are helping us understand this transition
that we're going through. Have a wonderful day.
You too. Always be compressing. Aha. Ooh, I love
that. You know, you know, Glenn. You know, you
know.