Mapping the Supply Chain for Room Air Conditioning Compressors

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Mapping the Supply Chain for Room Air Conditioning Compressors Mapping the Supply Chain for Room Air Conditioning Compressors Scott Nicholson and Chuck Booten National Renewable Energy Laboratory CEMAC is operated by the Joint Institute for Strategic Energy Analysis for the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy. Technical Report NREL/TP-6A20-73206 May 2019 Contract No. DE-AC36-08GO28308 Mapping the Supply Chain for Room Air Conditioning Compressors Scott Nicholson and Chuck Booten National Renewable Energy Laboratory CEMAC is operated by the Joint Institute for Strategic Energy Analysis for the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy. Clean Energy Manufacturing Technical Report Analysis Center NREL/TP-6A20-73206 15013 Denver West Parkway May 2019 Golden, CO 80401 303-275-3000 www.manufacturingcleanenergy.org Contract No. DE-AC36-08GO28308 NOTICE This work was authored by the National Renewable Energy Laboratory, operated by Alliance for Sustainable Energy, LLC, for the U.S. Department of Energy (DOE) under Contract No. DE-AC36-08GO28308. Funding provided by Kigali Cooling Efficiency Program. The views expressed herein do not necessarily represent the views of the DOE or the U.S. Government. This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications. U.S. Department of Energy (DOE) reports produced after 1991 and a growing number of pre-1991 documents are available free via www.OSTI.gov. Cover Photos: (left to right) iStock 2225189; iStock 16687273; Oak Ridge National Laboratory; iStock 24304597; iStock 26005993; iStock 2069560 NREL prints on paper that contains recycled content. Acknowledgments We would like to thank the Kigali Cooling Efficiency Program for providing funding for this analysis. In particular, we would like to thank Gabby Dreyfus for providing guidance and connecting us with cooling industry experts whose perspectives were essential in developing this report. We would also like to thank Samira Elkhamlichi and the rest of the World Bank team for inviting us to present preliminary findings from this work at the 2018 International th Sustainable Cooling Conference and 5 Annual CO3OL Workshop in Washington D.C. iii This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications. Nomenclature or List of Acronyms BEE Bureau of Energy Efficiency CEMAC Clean Energy Manufacturing Analysis Center GMCC Guangdong Meizhi Compressor Company GWP global warming potential HCFC hydrochlorofluorocarbon HFC hydrofluorocarbon HS harmonized system kW kilowatts MEPS minimum efficiency performance standard MLF Multilateral Fund for the Implementation of the Montreal Protocol NREL National Renewable Energy Laboratory POE polyolester PVE polyvinyl ether R-22 chlorodifluoromethane R-290 propane R-32 difluoromethane RAC room air conditioning THACOM Thai Compressor Manufacturing Company iv This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications. Executive Summary The Kigali Amendment to the Montreal Protocol on Substances that Deplete the Ozone Layer calls for the phasedown of hydrofluorocarbons (HFCs) with high global warming potential (GWP) that are used in a diverse array of applications, including refrigeration, foam blowing, and air conditioning.1 Much attention is focused on the air-conditioning sector, which is projected to grow substantially, especially in developing regions.2–3 The ductless mini-split is a common room air-conditioner design in use worldwide, and its adoption is growing in developing regions. Much of this report focuses on the market for rotary compressors, the type of compressor most commonly used in mini-split room air conditioners. The two types of rotary compressors used in mini-splits are fixed-speed and variable-speed. Fixed-speed units have only two modes: off and on. They cycle on when the temperature in the room gets too warm and turn off once the room has cooled sufficiently. This control method is simpler than that of variable-speed compressors, but it is also less efficient. Variable-speed units can operate at more than one speed in order to maintain a steady room temperature, leading to quieter and more efficient operation overall. The tradeoff is that variable-speed units are inverter-driven and require electronic control systems, which can add to manufacturing cost. Inverter-driven compressors were first developed for room air-conditioner use by Toshiba in the late 1980s. Our analysis of patent filings relating to inverter technology shows that the number of filings per year has risen sharply since then. The rate of patent applications relating to this technology reached an all-time high in 2016. We also find that the design of lubricants for efficient cooling equipment is an important area of research and development in the transition to low-global warming potential (GWP) refrigerants. Lubricant oil formulations developed for use in compressors with earlier generations of HFCs were incompatible with R-32, one of the low-GWP alternative refrigerants. Compatible oils have since been developed and patented for room air-conditioner use. Before proceeding further into the main report findings, it is worth reviewing the refrigerants and associated terminology that appear throughout this report. The “R-” nomenclature is used when referring to a gas or mixture of gases as a refrigerant. R-22 and R-32 are individual gases: HCFC-22 and HFC-32, respectively. R-410A is a mixture of HFC-32 and HFC-125. The hydrocarbon R-290 is more commonly known as propane outside the cooling sector. The GWP of a greenhouse gas is a measure of the amount of global warming impact associated with the gas relative to carbon dioxide, which is defined as having a GWP of one. On a 100-year timeframe, the GWPs of R-22, R-410A, R-32 and R-290 are 1810, 2088, 675 and 3.3, respectively.4 This report covers the major characteristics of the global rotary compressor market. It focuses on opportunities and challenges for adoption of the higher efficiency units. Company-specific compressor production capacity data show that nearly all rotary compressor production is concentrated in Asia, specifically China. The largest compressor manufacturing companies in China include GMCC, Gree, Highly, and Rechi. We find that these four companies, combined, account for over 60% of current global rotary compressor production capacity; GMCC alone v This report is available at no cost from the National Renewable Energy Laboratory (NREL) at www.nrel.gov/publications. accounts for about a quarter of global capacity. Other countries with rotary compressor production capacity as of 2018 include (in descending order of production capacity) Thailand, South Korea, Malaysia, Japan, India, Brazil and the Czech Republic. A compilation of data from company catalogs and websites indicates that rotary compressors using refrigerants with higher GWP, R-22 and R-410A, still account for the majority of models available worldwide. Many companies now offer both fixed-speed and variable-speed compressors. None of the variable- speed models identified in our search of major manufacturers’ compressor offerings use R-22 as a refrigerant; the variable-speed units use either R-410A or one of the low-GWP refrigerants: R-32 or R-290. In China, 42% of the 167 million rotary compressors produced in 2017 were of the variable-speed type; in 2012, only 30% of the 103 million Chinese-manufactured compressors were variable-speed. China accounts for the largest share of global rotary compressor trade, with significant flows to air-conditioning manufacturing hubs in Brazil, Europe, India, Japan, South Korea, Thailand, and other regions. However, more than 80% of the compressors produced in China are not exported; instead, they are used in the domestic manufacturing of air conditioners and are then exported as final products to other regions or sold to consumers within China. Looking further up the air-conditioner supply chain, we find that manufacturers currently rely on imports from several countries for parts used in the manufacture of both compressors and air conditioners themselves. Companies in countries such as Japan, South Korea, and the United States often supply the electronic components needed for these systems, especially the variable-speed ones. At least one company, Gree, is investing in infrastructure to manufacture electronic control microchips at one of its own plants to reduce reliance on imports. A representative of one manufacturer of air-conditioner parts—including inverter controllers, expansion valves, and heat exchangers—noted the importance of economies of scale in producing these smaller parts; it is usually more economical to have one large facility located in one lower-cost manufacturing region instead of multiple smaller, regionally distributed plants. However, companies with sufficient production capacity across multiple regions can shift production from one region to another to adapt to changing conditions while still meeting demand. India’s growth into a major residential air-conditioning market has precipitated growth in India’s domestic room air-conditioner compressor manufacturing. In some cases, companies have migrated compressor production capacity from older or defunct plants in other countries to India (e.g., Tecumseh India bringing in equipment from a former U.S. plant). Conversations with air-conditioning industry contacts in India have indicated that research
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