Charles Goulding and Tyler Gianchetta of R&D Tax Savers examine 3D printing in HVAC applications.
As the population continues to shift toward cities and average annual global temperature rises, an increasing amount of people are buying air conditioners. In fact, it is projected that by 2050, the number of AC units around the world could skyrocket up to 4.5 billion from its current amount of approximately 1.2 billion. In order to accommodate for this rapid increase, HVAC manufacturers and professionals have implemented new processes to improve their designs, efficiency, and performance quality.
HVAC installers must be proficient in a variety of areas to optimize their craft. These practices now can integrate 3D printing to design innovative ducts, vents, and heating and cooling systems that were previously impossible. In addition to new design concepts, 3D printing also allows HVAC companies to deliver more efficient products as well as ensure a higher level of HVAC performance than ever before.
The Research & Development Tax Credit
Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
Must be technological in nature
Must be a component of the taxpayers business
Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process
Must eliminate uncertainty through a process of experimentation that considers one or more alternatives
Eligible costs include U.S. employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, U.S. contract research expenses, and certain costs associated with developing a patent.
On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax for companies with revenue below $50MM and for the first time, pre-profitable and pre-revenue startup businesses can obtain up to $250,000 per year in payroll taxes and cash rebates.
United Technologies Corporation
United Technologies Corporation has been a perennial leader across multiple facets of manufacturing, including elevators, aerospace, and air conditioners, through their subsidiaries Otis Elevators, Pratt & Whitney, and Carrier, respectively. Recently, the American industrial juggernaut has announced that they will be dividing their industrial group into three companies in an effort to promote a more centralized focus across the respective businesses and subsequently improve operational performance, as well as create opportunities for potential merger and acquisition activities down the line.
United Technologies is the latest industrial group, both nationwide and around the world, to undergo this transition of dividing their focus into more specialized, expertise-driven businesses. This mentality of “addition by subtraction” per se has been popularized by several household names, particularly in the manufacturing arena, with General Electric, Honeywell International, and Johnson Controls embracing similar strategies to simplify their structures through the introduction of spinoffs.
Specifically, UTC will spin off Otis, their elevator division, and Carrier, who manufactures HVAC systems, into separate companies, while UTC will take on a larger role in the manufacturing of aero engines and other aircraft parts, including Rockwell Collins, which was acquired in a $30 billion deal that closed in late November.
Not only does the split carry major implications for UTC as a whole, but it could also have a profound impact on the scope of each industry involved, including HVAC manufacturing. Deane Dray of RBC Capital Markets emphasized the potential for what he dubbed “a chain reaction of consolidation” in the HVAC industry, hinting at the possibility of further transactions and combinations involving major HVAC companies such as Carrier, Johnson Controls, Ingersoll-Rand, and Lennox International.
UTC has already demonstrated an understanding and acknowledgement of the wide array of applications that 3D printing can benefit. In 2017, they put forth significant investments into their $60 million United Technologies Research Center (UTRC), which serves as the innovation hub and features extensive additive manufacturing technology. This technology has already been utilized in UTC’s aerospace division, where they are exploring various methodologies to implement 3D printing into their HVAC division as well. The introduction of the new facility in conjunction with the decision to spin off their companies shows that UTC realizes the potential of 3D printing in their fields, as well as the appropriate methods to guide each of their divisions through this new wave of innovation.
Global Cooling Prize
Many air conditioners currently in use are running on age-old vapor compression technology with little incentive for innovation. If this trend continues, household air conditioners by themselves could feed into the elevation of global temperatures by as much as a half-degree Celsius by century’s end. Therefore, in order to break this cycle and inspire innovation, Richard Branson, British entrepreneur and Virgin Group founder, has recently initiated the Global Cooling Prize, a $3 million technology award intended to promote more efficient air conditioning technologies. Furthermore, the prize is not limited to startup companies, as Branson has emphasized that the value of these innovations is something that people of all firms should take note of.
The prize initially grants 10 selected contenders $200,000 with which they can build prototypes and demonstrate their efficient cooling methods. The different technologies are then tested in a lab, as well as in 10 Indian apartments in midsummer. Some of the firms involved have utilized 3D printing to develop their prototypes or even implement the technology into the design itself. While the prize itself is still fairly new, it has already brought significant attention to the true importance of innovating air conditioning methodologies around the world, just as Branson envisioned when he helped to initiate it.
University of Maryland Heat Exchangers
Traditionally, the inclusion of heat exchange in heating and cooling systems was previously implemented with complex and expensive tube-fin heat exchangers. However, the advent of 3D printing has facilitated the creation of more efficient and cost-effective parts to fulfill the same purpose. The University of Maryland has been able to design a prototype heat exchanger that is both lighter and more efficient than any other heat exchanger currently being utilized. They initially created the device in 2012,
known as the Webbed Tube Heat Exchanger (WTHX), primarily out of plastic, which helped contribute to its relative light weight and increased reliability compared to other heat exchangers. Plastics also work well for components such as wall caps and soffit vents, and alongside other new material possibilities that 3D printing allows for, they have the potential to revolutionize the manufacturing of cooling and heating systems.
In 2016, the University of Maryland strived to further improve the design of the heat exchanger by working alongside 3D Systems and the United States Department of Energy. In order to take on this endeavor, they utilized direct metal printing to create unconventional shapes that yield better heat exchange. Through their efforts, the team was able to develop a final product that was 20 percent lighter and 20 percent more efficient than anything else the industry was using, providing irrefutable evidence of the ability of 3D printing to offer HVAC professionals quality, reliable parts.
While 3D printing is primarily implemented in the manufacturing process of HVAC components, it could eventually be utilized to produce complete units, including heat recovery ventilation units as well as air conditioners. In terms of manufacturing, 3D printers offer a less expensive and faster method to creating parts and prototypes, providing the ability to create custom components in a matter of weeks rather than requesting them from a manufacturer, which can take several months. Aside from faster overall output, 3D printing is also a more environmentally friendly solution because the components are created in single instances, which produces less material waste and is therefore less of an environmental hazard.
3D printed parts are also more effective in regard to performance because the machine utilizes incredibly precise and careful layering, eliminating the possibility of seams appearing on the final product. Seams often yield subpar resistance and are prone to leakage, so by eliminating these seams, the piece can be produced with greater durability as well as higher efficiency.
The value of HVAC systems cannot be overstated, especially as the population continues to flock toward more urban environments. As the demand for heating and cooling systems continues to expand, so too do the methods for manufacturing them. Companies that are experimenting with 3D printing or integrating 3D printing technologies into their product development and manufacturing processes may be eligible to benefit from the federal R&D Tax Credit.