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The district cooling camp

George Berbari and Mike Hicks, the advocates representing the district cooling camp, present their arguments.

| | Apr 21, 2011 | 12:12 pm
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George Berbari and Mike Hicks, the advocates representing the district cooling camp, present their arguments.

Occupancy profiles and cooling approaches

We learnt that better scrutiny is required about anchor load and the speed of development. Banks are closely looking at who are the off-takers. This is good, because it will help the industry avoid earlier mistakes.

District cooling utilities have to learn not to oversell capacity. If you have 20,000 TR, you had better sell 30,000 TR of contracts. This will improve returns and optimise investments.

Delivering on promises

Whether it is standalone or district cooling, there is a certain stipulated time to make infrastructure and equipment available. We do have rental companies in the market to provide cooling in the earlier stages, whenever utilities or contractors have been delayed. So, district cooling has managed to deliver on promises, and none of the customers have suffered.

Yes, it is true that Tabreed pulled out of some projects, and as a result some of the developers faced uncertainty, but that was because originally, the promises they made were not realistic. No bank financing was available, and no one will go with 100% liquid. Even if Tabreed pulled out, the developers in question could have rented. The Motor City project worked on rental for a year and a half. Atlantis ran on rental for six months. So clients do have a potential solution.

Financing of cooling projects

It is much more difficult to obtain finance now than it was earlier, but there is nothing that cannot be achieved through proper effort. Post-crisis, we have been witness to three projects that have received finance: the Aramco residential complex project in Dammam, which was financed by Saudi Bank; the ADNEC project, which was financed by ADCB and Dalkia’s Saadiyat Island, which has also received funds. These three instances go on to show that while the case is difficult, it is not impossible.

Truly, if banks are happy with off-takes and if there are enough guarantee for return on investments, they will lend, so it is not as much of a desperate case as it is made out to be. The financial crisis is behind us, and we will see more financing of district cooling projects.

Costs and the end user

There was a consensus that district cooling in Dubai, in particular, is more expensive owing to the capacity or demand charge of between 750/TR/year and 1,000/TR/year. It is true you do not have such a charge in standalone systems and that the end user pays only for the energy consumed. However, it must be added that the district cooling industry has attempted to go down the path of levying one large connection fee and the energy charge.

We will agree that the savings on construction costs for the developer through district cooling should have been passed on to the end user; this was not done. The end user should have been assertive.

End users object, because they are not used to paying. In Dubai, it is more expensive owing to the slab rate system. Speaking of which, district cooling should be allowed to purchase power at more competitive rates as bulk users, but all things considered, we as an industry have not created enough of an economic environment to make district cooling appealing to the end user.

We have reason to believe that the complaints from end users are diminishing, because people have got used to district cooling and because sub-metering systems have reduced consumption. A villa owner in Dubai’s Green Community used to pay AED 30,000/year for district cooling; today, he pays AED 15,000/year, owing to sub-metering. There is evidence available for that. Also, district cooling companies are listening to end users and reducing capacity charge. Earlier, neither the master developer nor the district cooling company paid any attention when the contractor’s capacity estimate was more than the real capacity. District cooling utilities should give better advice and share operational data and actual load per square metre. They should also share information on how sub metering has a big impact on human behaviour.

Safeguarding the environment

Here, district cooling was an outright winner at the debate, in terms of the much lower refrigerant stock required during installation, operations and maintenance. Also, the carbon footprint that can be reduced through district cooling made district cooling a clear winner.

The use of water and the blow-down – of chemicals going to the sewer – are issues. Today, though, there are better monitoring regimens in place to keep biocides in check, thus reducing the impact of blow-down on the environment. Online monitoring helps us avoid overdose of chemicals and biocides.

Also, we are seeing a lot of water reuse with RO, and the re-use of blow-down for irrigation, after proper treatment.

Water and its availability

Treated sewage effluent (TSE), use of seawater and the new technology of manipulated osmosis, which is dramatically reducing the cost of desalination and the energy required, are options that are available. They are making water available at a much lower environmental footprint.

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