Estimation of Cooling & Refrigeration in the near future

In an interview with Cooling India Arushi Thakur Upadhyay, Associate Director, Industrial Practice, Frost & Sullivan shares a detailed assessment of the Cooling and Refrigeration Sector in India.

Could you provide a brief assessment of the Cooling sector in India? What is the market demand for various cooling solutions and what is the market growth trajectory for the cooling and HVAC&R sector?

The overall cooling demand in India is currently estimated at 23,000 MT which is expected to grow at 2.8 times by 2028. Space Cooling will contribute the majority of the demand with a 68% share approximately, followed by refrigeration, transport, air conditioning, and cold chain. The overall HVAC (Heating, Ventilation, and Air Conditioning) market in India is approximately ` 28,000 Crore in FY20. The room air conditioner market contributes to 60% of the market share according to Frost & Sullivan’s analysis. Overall, room air conditioners expect to have positive growth due to climate change and an increase in adoption. The current penetration of room air conditioners in India is low at around 6%, while the global average is 55%. Commercial ACs may see a sluggish growth due to slow-down in new establishments as well as reduction of footfall in commercial space. Currently, COVID-19 has impacted the market to a great extent creating uncertainty. Most corporate offices are considering ‘work from home’ as the ‘new normal’. In FY18 space cooling, energy consumption was estimated at 135 TWh, projected to grow four times by 2037-38. Also, the per capita space cooling energy consumption is low at 69kWh per person compared to the global average of 272 kWh per person.

On assessing market for refrigerants in India, how do we fare when compared to the international market? What is the kind of market demand for refrigerants and solutions?

Choosing the right refrigerant has become more complicated, as it is critical to ensure a balance between energy efficiency and minimal environmental impact. The annual indigenous production of refrigerants in India was around 24,300 MT in FY18 and is likely to grow to 1,66,000-1,81,000 MT by 2037-38. This is very low compared to the global market, which is led by China, the US, and Europe. With the help of India Cooling Action plan and other energy efficiency measures, the demand is anticipated to reduce by 25-30% by 2037-38.

What are the updates within the industry concerning the refrigeration sector in India? 

The penetration of domestic refrigerators in India is currently at around 33%, hence there is sufficient headroom for growth. The Indian refrigerators market is categorized into two product types i.e. Direct Cool and Frost Free. According to Frost & Sullivan’s analysis, Direct Cool refrigerators dominate the market with almost 75% share. However, the popularity of Frost Free refrigerators is growing, especially among urban households. Commercial Refrigeration market in India is highly fragmented, with the presence of many regional and local suppliers. Large players in the past have taken initiatives to organize the market for certain product categories. The major national players enjoy around 70% market share. However, the remaining 30%, is fragmented with the presence of 40+ players across regions and cities. The market expects to see a slowdown in the near future due to COVID-19 impact, as there will be dearth in sales across key end-user segments.

What are the various technologies in place for the sake of next-generation refrigeration and cooling solutions?

Next-generation refrigeration and cooling include various technologies, such as Ammonia-water VARs, Solar Assisted Cooling, Inverter Technology, and Heat Recovery. Ammonia-Water VARs (Vapor Absorption Refrigeration) – As water has a strong affinity towards ammonia, they are used in various operating conditions. Ammonia water solution has high stability and functions better with most materials except those that can easily be corroded, due to the presence of ammonia. In Ammonia-water VARs, ammonia is used as a refrigerant and water is used as an absorbent. Both ammonia and water are generated from the solution in the generator.

Solar Assisted Cooling – This system comprises solar collectors, storage tanks, control units, pipes and pumps and a thermally driven cooling machine. Solar Assisted Cooling (SAC) provides additional pre-cooling for chilled water/condensers of compression systems. It is an interesting alternative to reduce the power consumption of conventional cooling systems and reduce the carbon footprint. Inverter technology – similarly, in space cooling inverter technology, is gaining more prominence currently in room air conditioners, is expected to spread across commercial HVAC. In VRF (Variable Refrigerant Flow), most of the suppliers in the market have launched 5th generation VRF technology with advance dual inverter compressors. Heat Recovery Systems – Compared to heat pumps, heat recovery systems have lower energy requirements and facilitate efficient heat management. Due to the growing awareness among consultants and contractors about the advantages of heat recovery systems, the growth of the market is witnessing a major boost, according to Frost & Sullivan’s analysis.

Cooling Refrigeration
Image by Erich Westendarp from Pixabay

India is also a signatory to the Paris Agreement. How do we stand as a country in meeting regulations to achieve a low-carbon footprint?

India has played a key role by signing the Kigali Amendment, which aims to phase-down the hydrofluorocarbons (HFCs) by reducing their production and consumption and the Montreal Protocol, which aims to phase out Hydrochlorofluorocarbons (HCFC) by 2030. India has maintained that it will meet its 2030 targets ahead of schedule. Also, it has recognized the connection between the energy efficiency of HVAC equipment with the transition of refrigerant. Recently, Environment Minister Prakash Javadekar mentioned that India along, with six other countries are on the path to achieving the NDC (nationally determined contributions), where India is leading the list.

India’s national climate action plans, in accordance with the Paris Agreement, has set three major goals:

  • Increase the share of non-fossil fuels to 40% of the total electricity generation capacity.
  • To reduce the emission intensity of the economy to 35% by 2030 from 2005 level.
  • To create additional carbon sink of 2.5-3 billion tons of CO2 equivalent through additional forest and tree cover.

Studies by various research agencies have clearly shown that India is committed to achieving the goals set in the Paris agreement. A recent analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) indicates that India is expected to achieve its energy capacity and emissions intensity goals by 2020.

Considering the onset of COVID-19 being a game-changer, how would businesses have to rewrite the script through which they function?

Companies should focus more on online sales, as the footfall to retail stores will be reduced in the future. With the increasing trend of online retailing, suppliers can achieve the target. At the manufacturing front, most suppliers are dependent on imports for various components from China and other countries. OEMs (original equipment manufacturers) can now focus more on localization, which helps with the supply chain challenges they are currently facing. They need to partner with multiple local vendors and not depend on a single source of supply. OEMs need to have predictive analysis in place, to meet the demand for components/supplies in advance and keep the stock ready during the production phase. Installation, maintenance, and service staff should be trained to service customers while using PPE (personal protective equipment) kits.

From the industry perspective, what are the pressing questions that need to be addressed concerning HVAC applications, meeting client and also market demand?

Energy efficiency and reducing OPEX (operational expenditure) are becoming the primary concerns for customers, especially in key end-user segments such as commercial, data centers, and industrial clients. Establishing a clear balance between current and forecasted cooling demand through modular design while ensuring optimum performance will prove critical.

Tell us about technological advancement and the call for energy-efficient solutions, how big is this demand?

Energy efficiency in Cooling Technologies is the need of the hour. India Cooling Action Plan (ICAP) and District Energy in Cities Initiatives are expected to drive the demand for efficient District Cooling technologies in India. Ministry for Environment, Forest and Climate Change’s ICAP has set out certain targets to achieve in the next 20 years such as – reducing cooling demand to 20-25%, reducing refrigerant demand, reducing cooling energy requirement by 25-40%, and recognizing thrust of research and providing training and certification synergizing with skill India mission. Thermal storage and district cooling are new technologies that have a significant role to play in building and appliance efficiency.

What are the updates concerning policy and regulation around refrigeration and what role can the Government play for the future?

To increase energy efficiency, apart from the room air conditioner and refrigerator, the Government has implemented testing and star labelling for unitary products (Cassette AC, Tower AC, Ceiling/Floor AC, and Corner AC) up to 3 ton capacity in the year 2018-19. Similarly, in 2018-19 there is was an update to the Commercial ECBC (Energy Conservation Building Code), which provides two additional sets of incremental requirements for buildings to achieve enhanced levels of energy efficiency that go beyond the minimum requirements. The code applies to buildings or building complexes that have a connected load of 100 kW or greater, or a contract demand of 120 kVA or greater, intended to be utilized for commercial purposes.