Episode 25 – Ron Grabowski and Kyle Klahre on Navigating the Refrigeration Transition

In this episode of the BUILT2SUIT Podcast, host Greg Simpson sits down with industry leader Ron Grabowski, and Kyle Klahre, Director of Refrigeration at Cuhaci Peterson, to unpack one of the most complex shifts in the industry: the transition of commercial refrigeration systems.

From the AIM Act to evolving state regulations to CO2 vs. A2L refrigerants, the conversation explores the uncertainty retailers, engineers, and manufacturers are facing, and what it means for the future of grocery operations.

This is the show built to build what's next. This is BUILT2SUIT.

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Transcript

SPEAKER_00 0:00

You have to leverage a lot of different people because there's not one true expert tied to this right now, especially with what is going on with the AIM Act and all these regulations.

SPEAKER_02 0:27

Hey gang, welcome to the Build to Suit Podcast. I'm Greg Simpson, and this is the show Built to Build What is Next today. I have a really difficult topic to explore, and I've got some really intellectual people to help me do it. Across from me today is Ron Graboski of Hussman, probably uh one of the most respected OEMs for refrigeration equipment in the country. And beside me is my seeing eye human, is Director of Refrigeration for Kuhatchi Peterson Architects. And that is Kyle Clare. And what we want to do is dive in head first because this topic, uh refrigeration and refrigeration transition, is a really difficult topic to have a both an intellectual conversation and one that you can actually understand, especially probably from the people you're talking with. So you must be uniquely qualified. You've probably done refrigeration for the last 30 years of your career. You probably are well schooled in it, or maybe not. So talk about your beginnings in this because I find it very interesting that your knowledge level doesn't come from a super long history.

SPEAKER_00 1:43

It doesn't. Thanks, Craig. You know, I've been doing this for about 10 years now, specifically about six plus years in commercial refrigeration. And uh my background, you know, I I feel like where I was at, I started off in automotive electronics out of school for Motorola. Then I went in uh contract manufacturing. I actually worked for some Silicon Valley high-tech startups. Uh where growing glass, which is pretty unique. And then I I got into uh commercial doors before going to metal roofing, and then here I am in commercial refrigeration, right? So no, I don't have that level of knowledge of 30 years, but it feels like feels like I've gone, you know, six years of going from kindergarten to getting my PhD.

SPEAKER_02 2:34

Okay, so you've started in 2019 in this particular industry, but yet you had to be jumping into the deep end of a pool. This had to be really chaotic early on about what the scope of what it was, because as far as I know, AMAC had already been passed when you came in, so you're already reacting to legislation that may not be implemented or written, but certainly stuff that the industry's talking about.

SPEAKER_00 3:01

Well, I before AMAC got involved, I you know, I jumped into the fire essentially. And what I mean by that is the DOE uh energy uh regulations. And six months in, I'm making very big decisions for the company because of the energy efficiency requirements that DOE had for condensing its compressorized systems and uh evaporators, and then AMAC came. So when you go back to chaotic, yes, uh the the key term is chaos.

SPEAKER_02 3:32

So you've worked in seven industries leading up to this industry. I mean, you've told us how you ended up here, but how does what you did prepare you for what you were gonna get into?

SPEAKER_00 3:46

Yeah, I think the key the key the piece of it is this. Um, my experience with with learning and dealing with people and understanding what their needs are from a marketing perspective, and this really uh an interaction perspective has allowed me to take information, take the difficult part of it out and make it easy and articulate to allow us to go on a broader scale and then from there leverage my you know communication and skills in terms of dealing with people to influence and get what I need to get done and leverage them who have the 30 years experience or 40 years experience in the industry to get the answers I need.

SPEAKER_01 4:27

So a lot of good mentors is really what it boils down to early on.

SPEAKER_00 4:31

Well, I don't know if it's mentors, it's just like this is like the you know, you have to leverage a lot of different people because there's not one true expert tied to this right now, especially with what is going on with the AIM Act and all these regulations.

SPEAKER_02 4:45

We're gonna turn our attention to the AIM Act, so I'm gonna pull you in, Kyle, real quick. I get the broad understanding of the act is to phase down the HFC's uh both production and consumption, right? There's both sides of that. But can you just give us a little depth uh on AIM specifically and and what it's driving inside the industry?

SPEAKER_01 5:05

Yeah, I mean, so it's driving a lot of risk for retailers, right? It's opening up risk on the side of what system do I use for the next 10 to 15 years for my store? It's it's opening up risk of what if I choose the wrong system? What does it mean mean for us? Um, there's a lot of small grocers out there that maybe can't explore different options, so they need to hit it right from the beginning on that first try. So that's it's it's really opening up more risk for the industry.

SPEAKER_02 5:33

So, how do you view that?

SPEAKER_00 5:35

I couldn't agree more. Um, just just from the vantage point, you know, based on retailers and where they're at and you know the amount of capital they have, uh the many of them look, you know, differently in terms of what they're gonna do because of their money situation and what they want to spend money on, or even if they even care. I mean, some just don't even care about the regulations you know that are going on. You know, I'll deal with it when the time comes. I'm trying to sell food. So this happened in 2020, Kyle?

SPEAKER_01 6:07

Yep.

SPEAKER_02 6:08

So you say we this really started a lot earlier than 2020. How can you look at the roots of this and and where do you date it back to, sort of?

SPEAKER_01 6:17

Yeah, I mean, so it all really starts back in the 1980s. Um so NASA and a bunch of really smart people, a lot smarter than all of us here, um that they found rocket science. Yeah, that's awesome. So they they found a hole in the uh ozone layer. And what that was eventually contributed to was the aerosol sprays and then reaffrigerants we were using. Um so that was the first hurdle of regulation. Um from that, what what uh really started was the phase out of certain types of uh gases that are using chlorine. Um that has since for the most part been phased out across the world. Um I think Ron, you would say maybe not really across the whole world, but in the US for sure. Um and then from that, we were solving one problem with another problem. So we fixed the ozone dia pleating substances, but now we're having higher global warming potential. So it's it's solving one with another. So the next phase of regulation is attacking the global warming or the GWP.

SPEAKER_02 7:24

So the countermeasure that the federal government has put out is really reactive, not proactive. It sounds like states kind of ran out here and did their own thing. Talk a little bit about what that feels like as an OEM and and how the states have kind of shaped uh the Fed, not only the federal legislation, but has kind of shaped the frustration of different regulation. How does that feel?

SPEAKER_00 7:50

You know, the Climate Alliance came around 2015, 2016, and essentially it was 24 states and two territories, and they weren't happy with what was happening with the federal government. And that's really why the AIMAC came around because they were trying to find a way to consolidate what all these states are trying to do, so not everyone's doing their own things. So we were preparing to you know make those solutions available that they were requiring based on these regulations. We were adjusting already for that what was going on in with those acclimate line states, what was going on in California. California's been pretty pretty progressive for a long time, uh, but even more so on the regulations and what they came out with with CARB, you know, the California Air Resources Board. So the AIMAC was supposed to address all this, right? And then consolidate what those states were doing so that it wouldn't have what you're having in right now with New York and Washington and California. And you know, there's a lot of pushes to still try to have that happen. But from an OEM perspective, yes, it's it's it's been hard to manage because we don't know what direction the states will go, and we don't know what directions at the time retailers would go.

SPEAKER_01 9:08

Yeah, and if I if I kind of jump in. So the AIM Act is really there to set it standard across the whole US. So it's not a bad thing. And it's also making everyone healthier is really what the goal is, right? It's it it is saving our uh earth. But we have to make sure that we're fully understanding what's gonna be happening here and and and and that the that the regulations make sense across the board.

SPEAKER_02 9:34

Yeah. I think this is a really good place to throw the politics in here just a little bit. Not from a which side of the aisle you're on, but from a general understanding of who's in charge when certain things are happening and why it has been so difficult to get to a codified kind of written standard of the EPA. So if you have California, New York, and some of these states in the you know 16-18 range pulling these uh things together, they probably do it as a countermeasure to a Republican administration because they think the Republican administration is going to deregulate, not regulate. Uh that challenges the Republican administration to deliver aim uh in 20, uh, but the rules get written in a Democratic administration in 22 or 23, and now we get back into a Republican administration and we're we're changing some rules. Is that a little painful to have to go through all of that in that way, or just getting the legislation passed gives you a path to success?

SPEAKER_00 10:41

It's painful. And it's painful because it forces uh manufacturers to make uh investment decisions in terms of where they put their eggs in, right? And what they develop. And because of these changes, you know, we you know, we see on both sides of the of the fence where you know some manufacturers want the dates that the AIM Act and the technology transition rule came up with to stick. Whereas others are concerned about the impact if they don't move it out. The the change and the and all the codes required to make these solutions available is not moving fast enough. And because of that, it's gonna create problems potentially in you know markets that are served.

SPEAKER_01 11:32

And that's really where our crossover comes in, right? It's it's you're dealing with the UL side and the like equipment side, but then we're dealing with the building code and ASHRAY 15 and different safety standards we are working with. So it's that merging of our two to be able to come up with a solution at the end. Correct.

SPEAKER_02 11:50

Okay, you guys wrecked into technology transitions rule, and that's probably one of the big sticking points of where the legislation is. Let's get to where that is, where we stand currently here at the end of the first quarter of 2026 about where that rule is, what's proposed, and how we see this playing out. Yes. If you had to be a Suzeyer for a moment.

SPEAKER_01 12:11

Yeah. If I pull my uh crystal ball out, then I'll uh tell you what what's up coming. But um, so there was a reconsideration last October. Um it they they have since released a proposed ruling which will push dates out to uh 2032. Um it's yet to be seen if it's going to stick. Uh most likely, yes. But maybe they're gonna reel in dates um make it 2029 or something else. So all that's yet to be seen. So as of right now, the the original ruling is law um up until that next proposal or um final ruling comes out.

SPEAKER_02 12:52

Now you've also described other things about the legislation that are still in force but not being enforced. Yeah, so so talk about those a little bit.

SPEAKER_01 13:04

Yeah, so the condensing units, and this is your uh uh sandbox now too. But um so the condensing units as of right now, we have to be below 300 G GWP. Um having said that, the proposal will push that out. So the uh the the uh federal government has has said, although it's illegal, we're gonna not enforce it for right now based off of this proposal. So it's putting retailers in the in that middle ground of do I do it, do I not do it? And I think you would want to chime in too about what what's Hustman's take on it. What are you guys doing? Are you still creating condensing units or selling leftover condensing units?

SPEAKER_00 13:45

Well, we can still sell replacement equipment all day long as long as it meets the requirements of you know the technology transition rule where you can't exceed you know 75% replacement of evaporators or 100% of the connected load. So yes.

SPEAKER_02 14:01

Before we move on, we've got this patchwork of state regulation, we've got a AIMAC that's not fully implemented. Um what are we doing in those states until this gets done? Is there a federal supremacy in this legislation ultimately that the federal law will supersede state law, or does the federal law just have to completely cover the requirements of the state law for that to work?

SPEAKER_00 14:28

So the states in some cases will supersede the federal government. And a good example of that is New York, um California, and Washington. So, like in New York, and uh New York has its own rules based on 200 pounds of refrigerant and what you could do with 50 to 199 and under 100 under 50 pounds. California has what you could do over 50 pounds and under 50 pounds. Same goes with Washington. And because of that, the GREP requirements in California, and California would be a good example. If you go under 50 pounds in California, you could use a global warming potential up to 2200 on a condensed unit. Now with the federal law, the federal law is gonna supersede that and force them to use 300 or less. On Iraq, the same thing. You know, it's it's it's different rules where it's just gonna supersede or potentially the the state's gonna supersede. Depends on New York, for example. They're much more aggressive. Anything essentially under 200 pounds, they have to use a global warming potential of under 10. Right now, only things available are CO2 and propane for that, right? Or ammonia if you're industrial. So you you already have retailers figuring out what I can do to stay under 200 pounds if I don't want to use CO2 or ammonia, right? So they'll you know they're already playing their cards in terms of shifting.

SPEAKER_02 16:00

That's a mess. It is. That's a regardless of what happens with AIM, you're telling me it doesn't it doesn't really necessarily get better. It's still a patchwork. It is. And you're talking about the legislation, we haven't really got into the codes. Maybe we should get into the codes and and are the codes really ready for all this transition? Sounds like, at least with A2Ls, maybe, maybe not. Maybe there's some adjustments based upon what we're seeing. We can get into that. But let's just talk broadly right now about are the codes really ready for what we're getting into?

SPEAKER_01 16:37

Yeah, so the codes are ready, but it's the adoption of the latest codes that is not there yet. So you may be working in this jurisdiction, but they're referencing older code sections as their latest code. Well, those older code sections don't have great allowance for using certain types of uh systems.

SPEAKER_02 16:58

Okay, so you must wreck into this more than even he does as you start to get into your preferred choice of refrigerant, which is closer, is I found out today, is an actual R400, which is an A2L. There's got to be some issues with the codes being able to even understand them at the level that they need to to be able to legislate them, you think?

SPEAKER_00 17:20

Yeah, the part the the challenge with the codes right now, you look at the state level, a lot of them have adopted the use of A2Ls, for example, right? Um and as Kyle pointed out, the local level, local jurisdiction, they're using codes from 12 years ago. They're they're three cycles behind the current codes, right? And there's nothing out there on A2Ls, and there's you know, it's so far behind. And you know, some states have homegrown codes, right, where they they decide at the local level whether or not they'll accept the state codes, right? And so it's it's real interesting that like Missouri and Texas are great examples of that. So, you know, you'll have governments like in Texas, for example, that will say, all right, in our city, we're in Austin and San Antonio or Houston, we're gonna put rules in place to allow to use these technologies to drive towards that, towards lower GWP solutions, but it's it's it's not moving fast enough. Not only do you have the code side of this, you got the human element in terms of all right, I have to my people need to know this stuff so I can apply and use this in different applications.

SPEAKER_01 18:33

So, as Hussman, what do you do in those situations? Do you rely on an engineer or do you guys handle it internally?

SPEAKER_00 18:40

So we're we're we're being very aggressive to you know leverage engineer records with our our retailers. Um because we're we're not experts. You guys are the ones that will dig into the local code information, what's required, and making sure that there's no issues. And we're putting a lot of pressure on uh retailers to do that. However, we also have a lot of retailers that can't afford to hire an engineer record, right? So, you know, that that dichotomy is still being worked out. Um we're hoping you go back to the you know the changing of these codes that they pushed out to 2032. And it's it's important to point this out. It's not like I'm driving A2Ls for the business right now, but if you look at CO2, you look at other components out there. If everyone made a run on CO2, you would have concerns about material availability. A lot of cases you gotta buy this material from Europe, right?

SPEAKER_01 19:38

Yeah, I mean, and it's also not one size fits all anymore. Maybe CO2 makes sense for one grocer with a certain either climate, meaning actual climate outside, or their own in a turnal climate. But then the grocer next door, maybe it it is not right. So it it is not a one-size-fits-all like it used to be. So that's where partnering with a manufacturer or engineer really has value today.

SPEAKER_02 20:02

Correct. You sound like an educator. What role can you play to the the code authorities and the people who do model codes to help this get to a place where it's easier to digest industry-wide? Do you perform that role?

SPEAKER_00 20:18

You know, it's interesting interestingly enough, about 75% of my job right now has nothing to do with my job. So, yeah, I've uh uh because I've seen the need and I'm I've been you know very concerned about food deserts, you know, because of these codes, and as you're hearing, the lack of speed to allow to use new technologies. So yeah, I've been driving councils with a lot of engineers of record. Uh more recently, I've gotten uh consultants that were fire marshals, um, and they they they consult to AHAs in the industry, involve these engineer record councils, so that we get this awareness out there and discuss what is going on, what we're seeing, what do we need to address, and then when conveyed in conveying this information, you know, we're hoping it, you know, it gets altered or brought broader population. So yeah, we're doing a lot of stuff on our end to you know, try to address as much as we can, but obviously there's 5,000 municipalities, right? That's that's a pretty big net uh to cover all.

SPEAKER_02 21:28

I understand the Food Marketing Institute FMI had a lot to say about the delay of that technology transition rule. They were really lobbying the government pretty heavily. What do you think the responsibility of trade organizations like FMI uh is toward getting these record these these kind of these codes and these this legislation to where it's uh workable for the industry? Do they have a role to play?

SPEAKER_00 21:59

They play a They play a key role. So does HRI. You know, HRI does a lot of work, um, especially with training and technicians in terms of in awareness with codes, right? To get that message out there. So there's multiple organizations and agencies uh doing that.

SPEAKER_01 22:17

That are speaking for the retailer and trying to make sure that if the regulation is swinging one one uh side this way, maybe we're getting it back to the middle, right? So it's it is really speaking for the end user.

SPEAKER_02 22:30

Right. What's the engineering community's responsibility?

SPEAKER_01 22:34

From our standpoint, we have to make sure we are we are doing right by our end user. Um so we are advising and working through all the different challenges that are out there. So whether it is from a code standpoint or from what's right for your business standpoint, um, whether it be the the size of your store, it's it is working through what's the right choice and how do we add advise them for that.

SPEAKER_02 23:01

Okay, I want to go back and touch on Food Desert because it kind of came out there, and then we were kind of in the middle of codes and legislation, and I don't think it's clear the implications of low margin business and these kind of changes. Why don't you explore those with us?

SPEAKER_00 23:18

Yeah, so it's not just New York. I've had numerous conversations with a lot of retailers that they run on very low single-digit margins and they have old equipment, right? So that old equipment and the margins, you know, their finance people say, all right, I can't, you know, afford to reinvest because the the business case is not there. So if they're forced to these regulations and they have to replace equipment, the option becomes whether or not I do that or I close the store. And you know, the the risk is high that you know in areas where that ROI isn't there for a retailer that they'll take the the route of you know pulling out of that market wherever they serve, which is what we don't want to see, right? We don't really want to see that see that happen and why we're making so much efforts we are with this educational process, but the food desert risk is real. It is definitely real because it's whenever you change something, you add regulations. I mean, cars are a great example, right? You you look at the last 50 years and and on cars, you put all this technology and safety features, it was good, but now a car a new car costs you fifty thousand dollars, right? And then you're taking out an eight-year loan. I mean, back in the day, you know, loans used to be three to five years, and then it got to six, and now it's almost like what we're doing in Europe, right? Europe, you could, you know, they buy BMWs and Mercedes in Germany because they have 10-year loans. But I mean it's you're paying so much interest, and then to make it affordable, you just uh extend the life of the loan. So, you know, you we don't want to see that happen um uh in those sp in those spaces, but a lot of them are running low margin in in stores, it's putting a lot of pressure on them to uh do what they can do to keep the stores open.

SPEAKER_02 25:12

Certainly there's lots of options in the marketplace for refrigeration today, but if we move ourselves up the scale and we get to large-scale refrigeration systems like grocers have, and I'm talking about your 50,000 foot and above grocer, most likely, you're really dealing with a couple of system choices that are out there. Correct. Uh seemingly CO2 seems to be the climate uh advocate's choice because of its low GWP, low flammability position. But somehow for me, A2L seems more about a little bit of an extension of the same and a little bit more of a simpler transition. Can we talk a little bit about the two system types kind of generically and kind of explore where their value proposition lives?

SPEAKER_00 26:02

So the value proposition with if you look at the start with CL2, if you look at CL2 emissions, right, um, you know, you're not you're not gonna have to go back and revisit and have to worry about another code change because it's already uh it's the baseline of one for global warming potential, right? So when you look at that, um, you know, that that would be the end all and all be all, right? If you're looking at a solution. Based on your climate and the area you serve and your technicians, everything else, you have to factor factor in a whole total cost of ownership piece. And as you move south, you take penalties on energy, and you have to do stuff to diffuse that with equipment, so you could have like ejectors and parallel compression to help improve the energy efficiency. On on the A2L side, and it costs more money, right?

SPEAKER_01 26:56

Uh everything costs a lot more money, and it's complex, so then they can have to be able to understand it.

SPEAKER_00 27:02

So the the complexity really goes back to the technicians. If you look at the baseline of whatever drives a good amount of decisions, it's your availability to a good technician base. A. And then B, because the technology is getting so uh complex. And what I mean by that is a lot of these technicians that have been working for a long, long time, HVAC to carry you over in a commercial refrigeration. CL2 you require like case controllers. So these case controllers, you know, to program the case, if you don't program it right, your system's not running right, right? But if you look at the the differences between like a traditional HLC system, like a 448A rack versus an A2L rack, you're not gonna see much. It's the application that's different from say a CO2 system because of the differences in code. So the trade-off says it's gonna cost you less to do an A2L system versus a CO2 system, but the other side of it is the you know understanding the codes and being able to apply them.

SPEAKER_01 28:14

So what do you say to why not both hybrid systems, cascade systems, pump systems that are using CO2 and NA2L on the high side?

SPEAKER_00 28:24

It's our it's already happening. Um there's a retailers that are using CO2 for the the front of you know the whole store, and then they're adding these you know fulfillment centers up front and are using A2Ls, you know, condensed units and evaporators, and or a small distributed system. Um so that that that's happening as well, and even propane, right? We're not even talking about propane, like we're seeing that dichotomy where people want to do whole propane stores, 70,000 square foot stores, right? And air cooled and water cooled. So there's a lot of options available that retailers are taking. And you know, you go back to what retailers are trying to do, they're trying to figure out what do I want to do for the next 10 to 15 years, and they're still uncertain. So between equipment with CO2, between A2Ls, propane, you know, you're still seeing variation. I see a lot of hybrids in the future, you know, based on those solutions.

SPEAKER_01 29:25

Especially from being able to disconnect your systems, where your store side system is gonna be at that global warming of one, right? So, and then the high side we can figure out what's gonna happen later on. Um, it's definitely a huge option for grocers today.

SPEAKER_02 29:42

It is. Okay, that's we've talked about really the system side, but we haven't really got down to the case yet. These guys have a bunch of equipment and a one to two percent margin business. I mean, is all this equipment gotta change for either system?

SPEAKER_00 29:59

Um, yes. Um you know CO2, you know on cases, you require case controllers. And that's different from an HSE. Now, a lot of retailers do put case controllers on their cases, right? So there's some familiarity, and they like to control what's going on with the case. With A2Ls, you don't necessarily have to have case controllers, it's not a requirement, but you gotta have leak detection and mitigation. So you have to have equipment that if it's there's a leak that's occurring and it reaches the threshold of the lower front of the value limit in that space, it's gonna shut off the system, mitigate, diffuse the situation, and then force uh the retailer and to get a technician out there to correct the leak before starting the system back up.

SPEAKER_02 30:50

They've given you the title of the the non-title title of the A to L guy. And so you even participate in panels apparently as uh the A the A2L guy, the dirty gas guy, I think is what what we were talking about earlier.

SPEAKER_00 31:06

One of the guys I work off with dirty gas run, right?

SPEAKER_02 31:09

So so basically um it it feels like by default you g you've accepted the premise that A2L is a really powerful way for Husman to be. Not that you can't provide equipment for other systems and other other refrigerants, but let's get real specific into A2Ls and really let's put the sales case, let's put the full cook press on for the kinds of things that make A2Ls the answer for uh a lot of retailers today.

SPEAKER_00 31:39

Well, primarily if you look at the service, start with the service technicians, right? Going back to what I said before, they're very similar to a TX system, distributed or centralized rack, right? So when they're looking at the equipment, they're already familiar with working on the equipment. Now I just got some sensors, I have some guarding to protect some of the equipment, more labels, right? The refrigerant acts very, very similar to uh current HSCs today. So that's a huge benefit there, right? Then you look at the uh the pressures. So, you know, when you talk to some technicians, they you know, they all get worried about A9 or A8 valves like CO2. So you have that big difference there. You don't have to worry about the pressures uh with A2Ls.

SPEAKER_02 32:25

Um so let's talk about that. Let's let me let me jump in. What are the pressure differences I would be expecting?

SPEAKER_00 32:32

Well, they're A2Ls are medium temper uh medium pressure refrigerants, CO2 or high pressure. So you're looking over 1,000 psi on CO2, three to four hundred on HSCs, right?

SPEAKER_02 32:45

Okay, so the implications of that, just that one thing in store.

SPEAKER_00 32:51

So the implication uh the the fear is if you know one kind of technician told me that A9 is the God valve, right? Because if you're around that thing and that goes. Okay.

SPEAKER_02 33:02

That could be very that could be very painful. It's kind of like a blown tire. Right, right. It it has a lot, it could be very it could be violent. So that's and that would be all across the store as CO2, right?

SPEAKER_00 33:12

That would be No, that would just be tied to the system and the and So that's high site. High side, correct, correct. And then that's where the training is so critical, right? Because you know, COT is is a safe solution, but a lot of people they hear that and then they say, nah, I don't I don't want to touch this, right? And the same thing with retailers, right? So when you go back to the pressures, the pressures is one reason why people are shying away from CO2, right? So is that what you hear?

SPEAKER_01 33:40

It it is, but um, I will say that a lot of big retailers are move moving towards it, which is gonna allow the industry to gain a lot of knowledge around it on the service side, on the technician side. Um so it is a viable solution long long term. It's just a matter of is it right for you?

SPEAKER_02 34:00

Okay, so we got A2Ls. We start to talk about the techs, the tech is probably better equipped to execute against an A2L solution. What else should we be seeing as we value these together?

SPEAKER_00 34:11

Well, I I think you look at the the the first-time cost, the cost up front to buy, it's gonna be a lot cheaper with A2L versus CO2 because all the equipment in CO2 is a lot more, you have to have a lot of bell more bells and whistles.

SPEAKER_02 34:27

So at each piece of equipment, there's significantly more to do.

SPEAKER_00 34:31

Correct.

SPEAKER_02 34:32

Okay.

SPEAKER_00 34:32

And it's not only on the high side, it's also on the on the on the cases as well, right?

SPEAKER_02 34:37

Okay.

SPEAKER_00 34:37

You know, case controllers nowadays are very, very expensive. You know, I you know, I could be you know before like $500 another, $1,500 to $1,800 a controller, right? So that adds a lot of cost, and you've got a lot of cases in your store. When you look at a whole system and you look at all the stuff you gotta do, you know, you get the baseline based on where you're at, right? If you're here in Florida, you're gonna be adding more equipment to get the energy efficiency. So you're gonna be adding more costs to get the same result, right? So that's some of the big differences you'll see where you won't have to do that with uh an A2L piece of equipment.

SPEAKER_01 35:11

But do you see benefit from a case controller?

SPEAKER_00 35:14

Yeah, there's benefits to case controllers. You know, to monitor your cases and see how they're performing. It it all depends on you know what the retailer wants to do. Some don't care, right? Some I'm gonna put we we got retailers right now that are buying A2L systems. They don't need a case controller, but I want the case controller on the unit.

SPEAKER_02 35:32

Obviously, we've got potential cost considerations. There could be values considerations with the controllers, uh, maybe remote monitoring and some other things. Uh what's kind of the counter argument to A2L at this point?

SPEAKER_01 35:46

You're never gonna have to touch CO2 again. There's a there's a valid argument that future regulation could phase out an A2L because it everything is based off of CO2. That that is what the baseline is. So it is future-proofing your uh system, you know what you're putting in today, will not have a problem later on.

SPEAKER_02 36:07

Is the cost difference significant? I guess you can address that from the design side, but I'd also like you to address just the cost implications and the that cost implicate recovery, uh, end of life of asset, a whole broad array of things. So start here.

SPEAKER_01 36:22

Yeah, it it is, but but really what it boils down to is is cost the end all be all for you, or do you have other goals, whether it is net zero goals, or you're actually in a climate where CO2 makes sense on a transcritical system. So you're actually getting a lot of benefit from an energy standpoint on it. You don't need all the bells that and uh uh whistles. So all of it boils down to from a grocery standpoint, what are you looking to do? Is it just sell out groceries, or are you trying to to meet other goals?

SPEAKER_02 36:54

Let's talk a little bit on the A2L side. Obviously, the system deployed appears a little bit cheaper. Um, are you dealing with with retailers that are talking about the psychologies of well, I have all this equipment that hasn't ended its life? How am I gonna deal with this? I can't just write it off.

SPEAKER_00 37:12

Their questions are more tied to not even just end of life, you know, in terms of what they're gonna do. It's it's more about what am I gonna do? Because I I don't have the money to replace this equipment, right? So how am I gonna handle keeping this equipment going and then do I branch off and use HULs here and serve partners to do I use CO2 or do I use propane, right? So I mean um they're all evaluating that and then trying to figure out what is the best course of action for them because you know Kyle's absolutely right. You get a certain bucket of retailers are going one way because CO2 is the end I'll be all right, and that's fine. You know, that that's perfectly uh good for them, and that's what they want to do. But there's others that just don't want to they look at they look at the they look at the cost or they look at the technicians or they look at water. You know, no one talks about water here. Like there's concerns right now. Clark County's banned, you know, banned how you use water for you know refrigeration. That's probably gonna stem out to other areas around.

SPEAKER_02 38:23

Is that a data center role, or is that is that just it's it we use a lot of water in just pure grocery? Yeah, it's applying to uh huh.

SPEAKER_01 38:31

Yeah, so so to peel back on that, um to use CO2 in its own system, it acts a little funky when it gets up to a certain temperature. Um it is going to a Is that an engineering term?

SPEAKER_02 38:44

Little funky.

SPEAKER_01 38:46

I'm trying to keep it Crayola. Crayola. Um so it'll become a supercritical fluid. When it's up in a certain state, you have to do certain things to and it is going back to bells and whistles. So what a lot of solutions will do is have water cool the the uh CO2 so you're not just relying on the air. Um if it's super hot outside, then maybe it doesn't make sense. Um but there are jurisdictions where there are water restrictions. Las Vegas is a great like like uh kind of pinpoint of that where there are water re uh restrictions there in that in that jerk uh jurisdiction.

SPEAKER_00 39:26

There's retailers in the south that won't water the lawns because they're worried about the water usage as a whole, and then they look at these strategies, and if it's hot, they get you get into this supercritical fluids, you got you got to use attabatic coolers, right? So, you know, some are shying away from that. That's another one reason why they're not gonna use CO2, is because they're worried about the other energy piece, right? Is water and then electricity and everything else, right? So it's it's interesting dynamics are playing out based on areas, and even up north, right? Interestingly enough, as Kyle pointed out, you know, CO2 is a great solution for it works extremely well, you get great benefits up north in northern climates, but there's still others that that don't care, that you know it's that that's not their focus. So it's really about addressing customer needs, right? What do they want to do, why they want to do it, how do I approach it, and then how do they maximize what they want to do? And what I mean by that is this if I am looking at what I want to do in the future in a trade-offs, the questions I get a lot today is I do this, it's gonna cost me this much versus that much. But in the same bucket, can I open more stores? If I spend less money doing this versus that, can I get more usage of my CapEx and what the trade-off is so I, you know, you know, get more, you know, revenue. So it all bases everything is based on you know corporate goals, strategic goals, and then initiatives, and then it falls falls down to that. So there's a whole bunch of buckets tied to that.

SPEAKER_02 41:19

I kind of want to address the do nothing crowd for a minute. So technology transitions rule, if we were to look over the hill, by what date would we expect the phase down to begin?

SPEAKER_01 41:33

So it's already started. Um but 2032 is the proposal, but if you look back, the current law is still under rule right now, uh pending what the final rule is going to look like for that proposal. Uh, but it the the rubber is meeting the road today.

SPEAKER_02 41:52

So are people uh producing less of these HFCs today than they were uh before the AIM Act, or are have we not seen those implications of that arc yet? That's where I'm trying to get. Is this stuff's gonna phase down and supply is gonna constrain and the do nothing crowd is gonna be put in a really interesting position as the simple things get more expensive. How do you how do you address that with them?

SPEAKER_00 42:23

Yeah, so that you know, you look at the phase downs right now. We're at uh you know, we're going from 60 to 30 in 2029, and by 2036, it'll be 85% of the baseline. And they did the baseline off of 2011 or 213, 2013 data, right? So when you look at 85% of the baseline in 10 years, right, you're essentially looking at A2Ls, some HSCs, and then the rest of it CO2 and propane, right? From a do-nothing vantage point, and these retailers, some are buying vast amounts of refrigerant and you know, doing calculations on our leaks to figure out what do I do, what's the what are my risk? They're using like we have solutions like Store Connect, and then from Store Connect, we can predict what's going on with their systems to help reduce leaks. And we go back to the technology transition rule and the AIM Act to subsection H. In that rule, which the EPA hasn't even touched yet, they have requirements tied to Reclaim Refrigerant 448A, 449 are supposed to address, and there's only 2% availability, which is a huge problem, right? But if you look at the other refrigerants and why you haven't seen that arc and that drop, these bigger retailers have kind of flooded the market with 404 because they've all gone to CO2 or natural solutions. So you haven't seen that drop yet on 404, but that 448 is coming and this isn't. 449, those GDPs under 1400, like 1387 and 1391, which is 448, 449, are coming, and that's gonna that's gonna cause the refrigerant to spike up, and it's gonna happen sooner and then retailers think. So it goes back to that inflection point of all right, it's like buying a car. When do I want to buy uh a car versus my existing car? Do I keep fixing and replacing it? Or do I eventually replace and buy a new one? Some are gonna say, well, I'm gonna buy all these parts to keep in stock, so if I have failures here, I have the availability to use that with the reversion I bought. And then some are gonna, you know, spot by, right? And then take that risk in terms of what's gonna happen. And unfortunately, others are gonna, you know, not do that, and then once it does not become economically feasible, they're just gonna close the stores.

SPEAKER_02 44:52

So I hear you're a poker player. I am. This sounds like a game of poker. It sounds like their choices, you know, standard bet. Uh if you were a betting person, where would you bet? For the future.

SPEAKER_00 45:09

Well, if I were a betting man, I I think the end all if I'm looking 50 years from now, everything I'll be a CL2, right?

SPEAKER_01 45:18

So that's what you say for long term? What do you say for the next 10 years?

SPEAKER_00 45:23

It's gonna be uh HSCs, H2Ls, propane and CO2.

SPEAKER_01 45:28

Plethera.

SPEAKER_00 45:29

Plethera.

SPEAKER_02 45:30

So is there something that we have to get to in CO2s for that bet to be real? Or is it already there now?

SPEAKER_00 45:39

Well, I think the concerns with, you know, just in general with CO2 is just it's not energy efficiency, and I obviously no one talks about that, right? Um, when you're when you're talking to CO2, but it's it's just the reliability and then you know, and ensuring that you know you don't have food loss if an event occurs because if there's something that happens, whether it's an uh environmental event or something in the equipment, right? That's that's the biggest fear. And the industry's done a great job with solutions they've done of you know from backup condensed units to higher pressure systems coils like 90 bar or 120 bar versus 45, etc. So they've done things to do that, but obviously, once again, when you go to that next level, you're adding more and more cost, right? So that that trade-off with it. So I think the reliability, and there's been great progress made on that, but there's still concerns, and once again, the million-dollar question that keeps coming up at all these uh conferences I'm going to is the technician base, right? You know, where they're comfortable with it and able to use it and it becomes commonplace because it's still not commonplace in all markets, right?

SPEAKER_02 46:56

The always reliable Ron Grabowski. Thank you so much, Ron, for joining us today. Thank you for helping me through this, Kyle, because I couldn't have done it without you. Great conversation with the both of you. Thanks for joining us on the podcast, and we will catch you guys down the road on the Built to Suit podcast. Get it where you get your podcast. Have a great day.