How would you define the scope of Cooling as a Service (CaaS)? Do the design, supply, installation, commissioning, operation & maintenance – including electricity – and repair charges rest with you as the provider of the service?
The purpose of CaaS is to offset from the customer any expense related to the chiller. We have to maintain, operate and retrofit it to a condition to meet the cooling needs of the building with the highest level of energy efficiency we can achieve. This includes replacement, upgrades, optimisation, operation costs, maintenance, spare parts, consumables, repairs and utility costs, so that the cost of owning and operating is translated to zero for the customer, after the customer enters into the CaaS agreement. The customer pays the tariff for consumption of chilled water. A District Cooling contract is similar – you pay for the installed capacity and the consumption, and a key difference is that CaaS is localised. There are other differences, of course. In District Cooling, there are common charges that don’t apply in the case of CaaS. For instance, you have a connection charge in District Cooling; we don’t charge the customer to enter into a contract. A District Cooling contract has a billing charge, which we don’t have. Again, while District Cooling involves a disconnection and reconnection charge, we don’t have a suspension charge, in case you wish to refurbish a building, say. You have a Delta T charge in a District Cooling set-up; we don’t have that. Our business is about efficiency, and Delta T is part of the efficiency equation. It does not mean every customer will have perfect Delta T, but as a variable, we don’t charge.
In the case of CaaS, when it comes to consumption of chilled water, you pay zero if you don’t consume any at all in a month. That said, a minimum consumption has to be met. In certain months, you can take zero chilled water, but on an annual basis, there is an average consumption charge. The consumption varies significantly in the course of the year – during summer, customers tend to use more chilled water, and during winter, they use less of it. Likewise, the Delta T is good in some months and very poor in some months. The point I am trying to convey is that you need to consume a minimum volume of chilled water for our model to work. But our charge is significantly less when compared to District Cooling. That is because we design a customised solution for every individual customer, and that is where CaaS essentially differs from District Cooling. We are not bound by rigidity. We can design a solution for them that makes sense for their business and offers flexibility. And as a service provider, it allows us to design a suitable cooling solution. We address oversizing of cooling, Delta T-related problems and automation-related problems. I have been seeing these issues being spoken about in articles on District Cooling in Climate Control Middle East magazine.
Our intention is to address all of these through launching CaaS. And the building next door may have a completely different solution. We don’t impose solutions and say that they must fit everyone.
What about fuel surcharge, which is an integral part of District Cooling here?
When we pay utility charge, we absorb the fuel surcharge as part of that. We pay only one number.
How else is CaaS different from District Cooling? Is there a heavier leaning towards air-cooled chillers?
We use air-cooled as well as water-cooled chillers. So that would be the entire gamut of chiller, cooling tower, pumps, chemical-dosing units and everything. Our responsibility ends when the piping network is connected to a building. The primary and secondary loops are our responsibility, because you want to have full control over pumping. But it’s not one-size- fits-all. For now, as I said, the primary and the secondary loops are our responsibility; however, if a certain customer has a secondary loop, then we do only the primary loop. The tertiary loop is the customer’s responsibility.
District Cooling has the benefit of diversity and volume. If supplying to individual customers, there is no scope of distributing the costs, is there? I am trying to understand the financial model.
This is a conceptual difference between a centralised and a decentralised utility consumption model. You can do a centralised utility-scale plant or build a rooftop model. I am not saying one model is preferable over the other – there are disadvantages and advantages. The centralised model offers diversity because of scale, but it entails a lot of distribution losses. You would have to carry chilled water across several kilometres, and you would have lot of temperature loss. If a rupture happens in a main chilled water pipe, you would be denying chilled water to every customer. From our point of view, the group we are part of as a company, we believe firmly in the decentralised approach, which we feel is the more effective way of generating locally and consuming locally. And we see a far bigger advantage in the custom-designed and custom-built approach, as per the need of each customer. In a centralised approach, you are building a massive capacity, which means you are compelled to supply that much. You have massive infrastructure in place.
We believe the decentralised model makes sense, because different customers have different needs. We are able to offload a lot of diversity factors through our capacity to design customised solutions; if you do one-size-fits-all, it won’t work. In a centralised model, you have to maximise efficiency at every demand point you have. This requires lot of engineers and lot of controls. And that is why a lot of centralised projects don’t work as efficiently, because it is a simplistic approach to a complex problem.
If you have a cooling load of 3,000 refrigeration tons (TR), you don’t know what equipment they are using this cooling for. In my case, I would be going to a customer that has a particular business profile. I would study their need and, subsequently, tell them that the best solution is “XYZ”. In the case of the next building, I might design differently.
No centralised model can custom design a solution. We believe a decentralised approach is the best bet for efficient cooling, because in the case of a localised model, we can deploy different solutions throughout the lifetime of the contract. Indeed, in 3-5 years from now, a new technology might arrive that saves more water and energy, in which case I would be interested in deploying it. The client as well as I, as the service provider, will get direct benefit from that. In the first two-thirds of the contract, I would continue to deploy new technologies to get better results. This is possible in a decentralised model. In a centralised model, I would need to apply the minimum common denominator for every customer. We are inclined to think that a decentralised approach suits the market best. We are seeing a world that is moving to a decentralised model of doing business that is tailored to your particular needs.
How do you measure consumption of thermal energy, assuming that the building is residential and that each flat is occupied by different individuals?
You have two different realities that you would need to separate. The first is a chiller-free building, and there are many buildings that are chiller-free. In such a case, metering and billing involves the total volume of chilled water supply, and you issue one bill to the manager of the building. You also have the situation where every tenant pays their own chilled water bills, in which case we have partners working with us – billing agents – and you have metering infrastructure that we install in every flat. We are also offering for the possibility of owners that have a chiller-free set up who might want to convert to a regime where the tenants would pay the bills. If you pay per square feet, this is the opposite of efficiency, because you pay the same whether you use more or less chilled water.
If you pay your own energy bill, you will have more concern. If you go on a 15-day holiday and leave the AC on, you would pay more. So, we are promoting a culture of responsibility through a decentralised approach. We are saying that each customer has the freedom to use how much they want. If the AC in the apartment is running 24×7, you are free to do that – and you are going to have to pay a lot more. So, this makes you responsible for your own action.
In a decentralised approach, are there any penalty charges by the customer to the service provider for possible downtime of the plant?
We have SLAs (service-level agreements) in our contracts, and we have a responsibility, contractually, to deliver cooling within certain technical characteristics. And if we fail to deliver, there are penalties. To make sure we don’t enter those situations, we enter into agreements with third-party service providers. If peak summer and you are using full capacity and the chiller goes down, we have redundancy planned for the situation. And if something catastrophic happens, we have rental equipment, etc., to ensure no one goes without cooling. Now, this might have a slight impact on cost, but we have to make sure. We maintain chillers at a very high level and we have spare parts. And we have 99% of the time when everything is going well.
We have predictive maintenance in-built as a feature. We have a full controls system that offers real-time and 24×7 vision and 30 points on every chiller. We have very good level of information on the performance of every chiller. If the chiller is delivering the performance we want, the name of our game is not efficacy but efficiency. It must work at a specific efficiency level. And this is where the customer benefits, as well. Many customers compromise on maintenance contracts and fail to take good care of the chiller owing to budget constraints, but we are particular about maintaining to the highest standards, because that’s the way to achieve maximum efficiency.
Typically, what is the installed capacity and number of chillers in a CaaS project?
It depends upon the customer. We have done two chillers, and we can do 18 chillers. We don’t have any boundaries. Most of the models don’t work well below 400-500 tonnes – the net benefit for customers is very low if less than 400. That said, we have done 250 tonnes, because we felt the need for it; in that case, we achieved a very tiny saving as the net benefit. In most cases, we refrain from doing that small a tonnage, for 90% of customers will not be attracted by tiny savings. Broadly speaking, we have no dogmas when it comes to looking at every project and seeing feasibilities.
What is unit rate/tonne charged to the customer?
It completely varies. If custom-made, we can propose different tariffs to different customers. We want to achieve the lowest price point, so we can pass on the benefits to end users. We want to give net-positive solution as benefit to them. If not net-positive, we won’t do it, because else it does not make sense. And these may vary a lot depending on profiles of customers, because some customers have very high consumption or very high capacity. We really don’t have a standard charge. We look at current consumption pattern of customer and we calculate how much they are paying to run and operate, and we would look to offer a lower tariff. And we drive efficiency high, because we want to drive price down, down, down.
Is the chiller plant offered with BMS and CMS – Chiller Management System?
For us, the most important requirement for O&M is data. If we don’t have data to tell us what exactly has happened in all the main components we cannot maintain. So, we have a controls system that measures many different parameters of chiller, pumps and cooling tower to not only understand if they are working or not but also their performance level. We can understand you may have a compressor working, but it may not be working at the performance level. So, we go deeper – much deeper, in fact – than your typical company that takes care of your chiller. For many, if the chiller runs, it is enough; for us, it needs to run at a particular efficiency point. If not, we would intervene and understand the cause for the efficiency points we designed not being achieved. It may be there is some control strategy that we need to adjust, or simple cleaning that we need to carry out. There are many possibilities, but for us running is not enough – it has to run at a specific efficiency point, and if not, we have to improve it, because our model depends on efficiency.
Who will pay for the electricity charges consumed by the other systems, including AHUs, FCUs and other accessories?
Our areas of focus are the chiller plant and everything that is attached in the chiller yard. As CaaS, my responsibilities stop there. We don’t enter the air side at all. We would offer airside optimisation as an ESCO, but in CaaS, we offer it as an option. We assess the efficiency of the entire solution. But our solution as CaaS is restricted to the chiller plants. We offer the client a range of possible solutions that can be contracted under different models as an energy performance contract.
Will the plant have additional capacity in case of expansion in the building?
Yes, but we will not install until it is needed, because then it would not be efficient. For us, efficiency is a very big obsession. If you expand, we will expand our chiller yard, as well. I will buy and install at my own cost, as and when I need it, because otherwise, I will charge you for capacity that you are not using now. We are efficient in the way we bill – we don’t want to over bill.
How much would be the price that would have to be paid by the owner after 15 or 20 years of operation? Would the asset – chiller plant – and maintenance be transferred to the owner after 15 or 20 years? What are the ramifications if and when the chiller plant’s efficiency drops and the maintenance cost becomes high? I am asking from an owner’s perspective.
If your question is, “How much will the customer pay at the end of the contract?” the answer is zero. We will transfer all assets free of charge. There is an option – you may renew your contract for another 15 years, and as long as we have an active contract, we will continue to charge the infrastructure.