AI, IoT, and service models drive a smarter, more sustainable HVAC market

According to Frost & Sullivan analysts Amol Kotwal and Dennis Marcell Victor, AI, IoT, and low-GWP refrigerants are transforming HVAC systems, leading to smarter maintenance, enhanced energy efficiency, predictive diagnostics, and HVAC-as-a-Service (HVACaaS). They also discussed how machine learning algorithms utilise real-time data from occupancy sensors and building utilisation to predict and optimise HVAC operations, resulting in enhanced climate control and more sustainable and intelligent building operations.

How are IoT and AI reshaping maintenance strategies in modern HVAC systems, particularly in terms of enabling remote diagnostics?

Amol: IoT and AI are transforming HVAC maintenance by shifting from traditional reactive models to predictive, condition-based strategies.

Most significantly, IoT and AI free up building operators to concentrate on other critical tasks by reducing the need for human intervention in HVAC system maintenance.

IoT sensors provide continuous, real-time data on system performance, energy usage, and indoor air quality. AI-driven analytics process this data to detect faults or anomalies, predict failures, and optimise system performance remotely. Remote diagnostics of HVAC systems reduce system downtime, enhance occupant comfort, and cut maintenance costs by addressing issues before they can have a significant impact. This shift supports sustainability goals by improving energy efficiency and extending equipment life.

Please discuss the cybersecurity challenges that smart HVAC systems face when integrated with enterprise IT networks.

Dennis: The most frequent cybersecurity threats include lateral attacks via connected BAS, ransomware, and unauthorised access. The main points of vulnerability include outdated equipment with unpatched software, lack of encryption and authentication, and unprotected remote access. Legacy HVAC systems sometimes employ protocols like Modbus, which are vulnerable to assaults since they frequently lack authentication and encryption. Attackers may also gain unauthorised access to HVAC controls through compromised VPNs and exposed interfaces.

How is the adoption of low-GWP refrigerants driving innovation in HVAC product development and influencing regulatory compliance?

Dennis: HVAC OEMs are redesigning systems to handle mildly flammable A2L refrigerants, integrating leak detection and safety controls, and developing compact, retrofit-friendly units. Natural refrigerants, such as CO₂ and propane, are gaining ground in heat pumps and commercial cooling applications. Compliance standards are also changing, with stricter safety codes, mandatory digital tracking of refrigerants, and increasing technician training requirements for technicians. This transition is reshaping product development, service models, and building operations while aligning the industry with global decarbonisation and ESG goals.

How is HVAC-as-a-Service (HVACaaS) changing customer expectations and business models in the HVAC industry?

Amol: HVAC-as-a-Service (HVACaaS) is redefining the HVAC market by introducing a subscription-based model for heating, ventilation, and air conditioning systems. This approach aligns with evolving customer demands, focusing on operational efficiency, reduced capital expenditures, and sustained energy savings. By transitioning from a product-oriented framework to a service-driven model, HVACaaS delivers enhanced value through features like predictive maintenance, real-time monitoring, and optimised performance. Customers benefit from cost savings through outright equipment purchases with HVACaaS. They also save on operating and monitoring expenses with the added benefit of energy optimisation. On the other side of the spectrum, suppliers and businesses offering HVACaaS benefit from having a recurring revenue stream (predictable) compared to an ad-hoc service-based revenue model and, most importantly, offer these value-added services, enabling customer retention and loyalty.

With the rising demand for remotely monitored HVAC systems, the HVACaaS business model drives upgrades of HVAC systems in large buildings. Frost & Sullivan projects that subscription-based services will account for 8 to 10 per cent of global HVAC revenues by 2028.

What role do open communication protocols BACnet/IP and Modbus play in building smarter, vendor-agnostic HVAC ecosystems?

Dennis: As building systems become more integrated, the need for seamless integration, control and data sharing between multiple building systems becomes increasingly important. With open communication protocols like BACnet IP or the more secure BACnet SC, HVAC systems can become an integral part of a smart building by assisting facility managers to optimise building operations. They also help the customers to choose from a range of vendors, thereby improving product quality.

How can machine learning algorithms optimise climate control by analysing occupant behaviour and building usage patterns?

Jointly: HVAC companies are increasingly integrating AI and ML technologies into the development of Smart HVAC systems to enable intelligent, autonomous responses to dynamic conditions with minimal human intervention. Machine learning algorithms analyse real-time data from occupancy sensors, weather forecasts, and historical building usage to predict and optimise HVAC operations. By learning occupant preferences, space utilisation trends, and thermal patterns, these systems dynamically adjust temperature, airflow, and ventilation rates. This reduces energy waste in unoccupied zones while maintaining comfort where needed, leading to optimised energy consumption. Over time, the system refines its models for improved efficiency, lowering energy costs and enhancing occupant well-being, especially in Smart, adaptive building environments.

Over the next three years, Frost & Sullivan expects AI and ML technologies to advance, enabling HVAC systems to optimise performance in real-time through predictive adjustments and self-tuning capabilities. This evolution will result in Smarter HVAC systems that enhance occupant comfort, reduce energy consumption, extend equipment lifespan, and deliver significant operational savings.