Analysis: How Climate Change Will Create a Booming HVAC Market in the USA, Especially in These 2 Metro Cities
8 min
Nov 16, 2022
Climate change is creating interesting adaptations to the way we live and work.
Floating homes are becoming more popular in the Netherlands with rising ocean levels.
Miami should expect “100 year floods” every couple years, leading the local government to literally raise streets.
The Great Pacific Garbage Patch, a phenomenon that rocked the internet about 10 years ago, will likely be 90% cleaned up by 2030 due to increasing technology.
While there are interesting and exciting technological advancements due to climate change (technologies that will reduce greenhouse gasses while simultaneously making our lives better), the main side effect the average person is experiencing is rising temperatures. With rising temperatures, what will this mean for the HVAC market, an industry designed to keep people cool?
After a detailed analysis, it’s likely that the HVAC market will see dramatic growth over the next 20-30 years, with particular growth in 2 major US cities.
Note: HVAC is for both heating and cooling. In this analysis, we’re focusing on the AC side of HVAC.
Climate Change Projections in Major Metro Areas in the 2050s:
According to data, this is what some of the major metropolitan areas might experience in the 2050s:
- Chicago, IL: The typical number of heat wave days in Illinois is projected to increase from 10 to more than 60 days* a year. See info.
- New York, NY: Average temperatures are expected to increase by up to 5.7 degrees Fahrenheit. See info.
- Seattle, WA: By roughly 2050 a “normal” year in Washington will be warmer than the hottest year during the 20th century. See info.
- Dallas, TX: Currently averages more than 60 dangerous heat days a year. By 2050, the state is projected to see 115 such days a year. See info.
- Denver, CO: Climate models predict a 2.5 to 6.5 degree rise by 2050. See info.
- Portland, OR: Average annual temperature is projected to increase 5 degrees Fahrenheit by 2050 and more than 6 degrees in summer. See info.
- Miami, FL: Currently has an average of 25 dangerous heat days each year. By 2050, it is projected to see 130 such days each year. See info.
Climate Change Has (and Will Continue) To Heat Up HVAC Market Growth
It’s not just new homes from population growth fueling the HVAC market. It’s also existing homes that aren’t prepared for rising temperatures.
The United States government says:
“Results from a wide range of climate model simulations suggest that our planet’s average temperature could be between 2 and 9.7°F (1.1 to 5.4°C) warmer in 2100 than it is today.”
Climate change is likely already contributing to mass AC adoption.
.png)
Just 25 years ago, over 30% of households didn’t have any type of AC (central unit or wall unit). Now? Less than 15% of households don’t have AC.
Major Metropolitan Markets and AC Adoption
- Chicago, IL: About 5% of households do not have AC. See info.
- New York, NY: About 10% of households do not have AC. See info.
- Seattle, WA: About 52% of households do not have AC. See info.
- Dallas, TX: About 10% of households do not have AC. See info.
- Denver, CO: About 30% of households do not have AC. See info.
- Portland, OR: About 41% of households do not have AC. See info.
- Miami, FL: About 1% of households do not have AC. See info.
While some of these numbers seem small, such as 10% of households in Dallas not having air conditioning, it’s important to note that Dallas has nearly 8 million people. 10% is a significant amount of households.
With climate change projections impacting all major cities in the United States, it’s likely that the HVAC market will see steady, consistent growth in the next 20-30 years. However, while there’s massive demand for AC across metropolitan markets across the United States, certain communities will likely have more future demand, per capita, compared to others due to climate change impacts.
Look back at the list above. Over 50% of households do not have AC in Seattle, WA which has over 4 million residents. Compare that to Chicago, where 5% of households don’t have AC. The future market potential for HVAC companies will be much different.
Communities without AC in the Pacific Northwest Have Proven to be a Potential Health Crisis, with Hundreds Dying of Heat Stroke in 2021
The entire Pacific Northwest (Oregon, Washington, and British Columbia) saw record heat in June of 2021. Portland, OR hit 116 degrees, shattering its previous record of 106 degrees.
About 800 people died during the heatwave across Oregon, Washington, and BC. Many homes in these communities don’t have AC, which we’ll explore deeper in the next section.
Getting AC installed in these communities (particularly in homes where at-risk people live) is a public health effort teetering on the edge of a public health crisis.
Millions of households in the Northwest don’t have AC
2018 data show the percentage of households that don’t have AC (whether central AC or wall unit):
- Montana = 52% of households don’t have AC
- Washington = 48% of households don’t have AC
- Oregon = 41% of households don’t have AC
- Idaho = 22% of households don’t have AC
Some of these numbers are shocking. Washington is the 13th most populous state in the US. And 48% of households don’t have AC.
- Total residents in these 4 states as of 2021 (most recent data) = 15.2M
- Estimated households in these 4 states as of 2021 = 5.8M
- Estimated households without AC as of 2021= 2.5M
That’s a total of 2.5M households without AC of any kind in Montana, Washington, Oregon, and Idaho.
Fun fact: I’m writing this from Portland, OR on August 17th, 2022. My wife and I recently moved to a home that, you guessed it, doesn’t have any sort of AC (whether wall unit or central air). We fall within that category!
Fun Fact #2: The temperature today? 98 degrees. The temperature tomorrow? 97 degrees. The supposed “average” high temperature for August in Portland? 80 degrees.
Fun Fact #3: We’re actively looking to buy an AC unit.
Population Growth + Climate Change in The Northwest:
The numbers in the section above, 2.5M households without AC, doesn’t take into account population growth and new households.
Let’s look at the two main cities in Oregon and Washington. You’ve got Portland, OR and Seattle, WA.
Seattle:
- Seattle metro has an estimated population of 4,102,400 as of 2022.
- By 2040, Seattle is expected to add 1.7M people. At 2.6 people per household, that’s another 653,846 households for Seattle.
Portland:
- Portland metro has an estimated population of 2,197,000 as of 2022.
- By 2040, Seattle is expected to add over 800,000 people. At 2.6 people per household, that’s another 307,692 households for Portland.
Between these two cities alone, we’re looking at close to 1 million new households (961,538 to be exact) before 2040. That’s less than 20 years away.
There’s already hundreds of thousands of households without AC in Portland and Seattle. Then you’ve got nearly 1 million new households due to population growth.
For the entire United States, the HVAC market is valued at $16.54 billion in 2021. It’s “projected to grow at a compound annual growth rate (CAGR) of 5.6% from 2022 to 2030.”
Projected Market Growth in Portland and Seattle Alone:
We believe the HVAC market value in Portland and Seattle will more than double by 2040.
Based on projected growth, we believe that Portland and Seattle alone will increase from an estimated current market value of $313M to more than $749M*
There’s a lot of opportunity for HVAC companies targeting this specific market.
HVAC opportunities exist in all major metropolitan markets in the USA, but the Northwest will see booming market growth , per capita, in the next 10-20 years
For example, Las Vegas has 99% AC saturation. Meaning that 99% of homes have air conditioning.
Compare that to the Northwest, where Montana has 48% saturation, Washington state has 52% saturation and Oregon has 59% saturation.
Growth opportunities are threefold:
- Existing HVAC companies in Oregon, Washington, Montana, and Idaho can step up their game, winning not only major metropolitan markets, but expanding satellite offices in smaller communities to become the dominant presence.
- Existing HVAC companies outside the Northwest can open offices/territories in these areas, infiltrating existing competition
- New HVAC companies open, attempting to take market share as demand rises.
Air Conditioning Isn’t The Solution to Climate Change - Expect the Market to Change Dramatically
Traditional air conditioning units actually are problematic to the environment.
They use chemical refrigerants and actually release heat back into the air. In densely populated areas with tall buildings, lack of trees, and yep, AC units adding more heat into the local environment, phenomena known as “heat islands” can occur.
Technological advancements in AC is a must. Thankfully, startups are working to develop environmentally friendly cooling systems.
What could an overhaul to HVAC units mean for the HVAC market and HVAC companies?
It could mean total market disruption. If one of these innovative, environmentally friendly cooling systems proves successful, new regulations could go into effect requiring new households to use these systems.
HVAC companies will need to quickly pivot to adopt these new technologies, become the experts on installation and maintenance.
*There aren’t any publicly available market values for the HVAC market in Portland and Seattle. To estimate these numbers, we gathered data on the total current US HVAC market valuation (16.54 billion) and divided it by the number of people in the United States (2022 estimation of 332,403,650).
From there, we determined a rough market value per person in the US ($49.76).
Current rough estimated market value per person = $49.76 x current population of Portland + Seattle = $313,458,144
We then assumed the cost of HVAC rising 4% per year. So, in 2040, the value per person will be $85.12.
Finally, we multiplied the expected market value per person in 2040 = $85.12 x expected population of Portland + Seattle = $749,260,288
