One month in, and Australia’s commercial road transport industry is steadily adjusting to the new carbon tax which is a new line item on every business’s energy bill. In particular, the refrigerated transport sector, which is continuing to face growing costs, given the price rise on refrigerants. But, some brands are now using the conversion as an opportunity to innovate.
It is safe to say that the advent of the carbon tax has affected the price of refrigerants significantly. Why? Because they are classified as hydrofluorocarbons (HFC). Under the Australian Government's “Clean Energy Future Plan”, synthetic greenhouse gases listed under the Kyoto Protocol – hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride, and any equipment or products which contain these gases – now have an equivalent carbon price applied through the existing “Ozone Protection and Synthetic Greenhouse Gas Management” legislation. These new arrangements commenced on 1 July 2012.
To gauge the equivalent carbon price, you just need to multiply the refrigerant’s Global Warming Potential (GWP) – a relative measure of how much heat it will trap in the atmosphere – by the amount of refrigerant you want to use. To do so, the Australian Government is offering a free calculating tool that can be downloaded from the Internet.
For example, the refrigerant R404a has a GWP of 3,260kg of CO2. The average trailer refrigeration unit, meanwhile, uses about eight kilograms of R404a. According to the official “Import Levy and Equivalent Carbon Price Calculator”, the equivalent carbon price is $599.84, the total levy $601.16 – including $1.32 non-carbon price import levy for HCFC and SGG components. Hence the total levy per kilogram R404a is $75.15. And, as the carbon price per tonne is meant to rise over time, the cost will rise as well, reaching $78.89 in 2013/14 and $82.97 in 2014-15.
“We usually import refrigeration equipment that is already filled with R404a, so we now have to pay the equivalent carbon price on that gas when the unit arrives in Australia. This flows on to effect our customers,” says Carrier Transicold’s Kelly Geddes.
And, the cost of a gas leak has not even been added yet. Refrigerant leaks have been accepted as a common problem in the trade and based on an eight per cent leak rate, a typical trailer refrigeration unit could lose 6.4kg of refrigerant over a 10-year lifecycle. The refill will again be taxed based on the carbon price valid at the time. In that sense, every new installation or breakdown will also become more expensive.
Peter Lawrence, Regional Director for Thermo King Australasia, also realizes the inescapability of passing on price increase. “Firstly, the tax will raise the import cost of the actual equipment,” he says. “But, since Refrigerant content only represents a small proportion of the overall value of the imported machine, we intend to pass on the increase at import cost value. Thermo King therefore plans to identify pre-July imports and post-July imports for differing invoice value to our dealers. Secondly, however, warranty costs will increase by virtue of the need to fund the significant price rises for refrigerants purchased by dealers and authorised repairers at the local level and then used in any warrantable repairs. Customers can expect billed repairs to contain refrigerant prices increases 300 per cent to 600 per cent beyond current levels according to estimates by Refrigerants Australia.”
The question, now, is whether the growing cost level will force some entities to the point of closure, or if they have contingencies in place to thwart the impact. Tim Edwards, President of the Australian Refrigeration Association (ARA), is optimistic that the levy will not cause mayhem. “The purpose of the levy is to give the industry a price incentive to reduce HFC refrigerant leakage and to adopt low GWP technologies,” he says. “The refrigeration and air conditioning industry needs to look beyond the short term concerns to see the immediate and longer-term benefits of the levy. The ARA is confident that the levy will cause growth in the HVACR industry for those that embrace the opportunity.”
According to other refrigerant equipment specialists, there are some upsides in the carbon increases. “Of course we also see the positive side of the tax,” says Carrier’s Kelly Geddes. “The Government is trying to reduce the leakage of synthetic greenhouse gases, which is good for the environment and will push the industry to develop new, more efficient technologies. Unfortunately, at the moment, there is no direct, drop-in alternative in R404a equipment, which is why some companies are now opting for all-electric systems and hybrid technology. They are more efficient and have significantly reduced leak rates, saving operators money on high cost refrigerants.”
In a conventional belt-driven trailer refrigeration system, a diesel engine provides power via a system of shafts, belts and pulleys to an open type compressor that requires a vulnerable shaft seal to contain refrigerant. Units like the Carrier Vector, however, use a high-output electric generator that drives a sealed compressor and refrigeration circuit to greatly reduce the potential for refrigerant leakage to as low as 1.5 per cent.
While strategies to tackle the impact of the carbon tax vary, industry leaders agree that the development of environmentally sound technologies is a must in Australia’s contested transport market. According to Tim Edwards, by considering low GWP refrigerant technologies, the industry has the opportunity to create more energy efficient solutions and help the industry save hard cash. “Both of these will generate greater revenue and employment in the industry for those suppliers that see the commercial opportunity in the HFC levy; perhaps as much as five to seven per cent incremental growth per annum over the next ten years.”
On the fleet side, that growth potential is still being questioned. Adelaide-based transport business, Wightman Transport, for instance, does not see an alternative to passing on the cost directly. The company makes its coin by freighting perishable goods for retail outlets from Adelaide to a variety of locations across South Australia and parts of Victoria and NSW, using a fleet of 50 refrigerated trailers. “As far as business goes, the challenge is how to adjust to yet again,” says Transport Director, Peter Starke. “No tax is a good tax, because higher rates will always be passed on to the consumer in one way or the other.”
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