Russian Refrigerant Market in The Light of the Forthcoming Phase-Out of Hydrochlorofluorocarbons

Refrigeration and HVAC business in Russia has found itself in a rather difficult position. Besides the consequences of the global economical crisis, the industry faced the difficulties caused by the accelerated fulfillment of obligations under the Montreal Protocol.

Background

Starting from 2010, import of ozone-depleting substances – hydrochlorofluorocarbons (HCFC) – to Russia has been practically forbidden. Promises of various regulatory bodies to develop the mechanism of import quota allocation had not been fulfilled by the beginning of the season. The suggestion for temporary quota allocation has neither been approved nor declined while the corresponding decree of the Government of the Russian Federation was at the coordination stage as of the date of this article preparation. HCFC consumers and sellers were essentially suggested to orient themselves to the domestic refrigerants; however, our factories do not produce freon-22 in disposable containers while R141b, which is used as a foaming agent in production of heat-insulation materials, is not produced at all.

At first sight, HCFC phase-out does not seem as a significant issue. This is because Europe had finished this process several years ago, and everybody seems to have survived the process. However, the situation in Russia is different in certain ways. Montreal Protocol signed in 1987, was adjusted in 2007 in order to accelerate HCFC phase-out. At that, no prohibition for importation of HCFC-based equipment was adopted in our country and, since the developed countries started the phase-out process much earlier, the non-demanded R22-based equipment flushed to our country. The economical crisis worsened the situation even more: customers, on the basis of price first of all, often selected R22-based equipment and distributors who expected the forthcoming prohibition of the corresponding equipment, filled warehouses with it.

In addition to the above, contrary to any reason, in the conditions of HCFC prohibition being in force in Europe, in the second half of the first decade of 21st century in our country industrial ammonia-based refrigerating equipment were transferred to R22 on a large scale, and even new large objects with HCFC-based equipment were built. As a result, the newly built cold storage facilities and re-equipped strategic storages increased HCFC consumption which had already been rather high: according to different estimates, today we need 20-40 thousand metric tons of R22 per year, while the limit determined by the Montreal Protocol is less than 1000 tons ODP (ODP ton is the product of the mass by ozone-depleting potential value which is equal to 0.055 for R22; this means less than 20 000 metric tons per year).

Today

Strict limitations for HCFC importation turned out the actual prohibition. It is the height of the season already, however, the norms and criteria for import quota allocation have not yet been developed.

By the beginning of 2010 season, the usual servicing of air-conditioners and refrigerating installation had become a nontrivial task. The price of R22 increased abruptly to 180-220 per kilogram while the refrigerant in small-volume disposable containers had just disappeared from warehouses of distributors. The situation turned out even worse for foam insulation manufacturers who use R141b – they had either to upgrade their equipment urgently, or to stop the manufacture process.

Domestic factories failed to organize HCFC manufacture in the forms needed by the industry: at “Halogen” factory R22 is sold in cylinders from 40 kg in volume (and the price of one cylinder more than 30 times exceeds that in China); those, who wish to use their own cylinders should keep in mind that each container must be certified. “Chimprom” in Volgograd seem to have already stopped R22 manufacture, however, the factory accepts orders for the refrigerant in cylinders from 40 kg in volume, but without any exact terms of fulfilling those orders.

With all that, R22-based equipment is still offered to consumers and customers. And it’s not a surprise since there is no ready-to-use alternative to this refrigerant neither for commercial refrigeration, nor for HVAC systems; moreover, the price is a very essential factor these days.

At that, Rostekhnadzor has already started implementing the order to create the registry of all HCFC-charged equipment. Within the nearest future, de-installation of such equipment without proper disposal of the refrigerant will be prohibited while maintenance of the working systems will be a challenge due to HCFC shortage. Even with the importation quotas having been developed, the volume determined for our country by the Montreal Protocol will be insufficient.

Nearest future

Hydrofluorocarbons (HCF) such as R407C, R410a, and R134a could be used to replace HCFC. However, it’s not that simple even in this case. First of all, the manufacture of those refrigerants is rater expensive: both refrigerants themselves and the equipment charged with them are more expensive than R22-based analogues. Second, limitations for R134a use are a matter for the nearest future: in some European countries prohibitory taxes have already been introduced for this refrigerant. HFC can be prohibited due to their significant global warming potential and due to their obviously low energy efficiency.

Even today, amendments and annexes to international protocols regulating HFC phase-out are being prepared. The base level of their consumption is set at the level of 2004, and by 2033 HFC consumption by developed countries is to be decreased down to the level of 15% of the base level, while 10 years later the developing countries are to reach this level, too.

United Nations Industrial Development organization (UNIDO) is presently implementing the project aimed at aiding companies which are forced to upgrade their refrigerating and HVAC equipment, in the transfer to most efficient refrigerating technologies. As one may understand, HFC use is not related to such technologies.

So, what will HCFCs be replaced with? R22 is expected to be replaced rather rapidly with mixture refrigerants like R404a, R407, and R410. However, since all those refrigerant are HFC-based, they will become subject to replacement earlier or later. Even now Honeywell and DuPont are setting about large-scale manufacture of innovative refrigerant HFO-1234yf which is to replace R134a in MACs (see. World News column). In domestic refrigerators, isobutane (R600a) can be used instead of R134a. Due to the explosion hazard, the use of this refrigerant in large systems may cause serious problems. In order to decrease the risks, it is suggested to transfer to less powerful de-centralized systems, however it is an open question whether such transfer can be implemented in today’s economic situation.

Another alternative to HCFC and HFC may become the introduction of CO₂- and ammonia-based installations. Ammonia is a natural refrigerant which does not deplete the ozone layer and has no influence on the climate. Despite the fact that ammonia use in our country has been complicated by numerous norms and limitations, today we have an opportunity of changing the situation. All ammonia-related norms were calculated half-century ago basing on the low quality of materials and fittings available at that time, and complete absence of protective automation devices. Ammonia systems have a right to exist and modern equipment is relatively safe (see opinions of experts).

Carbon dioxide which seems safe in all regards, still has one serious disadvantage: a very high operating pressure (not lower than 80 bars) has to be maintained in CO₂-based systems. In spite of rather strict certification rules for working with pressure vessels and controlling the state of the vessels themselves, our refrigeration industry is obviously not ready for this technology due to the lack of qualified staff. By the way, it is another difficulty for the regulating bodies, which is expected to be eliminated through the foundation of a network of authorized training centers and the system of attestation of persons working with refrigerants.

Summary

The combination of several unfavorable factors has put the Russian refrigerant market in a very difficult position. Almost everybody understands that ozone-depleting refrigerants must be phased out, however, there is neither any comparable alternative to HCFC nor a common opinion on what should such an alternative be; likewise, there is no clear action plan which organizations responsible for HCFC phase-out should have. There is no HCFCs in disposable containers, no importation quotas have been worked out, and the current market situation means that 2010 season will be a hard one.

The article has been prepared by Sergey Buchin and Sergey Smagin.

Opinions of Experts

Anders Lindborg, a leading expert for refrigerant applications, Sweden

“Alternative” refrigerants

Of the refrigerants whose properties are listed in Table 1, only ammonia, carbon dioxide, air, and water are used (fig. 1).

Chlorofluorocarbons (CFC) and hydrochlorofluorocarbons (HCFC) have been phased out, while hydrofluorocarbons (HFC) application has been limited by the legislation due to their high global warming potential (GWP). Another drawback is that many HFCs are used as blends of which most of them have glide. This causes limitations as blends with glide cannot be used in flooded systems. Flooded systems normally offer better efficiencies than process with thermostatic expansion valves.

Figure 1. Refrigerants Time-Line

Ammonia is used more with respect to modern Safety Standards. Materials, welding techniques and inspections have improved quality and above all education of operators and service personnel. Ammonia is very energy efficient, which attracts owners and users of refrigeration systems.

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Yuriy Sorokin, HCFC phase-out in Russia UNIDO Programme Director

Nikolai Ratanov, Conditioning and Refrigerants Division Director at OOO Morena.

The Summer Will Place Everything in Its Place

R22 and other HCFCs importation limitation coincided with the increase of prices for raw materials for manufacture of modern refrigerants.

Presently the situation has stabilized and price growth for refrigerants has stopped, even some decrease may be expected, however, not to the levels which everybody dreams about. Chinese manufacturers saw that they actually can dictate their conditions and are unlikely to decrease their prices.

European manufacturers started “who sells at higher price” game among themselves while not having the required amounts of the product. Work with domestic R22 manufacturers resembles the pre-historic times when installers had their own cylinders and got “poured” refrigerants in their own containers. The impossibility of legal satisfaction of the market demand for the refrigerant led to the emergence of offers for contraband importation of R22 from the Ukraine, from regions bordering with Kazakhstan, from the Far East. We observed similar situation after R12 prohibition.

It is practically impossible to forecast the refrigerant market development scenario because many equipment suppliers did not listen to recommendations of specialists and did not adjust their plans for 2010. Substitutes which could actually alleviate the situation at the HVAC&R market, are practically absent. Failure to introduce the prohibition for R22-based equipment simultaneously with HCFC importation limitation worsens even further the situation for consumers for whom the issue of equipment price outbalances all other issues.

My opinion is as follows: the summer, which according to meteorologists will feature abnormal temperatures, will put everything in its place.

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Oleg Borisovich Tsvetkov, professor of St. Petersburg State University of Refrigeration and Food Engineering, member of IAR

Vasiliy Nifantievich Tselikov, Advisor of the Directorate of FCGS "Ecology", Consultant at United Nations Industrial Development organization (UNIDO)

HCFC Consumption in the Russian Federation

In Annex C (Group I) to the Montreal Protocol on the Substances that Deplete the Ozone Layer, 40 substances are listed. Of those, only four are in demand in Russia: HCFC-22, HCFC-141b, HCFC-142b, and HCFC-21. The consumption of the latter two refrigerants is relatively low. Take a detailed look at the balance of these substances consumption (manufacture, use as raw stuff, import and export) in 2007-2009. This data may be most representative for forecasting the trends for the nearest future.

The data above show that the most widespread from consumption point of view is HCFC-22: its annual consumption in the country constituted almost 12 thousand tons during three last years. The main application is the use as a refrigerant for service maintenance and HVAC&R equipment manufacture. This refrigerant (including contained in blends) is imported mainly in disposable cylinders. The volume of consumption as a foaming agent and solvent is insignificant and does not exceed 100-150 tons.

The crisis with HCFC import which broke out in January 2010, has a number of underlying causes. First of all, from this date, another stage of implementation by Russia of its obligations under the Montreal Protocol started, which consists in limiting HCFC consumption at the level of about one thousand tons of ozone-depleting potential (ODP t). Considering the fact that in 2007 the level of consumption constituted 1028.2 ODP t, in 2008 – 1133.2 ODP t, and in 2009 – 936.6 ODP t, the related federal executive bodies (Minprirody of Russia, Minprodtorg of Russia, and Rostekhnadzor) deemed the exceedance of this level very likely to occur.

Second, according to the Resolution of the Inter-governmental Council of January 1st, 2010 No 19, the Unified List of Goods on which import or export prohibitions or restrictions are imposed by the members of the Customs Union within the scope of the Eurasian Economic Community in trade with third countries and Regulation on application of restrictions were approved. This list includes all HCFCs listed in Annex C to the Montreal Protocol.

The agreement among Governments of Eurasian Economic Community member states of June 9^th, 2009 “On the order of introducing and implementing measures related to the external trade within the common customs territory in regard of third states” provided the introduction of HCFC importation quota allocation.

Resolution of the Government of the Russian Federation of May 8th, 1996 No 563 approved the Resolution on the order of import to the Russian Federation and export from the Russian Federation of ozone-depleting substances (ODSs) and production containing them. The above Resolution states that import and export of ODSs and products containing those shall be performed under licenses issued by Minpromtorg of Russia on the basis of resolutions of Rostekhnadzor.

However, up to the present, the order and the procedure for issuing licenses for ODSs, including HCFC-22 and HCFC-141b, import and export to and from the Russian Federation, as well as quota allocation for importing such substances, have not yet been determined.

From January 1^st, 2010 Rostekhnadzor and Ministry of Industry and Trade of the Russian Federation suspended the issuance of permissions and licenses for importing HCFC to the country up to the execution of the Resolution of the Government of the Russian Federation. For reference: during the 1Q2010, 307576 metric tons of pure HCFC-22 and 7106 metric tons – in the composition of R406A blend refrigerant – was imported to Russia (under licenses issued in 2009).

Reserves of HCFC-141b which existed in Russia, have been exhausted completely. Polyurethane heat insulation manufacturing enterprises using this freon will be shut down during the first half of June of 2010. The situation with HCFC-22 consumption is alleviated by the existence of working facilities manufacturing this freon within the territory of Russia; however, the fact that the freon is not packed in disposable cylinders may impact significantly the possibilities of servicing organizations.

For the purposes of preventing actual bankruptcy of hundreds of Russian enterprises, the federal executive bodies need to work out a temporary plan of ODS distribution among consumers and issue licenses for HCFC import to the Russian Federation in 2010.

By the way…

China Considers R32 Refrigerant as an Alternative to R22

At the meeting of the Executive Committee of the Multilateral Fund operating within the framework of the Montreal Protocol held from April 12^th till April 15^th, 2010, the Ministry of Environmental Protection of the People’s Republic of China and China Refrigeration and Air-conditioning Industry Association (CRAA) received financial aid for experimental projects for R22 refrigerant phase-out. Instead of transferring from R22 to HCF R410A which has high global warming potential, China explores the expediency of R32 refrigerant application (HFC difluoromethane) which has low global warming potential, as well of natural refrigerants (NH₃/CO₂).

Based on Jarn materials