Derek Cole explains why ACs smell musty: condensation collects in the drain pan, and if it doesn't drain properly, bacteria and mold grow in the standing water. Dead microbial cells pile up and create that damp smell, especially when you first turn the system back on.
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Air conditioning is all about removing heat, right? So you're taking heat out of the air, it's going over a cold coil which has refrigerant in it, and then it's coming back out cooler air than what came in. So the byproduct of that is water. So that's why you have drain lines, that's why you see water dripping outside. So what will happen is when you have that hot air going across that cold coil, you get condensation, and that's going to drip down to the drain pan. Well, if that drain pan is not draining or something is the matter, things will start growing in that drain pan because you have cold water sitting in a damp, dark spot. So the thing that happens is growth, right? So even the most— the strongest bacteria in the world lasts 24 hours. So if it's not in the air or if it's a bug or it's a virus or whatever it is, it's going to die and it's going to sit at the bottom in that drain pan for a period of time. So you start getting— the first time you turn on your heat or your air conditioning, especially, you get that kind of damp, musty, moldy kind of smell.