In a world dominated by headlines of possible wars and a global pandemic that’s turning endemic, there are many issues that can sway business in the year ahead. After much consideration, I selected three that I felt would be the most relevant to the HVACR industry in the region, and here are my thoughts on them:
All’s green in love and war
How are honeybees in Oman related to orders for HVACR equipment in a new mega-development in Saudi Arabia? As you may have guessed, the answer is “global decarbonisation”, and it’s the love of the earth that will trigger the next business battle.
The UAE and Saudi Arabia have set definite net-zero-energy deadlines and are now working in earnest towards this global goal. Even though the UAE and Saudi Arabia have high per capita pollution rates, considering their relatively small populations, the overall significance of the pledges by these energy leaders, when it comes to the total direct impact to the global net-zero-energy goal is small. The significance lies in their shared ambition to be energy leaders in the future green energy world. To shed the black mantle of oil and replace it with one that is green is a multi-decade evolutionary course that will drive development across almost every sector and industry in the region.
The lowest-hanging fruits in terms of high visibility and high-impact initiatives are the electrification of transportation through the implementation of inter-country and cross-country rail lines and the development of infrastructure for EVs and hydrogen-powered vehicles. The next is the continued aggressive building of renewable energy plants at all scales, followed by the decarbonisation of the oil & gas sector through initiatives like CCUS (carbon capture, utilisation and storage).
While the transport and energy sectors will offer a number of HVACR-related opportunities, it is the decarbonisation of urban development that poses the greatest opportunity for HVACR, but it also comes with the highest complexity. Social consciousness aside, the complexity stems from:
- A lack of awareness or belief by owners in the Op-Ex benefits of energy-saving products
- A lack of standards to evaluate, test and benchmark energy efficiency of products
- A lack of regulations that incentivise green products and energy saving
To invent an adage, ‘from complexity stems opportunity’. Greenifying your products, and manufacturing and supply chain processes is a given. The battle will lie in developing the standards, educating the market and proving the benefits.
Chips and ships
A critical element of going green is better monitoring and control of HVAC systems that fall under the broad purview of the Internet of Things (IoT). Unfortunately, semi-conductor chips, which constitute a key component for almost all equipment these days, are in short-supply due to an exponential increase in demand, poor planning and globally centralised manufacturing. With mammoths like smartphone, telecom and automobile manufacturers in line, the HVAC industry isn’t on the priority list, and manufacturing delays can be expected to last through the year and possibly well into 2023. Equipment delays can significantly affect project schedules and have a knock-on effect on non-chip products, which will not be needed unless key system components are available.
Then we have the ships. In a world used to products magically appearing in stores and on supermarket shelves, the current fragility of the global supply chain lies exposed for everyone to see. With a pandemic that has caused supplydemand pandemonium there are now too many ships at some ports and none at others. There are truckers struggling for work in some places, and others who are shunning the ever-growing backlog of work to fight for their causes. Hence, chips aside, raw materials of various natures, including rudimentary materials that one would typically have taken for granted can be in short supply, directly affecting project execution and local manufacturing.
To quote a common adage, ‘necessity is the mother of invention’, and 2022 will pose the need for creative proactive solutions to supply chain problems.
“Beam me up, Saudi!”
It can be argued that the famous line, “I’ll have what she’s having”, from the movie, When Harry met Sally, aptly describes Saudi Arabia’s vision goals, which seem to mimic Dubai’s wild urban and tourist development success. However, it’s the line, “Beam me up, Scotty”, from the popular science-fiction television series, Star Trek that is often tersely mouthed to get the crew out of a tight spot that comes to mind when describing the current business sentiment with regard to Saudi Arabia.
Pandemic and wars notwithstanding, with the completion of over five years since the announcement of Saudi Vision 2030 and massive volumes of behind-the-scenes design and planning work commissioned and completed, it’s time to start seeing execution of these plans with a rapid growth in contract awards in the Kingdom over the course of 2022.
Businesses have made tentative moves towards establishing a base in the Kingdom, but many have been dissuaded by the lack of observable on-site activity and lack of faith that the plans will see the light of day. For the HVAC industry, in particular, pre-emptively investing in Saudi Arabia has been a large leap of faith with an offering that is procured far downstream from the early work that takes place on projects. While some have done the early work with consultants, many are still waiting for the boom to begin.
With urban activity across the region relatively subdued, all eyes are on Saudi Arabia to turn on its impulse drive and respond to the “Beam me up, Saudi” call out from across the construction industry.
To conclude, here is a simple but powerful adage attributed to the US Military that sums up the advice for acting upon this last theme. To be successful in Saudi Arabia, you need to just ‘Hurry up and and wait’.