#2 Alternative refrigerants for a demanding future and broader applications in the HVAC industry

"God is with those who has the best artillery"- Napoleon (allegedly)

Growing up in Mumbai, refrigeration and air conditioning felt essential to beat Mumbai’s heat and humidity. There was a steady growing demand for refrigeration in 1990s India following the economic liberalization. This led to Samsung India reaching a topline of $1 billion less than a decade after it opened shop. Most consumers buying these electrical products then might not have imagined the possibility of fluorinated (f-gas) emissions.

Credits: Classic Indian advertisements

Recent studies conducted by the European Commission’s Emissions Database for Global Atmospheric Research (EDGAR) estimate that 2.6% of the world’s total Green House Gas (GHG) emissions are f-gases. The United States Environment Protection Agency (EPA) estimates that f-gases contribute 3.1% of all GHG emissions in the US in 2022. A large source of these is the emissions from refrigerants.

In 2022, while at the Center on Global Energy Policy, I worked with the Food and Agricultural Organization on quantifying f-gas emissions from food systems' cold chain which focused on four hydrofluorocarbons (HFCs). These were already second-generation refrigerants replacing chlorofluorocarbons and hydrochlorofluorocarbons which had led to ozone layer depletion in the 20^th century. However, HFCs are now a growing problem contributing to global warming today.

So why is this a problem?

F-gases may contribute a small amount to global emissions, but have very high global warming potential (GWP), far greater than carbon dioxide, methane and nitrous oxide and linger longer in the atmosphere. This is coupled with a growing demand for cooling solutions till 2050 driven by rising temperatures across the world and standards of living in developing countries. Quite predictably there is a new generation of Indians and others across the world with disposable income looking to access refrigeration for their households.

The million-dollar question is: so what’s the solution?

Four intuitive solutions: 1) Detect leakages and ensure prevention, 2) Enhance energy efficiency which is everyone’s favourite mitigation solution, 3) Recover and recycle leaked refrigerants and 4) Develop alternative refrigerants. The last one though the surest will require long-drawn research and development.

This trail for a solution led to the development and consideration of numerous alternative refrigerants including propane, isobutane, ammonia and carbon dioxide itself. Multiple industry operators including SRF, Honeywell, Daikin and Chemours started manufacturing various alternatives. From synthesized refrigerants, the Hydrofluorolefin (HFO) R-1234yf was primarily used for automotive air-conditioning but also has applications in commercial and domestic refrigeration. The advantage of the HFO is a low GWP of 1 which falls below 1 over a 100-year horizon. However, reasons such as lack of supply, higher costs and lack of compatibility are possible concerns that led to the cooling off of interests in R-1234yf. This is coupled with concerns about its mild flammability raised by Honeywell, one of its early manufacturers, which makes safety a question mark.

So what’s another alternative?

With growing concerns of leaks and alternative gases not meeting all desired properties of an ideal refrigerant, scientists started exploring the possibility of solid refrigerants, especially barocaloric materials. Barocaloric solids are molecular chains that are typically disordered but under pressure become ordered and rigid, releasing heat. Despite initial concerns, researchers have found that barocaloric materials can act as refrigerants even at much lower pressure.

While R-1234yf was manufactured by the industry, solid refrigerants are a few steps from the commercial deployment scale and are under development in startups and academia. A quick search on VentureRadar will spit out several organizations. Magnotherm, a German startup founded in 2019 has already developed two cooling products and has more under development. MIMic Systems, another American startup designing solid-state cooling systems for buildings is currently supported by the New York State Energy Research and Development Authority. Barocal, a British startup spun out from the University of Cambridge is also developing cooling solutions using innovative barocaloric material.

Pascal, a startup founded by Harvard University chemists, Adam Slavney and Jinyoung Seo is now developing solid refrigerants that work in the same temperature range as HFCs and has applications across the Heating, Ventilation and Air Conditioning (HVAC) industry including freezers and heat pumps. The firm claims that its solution will eliminate direct emissions, will be 50% more efficient, and interface with other HVAC components at a competitive cost. This is topped with lower noise and greater safety, hence one does not have to suffer rattling and wobbling from cooling devices which we experience otherwise.

However, none of these but Pascal are as yet claiming cost competitiveness compared to incumbent refrigerants. As an observer from the Global South, I believe that this would be the differentiating factor for a winning solution in the nascent solid-state refrigerant market.

In May 2024, Pascal received $8 million in funding and is backed by Khosla Ventures and Engine Ventures. This is in addition to endowments from the United States Air Force and the Gordon and Betty Moore Foundation. It is noteworthy that the foundation is one of the few philanthropies that donate to scientific research and engineering innovation. Not a lot of climate philanthropy is directed to science and technology. This should ideally change especially in the absence of a favourable government policy, likely in the case of a Trump administration which is speculated to add GHG emissions.

Academia is not far behind. In 2024, the University of Tokyo led by Professor Shin-ichi Ohkoshi and in partnership with the University of Tsukuba, Osaka University, and MOLSIS Inc., has successfully developed an inorganic solid refrigerant featuring the world's highest adiabatic cooling and heating temperatures due to applied pressure. In the United States, the Oak Ridge National Laboratory has achieved advancements in solid-state cooling which could efficiently cool items ranging from food to vehicles to electronics without traditional refrigerant liquids, gases or moving parts. Once again the solid developed is an inorganic alloy capable of undergoing phase transition during which it absorbs heat. Research and development in alternative refrigerants and coolants could have been an opportunity for joint development for the Quad but Biden blocking Nippon’s acquisition of U.S.Steel could build near-term friction between the two countries.

What will drive the growth of this market?

Three policies can help drive this market: 1) regulations on ratings and incentives for buildings to improve energy efficiency and 2) incentives offered to consumers to reduce electricity consumption. 3) tax and penalties on heavy consumers of commercial and industrial refrigeration especially required in the food and beverage industry.

Beyond policy, consumer push to decarbonize the food and beverage industry by consuming products from environmentally conscious organizations can drive the food and beverage and consumer packaged goods industry to procure alternative refrigerants.

While we are far from the commercial deployment of these refrigerants perhaps except for Magnotherm, governments and civil society organizations should explore advanced market commitments and coordinated movements to pull demand and accelerate development timelines. All other value propositions aside, the cost-effectiveness of the product will be a major factor in winning this market, especially in developing countries.

What is the potential value of the alternative refrigerant market? How can we finance it?

The International Energy Association (IEA) estimates we need to reduce up to 460 Gt CO₂ equivalent from the cooling industry over the next four decades. Currently, the World Bank data on carbon prices across the world ranges from $167 in Uruguay to $0.46 in Indonesia. If we assume a global average of $50/tCO2e we are looking at an opportunity of $23. If we further assume that carbon prices are lower in developing countries especially India which will have a high demand for sustainable cooling and solid refrigerants, we are looking at an opportunity of at least $10 trillion over the next few decades.

While venture capitalists, philanthropic institutions and academia are already investing in this opportunity, an additional source for funding other than governments is development finance institutions. Some of them most prominently the International Finance Corporation has invested $63.6 million in 4 companies as a part of its Sustainable Cooling initiative, and will scale operations. The World Bank identified this problem in 2019 but it is not yet clear whether they have planned or ongoing investments in alternative refrigeration we might see future investments given the ramifications it has for the food and pharmaceutical industries.

A supermarket in the United States lined with refrigerants, which as an immigrant I was momentarily intimidated by when I moved to New York in 2021. Picture credits: Newsday

A lone refrigerator in a typical kirana store in sub-urban India. Picture credits: Justdial

While historically there may have been great inequality in the world’s consumption of cooling, the onus is on cooperation and aid from developed countries to solve this problem globally since it is as likely to be a problem of the present and future in developing countries. Hence, I would personally like to see it in discussion in future multilateral forums.

Aside, has anyone explored methane flaring, especially from the oil and gas industry, and are there any solutions to capture methane? A few years ago, I came across this real-time flaring tracker, FlareIntel, which does a great job in detection, but are there solutions that capture and convert methane emissions?