When Compliance Collides With Cost

As refrigerant phaseouts and DOE energy standards tighten, manufacturers warn that customer adoption and ROI must stay part of the conversation.

By Tim O'Connor
Editor and Communications Manager

When federal and state regulations change the design and performance requirements for foodservice equipment, the effects ripple far beyond the manufacturing floor. New rules can influence what products dealers can offer, how much they cost and whether customers are willing — or able — to invest in the latest models.

In the best cases, these standards can drive innovation, lower energy consumption and help operators reduce utility costs. But when mandates become too ambitious or misaligned with market realities, they often trigger unintended consequences that frustrate end users and slow adoption of the very environmentally friendly technologies regulators are trying to promote.

“Just because you can do it, doesn’t mean your customers can afford it,” said Ronald Shebik, director of government and regulatory affairs at Hussmann, a manufacturer of display cases, refrigeration systems and specialty merchandisers. “If you want to push more efficient product on the market that’s feasible for the customer, it has to make sense for a customer to be able to afford to buy it and the payback has to be acceptable for the customer.”

For foodservice equipment distributors, it’s essential to understand how the shifting regulatory landscape might affect their businesses. From there, they can help legislators and policymakers grasp how new mandates influence real-world purchasing decisions.

Considering the Customer
Shebik’s perspective is shaped by years of working with retailers who measure equipment investments in terms of tangible returns. While many large grocery chains and big-box stores have been early adopters of higher-efficiency equipment, they are also disciplined buyers. They will embrace energy-saving features if the numbers add up, but few are willing to spend years paying off a cutting-edge refrigerated display case if there’s a less expensive alternative available.

“If a retailer is developing a new store or expanding an existing one and they need more reach-in cases, does it make sense to spend extra money on newer equipment that meets the current environmental standards if that equipment comes with a five- or six-year payback period?” Shebik asked. “Or is it better business sense to buy a refurbished case that’s less energy efficient but appears to function identically to a new case?”

The irony, he noted, is that overly stringent requirements can undercut the very environmental goals they were designed to achieve. When faced with expensive upgrades, some customers will opt for remanufactured cases that are not subject to the new Department of Energy (DOE) standards. “It defeats the purpose because now you’re going to have an older, less efficient case added to a remodeled line-up,” Shebik said.

The key is balance. Shebik explained that equipment manufacturers and the market are better served when regulations aim for achievable gains that won’t drive costs so high that customers bypass new equipment entirely.

Reforming the AIM Act
Proposed changes to the American Innovation and Manufacturing (AIM) Act show that the federal government is open to rethinking those standards. Signed into law during the first Trump administration in December 2020, the AIM Act directed the Environmental Protection Agency (EPA) to phase down the production and consumption of hydrofluorocarbons (HFCs), a synthetic gas that contributes to global warming, by 85 percent by 2036. To achieve that goal, the law allows the EPA to establish new regulations on refrigerants and facilitate the transition to next-generation technologies that will replace HFCs.

In 2023, under the Biden administration, the EPA approved a technology transitions rule that required manufacturers to switch from using HFCs to alternative options for products like commercial refrigeration systems. This change included limiting gases to blends that have a global warming potential (GWP) of 150 (for systems with 200 pounds or more of refrigerant charge) or 300 (for systems with less than 200 pounds of refrigerant charge) beginning in 2026.

These previous actions mean that HFC phasedowns under the AIM Act are already 60 percent of the baseline. However, some trade organizations are opposing future targets because they say limiting HFCs will restrict the food industry to a handful of refrigerant alternatives they believe are either impractical, technologically infeasible or create safety concerns. In December 2023, FMI (formerly Food Marketplace Inc.), an association representing the food industry, the American Frozen Food Institute and the National Grocers Association filed a joint lawsuit challenging the EPA’s technology transition rule and phasedown timeline, arguing that the requirements will force grocery stores to pay billions in refrigeration premiums that will further drive up food prices.

That lawsuit is currently on hold as the EPA, now under the leadership of the second Trump administration, announced it would reconsider how the AIM Act is being implemented to better balance environmental targets with economic growth and the ability of manufacturers to source more energy-efficient refrigerants. In October, the agency published a proposed rule that creates a new interim GWP level for small remote condensing units, cold storage warehouse systems and supermarket systems, which use racks of compressors to maintain temperatures for display cases. The existing AIM rule deadlines would stay in place until Jan. 1, 2026, for remote condensing units and cold storage warehouses, and Jan. 1, 2027, for supermarket systems. If the rule is approved, the original 150 or 300 GWP requirement would be pushed back to Jan. 1, 2032, for all three equipment types. During this interim period the GWP for remote condensing and supermarket systems would be at 1,400 and for cold storage warehouses 700.

Delaying the 150 or 300 GWP requirement until 2032 would temporarily extend the use of already available mid-GWP HFCs, the EPA said, and give low-GWP HFCs or non-HFC substitutes more time to penetrate the market. Ultimately, the agency still believes many manufacturers will make the switch to lower GWP refrigerants during the interim period — a trend Shebik said is already occurring to some extent. He noted that many foodservice equipment manufacturers, including Hussmann, are already designing equipment that uses alternative refrigerants, such as R-290 propane, CO2 or A2L refrigerants. Customers may still want the energy and environmental savings that these more efficient gases can deliver. “Our sales team will help figure out how we’re going to make the adjustment,” Shebik said of the proposed changes to the AIM Act timeline. “Some larger chains may still want to go with the newer refrigerants because they’ve already made a commitment to it.”

Although the new timeline in the proposed rule would create more flexibility for manufacturers and customers, the tight timing of the review process could lead to some confusion at the beginning of next year. Because the public comment period does not close until Nov. 21, the final rule might not be published until early 2026 and would need at minimum another 30 days before it can go into effect — meaning that the GWP 150 or 300 requirements that the rule is supposed to supersede could technically be in place at the start of 2026. That overlap could limit the equipment supermarket and convenience store operators can purchase until the new rule takes hold. To avoid order disruptions and compliance issues, Shebik recommended that distributors keep checking the status of the proposed rule change and talk with manufacturers about current guidance.

Improving the Rulemaking Process
Although much of the focus has been on the implementation of the AIM Act, other recent federal agency actions are also being reevaluated. Earlier this year, Congress eliminated two regulations through the Congressional Review Act, a law that gives legislators oversight of federal agencies. H.J. Res 75 nullified the Biden administration’s previous energy conservation standards for commercial refrigeration equipment, while H.J. Res. 24 removed stricter energy requirements for walk-in coolers and freezers.

Shebik expects the commercial refrigeration industry will continue to advocate for a rule that better considers the practical constraints facing equipment design. For example, requiring thicker walls on refrigerated cases can improve insulation and reduce energy consumption, but it may also make the cases too large for store layouts or reduce their interior capacity, undermining their utility for customers.

That kind of insight into how regulations shape equipment and limit customer options is why Shebik believes manufacturers and distributors must weigh-in when federal agencies propose changes. In many cases, their voices can lead to better outcomes for the industry. When the DOE last reviewed its process for equipment standards rulemaking under the Energy Policy and Conservation Act (EPCA), something it must do at least once every six years, Shebik said manufacturers pushed for changes that would result in more lead time between test procedure updates and new energy conservation standards. That extra time is crucial because compliance often requires redesigning the entire structure of a case, from changing lighting systems to reconfiguring machine compartments and completing UL testing before the product is market ready.

Going forward, Shebik would like to see the review cycle extended beyond six years, particularly for product classes that have reached diminishing returns on energy efficiency. “At some point, the DOE needs to be more focused on: ‘Hey, we’ve really reached diminishing returns on some of these equipment classes. Let’s be done with these and revisit them maybe 10 to 20 years later when technology may have changed,’” he said.

Longer periods between new equipment standards would also give manufacturers more space for innovation and research, while allowing customers to avoid steep cost increases on equipment they perceive as essentially unchanged. “Looking at a remote case for a supermarket, there’s not a whole lot more you can do to take energy out of it,” Shebik said. “You’ve got lights and fan motors. So, if you are already using the most energy-efficient fan motors and lights, there isn’t much else to do with the product.”

How Distributors Can Make an Impact
For foodservice equipment and supplies distributors, engaging in regulatory discussions can support manufacturers’ concerns. Distributors are on the frontline with customers, and they understand how cost and usability issues can slow the adoption of higher-efficiency products.

“When federal regulators hear from us, they think all we’re worried about is the extra cost we have to spend,” Shebik said. “But they don’t always realize we can only absorb so much of that cost, and the equipment ends up becoming more expensive to the end user.”

Higher costs can make efficient equipment a harder sell, pushing customers toward refurbished options and undermining the environmental and performance benefits of modern designs. “Dealers can help explain the burden and impact on the end users and how it will affect the utility of that equipment,” Shebik said. “When something has to be done on a certain timeline, make sure the DOE realizes it’s not just manufacturers that have to make these changes and incur these costs, but the end users that are going to be impacted.”

As regulatory timelines advance and new requirements take shape, foodservice equipment and supplies dealers can be a critical bridge between policymakers and the realities of the marketplace. Distributors who engage with policymakers through FEDA advocacy efforts and share data-driven stories about customer impacts with their senators and representatives can help shape more practical, achievable standards.