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At a crossroads

The lingering downturn offers the ideal opportunity to the HVAC industry on how to approach the comfort-cooling needs of the region

| | Apr 20, 2011 | 5:17 pm
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The lingering downturn offers the ideal opportunity to the HVAC industry on how to approach the comfort-cooling needs of the region in a manner that is financially and environmentally sustainable and, at the same time, respects the needs of end-users for a cost-effective and reliable regimen. By B Surendar

B Surendar

B Surendar

The construction boom in Dubai in 2002 and the subsequent developments in Abu Dhabi triggered the ascent of district cooling in the GCC. With the announcement of one mega project after another, district cooling took centre-stage as the approach of choice and as even the be-all and end-all solution to comfort cooling needs. With it came a string of bad practices, though, be it over-designing to capacity and the resultant profligacy when it came to tunneling chilled water piping networks or haphazard financial structuring.

Such was the euphoria, though, that all these were glossed over. In conference after conference, any talk of the need for best practices and a quality-based approach to comfort cooling was drowned in the buzz.

And then the downturn happened, and it brought in its wake a realisation of the grave errors. As projects either slowed down or were suspended, many of the chilled water networks suddenly came to represent ‘dollars lying buried in the sand’. A reverse situation involved those buildings completed on schedule. Quite a few were designed to receive chilled water; however, their owners soon discovered that the district cooling companies contracted to provide them the chilled water were no longer in a position to connect them to their plants, considering it was prohibitively expensive to dig chilled water networks. In desperation, the owners had to eventually invest in standalone chilled water plants.

Yet another issue that came to the fore involved the end-user community. For long ignored during the euphoria, the end-users began to demand a better quality of service. The most common complaints were inadequate cooling to their apartments or villas and what they felt as exorbitant demand charges levied on them. Naturally, they resisted, causing crease-lines to appear on the district cooling establishment.

Things came to a head when Faisal Al Kamali, the Head of Infrastructure at Aldar Properties, famously declared during a September 2010 conference in Abu Dhabi that he was not averse to the idea of opting for standalone systems in place of district cooling for future mega-projects. Standalone systems, he said, involved far less capital expenditure and, in a 20-year lifecycle, cost substantially less than district cooling systems, in terms of operations, maintenance and replacement of equipment.

For several decades, standalone systems have been the approach of choice in Dubai, Abu Dhabi and other GCC entities. They have been popular precisely because they have come at a substantially reduced capital cost. Standalone systems enjoy 90% market penetration in the UAE and 93% in the rest of the GCC. For long, though, standalone systems, like window air conditioners and splits, have not known to be energy efficient. The construction industry embraced them, though, because energy efficiency was not a prominent term in the world’s lexicon and consciousness. With awareness towards global warming building up, questions started being raised about the greenness of standalone systems. And that was how district cooling came to the fore.

Today, though, proponents of standalone systems claim that they have champions in VRVs and VRFs. While fulfilling the main demand – lower capital investment when compared to district cooling – the new standalone systems, the proponents say, also score high on energy efficiency.

This has opened up an interesting possibility – that standalone systems can compete shoulder to shoulder with the best that district cooling has to offer and can ease the uncertainty engendered by the downturn. It no longer has to be district cooling as the be-all and end-all solution, the proponents of standalone systems argue. Instead, the industry can adopt a horses-for-courses approach and choose what is best for a given application.

It is important for the HVAC industry to understand and embrace this paradigm shift. The downturn has provided opportunities for all. While it has opened the doors wide for the new types of standalone systems, it has provided the district cooling industry an opportunity to realign its approach and to adopt best practices that will stand it in good stead. These include designing as per load requirements, evolving a mechanism of off-take agreements, based on load profiles, and identifying the parties that should bear the costs for laying the piping networks. An off-take guarantee is one of the key elements that banks look for while financing projects. Equally, the district cooling industry should pump for regulation, be it in securing treated sewage effluent (TSE) or power – at rates conducive to its requirements. For this, though, it has to present a convincing and compelling story of how it can benefit the utilities in their search for power security and how, considering power subsidies are unsustainable in the long run, district cooling is the way forward in applications best suited to it. And perhaps most important, it has to win over the end-users by adopting a tariff mechanism that is fair and balanced, and by educating them on the benefits of district cooling and on how the savings are being passed on to them. And for this, it should start with installing reliable sub-metering systems that are easy to access, maintain and operate.

No one has questioned the effectiveness of district cooling. Indeed, examples abound of successful district cooling and district heating regimens in the US and in northern Europe and of how they have shaved entire megawatts of energy off the power grids and brought succour to the electricity utilities. At the same time, it must be remembered that the success of those regimens have been based on sound qualitative principles of proper design and management practices, all the while keeping the interests of end-users in mind.

In all, district cooling and the new wave of standalone systems represent the way forward for the HVAC industry in its bid to provide comfort cooling in a cost-effective, environmentally sustainable and reliable manner. The onus is on the industry to propose the right approach on a case-by-case basis, so that the outcome matches the intent. The GCC needs the support of the HVAC industry from a broad perspective. At the height of the boom, the talk was that the GCC would need 15 million tonnes of refrigeration (TR) by 2015, though it must be added that even then, some greeted the estimate with incredulity. Given the current circumstances, the figure has been substantially readjusted, but there will come a time when 15 million TR will be a necessity. Saudi Arabia needs to build more homes for its burgeoning population. According to current estimates, the Kingdom requires 15 million homes by 2015, and all the units will need cooling. The UAE, in the context of the recent unrest in northern Africa and in Bahrain and in Oman, is perceived as a safe haven, and as such, is likely to attract businesses and those seeking employment, which will lead to an increase in occupancy of buildings and, thus, an increase in demand for projects. And Qatar, with the 2022 FIFA World Cup as a target, also will see a ramp-up in comfort cooling demand, though the question remains – what after the tournament? But that’s beside the point.

For all the cooling, a key requirement is power. It is common knowledge that air conditioning accounts for 70% of the total power consumed by a typical building in the GCC. An increase in population and the resultant increase in demand for residential, commercial and mixed-used developments will see power consumption increase by several notches, something that the GCC would like to keep in check. Already Saudi Arabia is battling with the issue. Currently, the Kingdom produces eight million barrels of oil a day, of which it consumes three million for domestic purposes, including for power generation, leaving it with only five million to export. The demand for oil for domestic consumption is increasing by eight per cent a year, which if left unchecked, will result in a scenario where more than 50% of the oil produced in a day, will be needed to run power generators. Saudi Arabia needs a solution, and air conditioning and co-generation systems constitute that. The rest of the GCC countries also need a solution. When viewed from that perspective, the HVAC industry needs to rise to the occasion – and urgently at that.

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