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Stakeholders advocate for greater flexibility in District Cooling contracts

Industry experts outline challenges in making District Cooling more commercially viable for customers in view of penalties

| | Apr 21, 2019 | 11:40 am
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Dubai, UAE, 21 April 2019: Without a doubt, District Cooling is the most efficient, reliable, and sustainable cooling source, said Muna al Nahdi, Manager, Energy Management, Dubai South. However, she said, there is greater scope for improvement when it comes to making it commercially viable and ensuring the framework presents itself as the most efficient choice for customers. Liju Thomas, President, ASHRAE Falcon Chapter echoed this, pointing out that District Cooling can reduce consumption to only 1 kilowatt per tonne – even 0.8 kilowatt per tonne in more efficient designs – a notable contrast, he added, compared to the 1.6 kilowatt per tonne, on an average, consumption of DX and other conventional systems, but that despite this, there are objections from building owners owing to penalties.

Al Nahdi shared a similar observation from her experience in the field of energy management. She said that building owners who are eager to adopt more sustainable practices and keen on improving performance are hesitant to do energy retrofits, if they are connected to District Cooling networks. “When you do energy retrofits,” she explained, “it affects the Low Delta T, and basically you reduce the load.” As building owners and operators are under contract with the cooling provider, Al Nahdi said they are not able to benefit from the ROI of the retrofits, as they are penalised for using less capacity than originally requested in the initial contract. “In certain cases,” she said, “the penalty cost is much higher than whatever savings they can achieve. So, they kind of avoid it, and that’s challenging when it comes to the bigger picture of achieving sustainability.”

Weighing in on the issue, Thomas said that building owners that apply for District Cooling agree to a certain load, but that often, owners and operators are not able to maintain the Delta T owing to various reasons. An example, he said, is wrong specification of FCUs and AHUs, owing to cheap contractors, who win projects based on lower quotations – an issue, he said, is further aggravated by improper installation from unqualified stakeholders. Al Nahdi said she also views inefficient design as a bottleneck for the acceptance of District Cooling. “Most of the time,” she said, “the owner doesn’t have someone experienced in HVAC to identify inefficiencies in design.” At the end of the day, she emphasised, the owner is concerned with keeping tenants happy, and is unaware of technical aspects until huge penalties are imposed. To provide an example, Al Nahdi said that she knows of a client who pays AED 2-3 million in penalties, annually.

Al Nahdi stressed that buildings are essentially designed based on assumptions. “But it doesn’t mean they are operated or used as per those assumptions,” she said. “Most of the cooling systems within the UAE are over-designed, because the owner will have certain requirements, but some residential buildings are half-occupied. If you have your own chillers, you can remove one of the chillers.” However, she said, once buildings are connected to District Cooling providers, they can get penalised. As such, Thomas added that District Cooling providers need to be flexible and allow buildings to readjust energy demands and terms, if not annually, at least every two years to reassess requirements and address fluctuating occupancy rate. “What if the building is half-occupied?” he asked. “Do you still pay for the full building, or can you pay for half the building? Or, what if you convert some of the retail into F&B, and there is a change in load? Or, you close down some of the F&B and keep it as an office space or even a showroom? The load completely changes, so flexibility has to be there. That has to be looked at by both the parties.”

Al Nahdi pointed out that currently, contracts with District Cooling providers are fixed and on a long-term basis, which does not take into account innovations in an ever-evolving construction market. “Technologies are evolving,” she said. “Buildings themselves are dynamic, they change all the time.” As such, she said, District Cooling providers must be more open and flexible in discussing and revisiting terms within the contracts. Al Nahdi said this can benefit both the District Cooling provider and the building owner. The provider, she explained, could revise the contract in such a way that can be of benefit to them. “If one building load reduces they can allocate the same capacity for another client,” she said. Al Nahdi said bringing in legal parties in the initial discussions could also help, as each party needs to understand exactly the consequences of the contractual terms.

As such, Al Nahdi said that a holistic approach is the only way forward. “At the end of the day, all systems are dynamic and interrelated,” she said. “Lots of people draw back from using District Cooling because of some experiences they have had, and they are just judging based on that experience.” As such, she said, the industry must work together to reveal the long-term benefits of an efficient District Cooling framework.

Hannah Jo Uy is Assistant Editor at Climate Control Middle East magazine. She may be contacted at hannah@cpi-industry.com



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