• HVAC
  • Energy Efficiency Standards
  • Energy Policy
  • Policy and Regulations
  • Sustainability

The Future of Residential Cooling

Young Hoon Kim
Oct 08, 2020

Guidehouse Insights

Energy demand for space cooling has more than tripled since 1990—it consumed nearly 8.5% of total electricity in 2019. Without immediate action, the energy demand for cooling space will increase dramatically by 2050. Enhancing cooling equipment efficiency and persuading consumers to purchase the most efficient products can play a crucial role in reducing cooling energy demand by approximately 45%, as stated by the International Energy Agency. Various attempts to reduce cooling demand through policy are currently driving growth in adoption of more efficient air conditioning.

Policy Efforts to Improve RAC Efficiency in Asia Pacific

A new efficiency rating for room air conditioners (RACs) in China is expected to make 99.8% of fixed speed RACs obsolete, according to the Kigali Cooling Efficiency Program. The new standard took effect in early July 2020 and will lead the RAC market growth toward high efficiency, variable-speed AC by combining fixed and variable technology standards into one. Consequently, incumbent industry players such as Haier, Midea Group, and Gree will offer higher efficiency models due to the new requirements.

The regulatory efforts in China toward higher efficiency products follow a trend that has occurred in India and South Korea over the past few years. Every 2 years, India’s Bureau of Energy Efficiency upgrades efficiency ratings, specifically for AC and refrigerators. The recently amended RAC standard will provide the updated Indian Seasonal Energy Efficiency Ratio in January 2021; the default temperature setup at 24°C (75.2°F) has already been enacted from January 2020. Notably, an increment change of 1°C (1.8°F) for AC will save up to 6% electricity. Similar regulatory activities are occurring in other countries as well. For example, the default temperature setting is 28°C (82.4°F) in Japan, and users cannot lower the AC temperature below 26°C (78.8°F) in California in the US.

Coordination between Government and Industry Is Key

Careful policy design is key for incentivizing consumer behavior. For example, the Korea Energy Agency (KEA) implemented new energy efficiency labeling and standards in 2018. Labeling ranges from Grade 5 at the bottom to Grade 1 at the top. Although many appliances—including some wall-mounted RACs—satisfied the Grade 1 requirement, the 2018 standard was too challenging for floor-standing RACs (shown in the figure below), which are popular in South Korea and some regions of China. Subsequently, all formerly Grade 1 floor-standing RACs were downgraded to Grades 2 and 3, even if the systems were highly efficient from an industry perspective. Many consumers desiring a top efficiency RAC are confused by the absence of Grade 1 floor-standing RACs. As a result, KEA and energy-related government entities are considering changing the floor-standing RAC's energy efficiency label (Note: website is in Korean) to alleviate consumer skepticism. Examples like this demonstrate that effective industry-government collaboration is required for policies to have a desired effect on production and consumer choice.

Floor-Standing RAC

Floor-Standing RAC

(Source: LG Electronics)

How to Achieve Sustainable Cooling

Achieving the ultimate target of sustainable cooling requires a tireless effort to change consumer behavior, develop active solutions, and innovate new technology and effective policy. Numerous global challenges and competition efforts such as the Global Cooling Prize (a global competition searching for innovative residential cooling technology) can improve cooling efficiency and sustainability. Most importantly, the movement toward more efficient and optimized RACs requires collaboration between governments and industry in updating energy efficiency labeling and standards.

Policy efforts in China, India, and other countries support energy efficient AC market growth in Asia Pacific, where population and income are expected to increase rapidly in the future. While many market barriers to efficient cooling remain in this region, policy will be a key driver in achieving cooling energy efficiency and sustainability. However, policy needs to be prudent and thoughtfully designed to support growth. For additional information about heating and ventilation, including AC, see Guidehouse Insights’ report Residential Heating and Cooling Innovations.