Exclusive Interview: Empower CEO, Ahmad Bin Shafar
CEO: District cooling must be the future of region's chilling needs
Ahmad Bin Shafar, CEO of Empower, discusses the future of district cooling as part of the UAE’s utility infrastructure, and its benefits to the region’s demands on electricity and water
Keeping the desert cool is one of the biggest problems this region faces. With summer temperatures constantly threatening to break the 50 degree barrier, sustaining life in the Gulf depends almost entirely on the availability of a comprehensive and economical cooling solution.
With electricity at a premium from already stretched generating facilities, traditional power-hungry cooling methods like air conditioning are beginning to strain infrastructure at peak times.
DEWA, Dubai’s power and water authority, estimates that during the summer there is a 40 per cent increase in electricity consumption between noon and 5pm, causing a surge in demand that generation facilities are required to cope with.
Not only that, the authority’s statistics also show that air conditioning represents 70 per cent of an individual’s electricity bill. Clearly, there is incentive for both authority and end-user to utilise a better, more efficient method of cooling.
District cooling is not a new idea. The idea for centralised production and distribution of cooling energy has been around since the 19th century, and today utilises an underground network of insulated pipes to deliver chilled water from a central plant to a series of buildings.
Through specially designed units, this water is then used to lower
the temperature of air passing through the building’s air conditioning system.
Having been implemented in Dubai International Airport in the 1970s, district cooling saw commercial adoption in the late 1990s on the back of the Emirate’s real estate boom.
After a shaky few years, the last five have seen it reemerge as a huge growth industry. Ahmad Bin Shafar, CEO of Empower, believes that the key to successfully implementing district cooling in the region is to be certain of the property development before work is begun on building infrastructure.
“I strongly believe in seeing the contractor and developer coming up with the building first,” he says. “When they get close to the handover stage, maybe 80 per cent of completion, I’ll instruct my team to start working on putting up plants for district cooling, whether permanent or semi permanent.”
“I don’t live with hope, I live with reality – I’m a very pragmatic person, and I will not move ahead until I can see construction, that the development is there and I can see there is building. I believe in seeing things done.”
Talking in the company’s Healthcare City headquarters, Bin Shafar is quietly confident that district cooling is the future of the region’s cooling needs.
Empower was established in 2003 as a joint venture between DEWA and TECOM, with the vision of providing efficient district cooling services to developments in Dubai and the surrounding region.
“The concept was to have an efficient utility company to serve new projects,” says Bin Shafar, who has been the company’s CEO since 2004.
“The requirement for air conditioning here is very high, and therefore authorities had to come up with a way to reduce the cost of the substations, and make it more efficient for the end user. A study was conducted, and it was found that the ideal solution was to go
with district cooling.”
Empower’s strategy to use a combination of permanent and semi-permanent plants is also a security measure against risk, allowing the company to invest based on actual, rather than predicted demand, and also to enable it to cater for short and long-term demand.
“District cooling requires very heavy cash investment,” Bin Shafar explains. “Obviously you’re not going to put that investment in without return, so from that front we have to be very careful.
Whenever we see that demand has increased to a certain extent, and we see it’s feasible to put in a permanent plant room, we go ahead and build a plant room. Otherwise we stay with a semi-permanent facility.”
“The concept is driven by operation,” he explains, “it’s not driven by how big your investment is or how many plant rooms you have. Many companies went that way around – they put up plant rooms with capacities of 50 or 60,000 tonnes, and said ‘we’re finished, we’re done’. But that’s like buying a bus to take two children to school – it’s not efficient.”
Recently, Bin Shafar also made a very public call to banks to increase their funding to the district cooling industry, reasoning that a rapid
rise in demand in the UAE had lowered the risks of such investments enormously.
“Despite the positive scenario, banks are reluctant to invest in the sector due to a lack of understanding of the nature of the business. As a result, a golden opportunity is being lost to invest in a promising and safe industry.”
Asked why banks don’t fully understand the nature of district cooling businesses, Bin Shafar says simply: “They have seen a few
scenarios that have been built in the wrong way – they have seen the wrong picture of district cooling and the infrastructure, so they pull out.”
banking on investment
“Now they have seen what we have done, we have huge support from the banks,” he says. “But they have to understand that district cooling should come after the development, not before.”
With the expansion (or decline) of district cooling intrinsically linked to the real estate market, Empower is predicting a steady rate of growth of between 15 and 20 per cent annually, increasing its current 350,000 tonnes of operational capacity to 380,000 by the end of this year.
Looking at recent events in the Middle East, Bin Shafar is confident that Dubai is looking at a period of growth, with people flocking back to the Emirate from across the region.
“I strongly believe that a lot of people will land back in Dubai,” he says.
“Dubai is considered an oasis of peace and harmony, and people enjoy living here. We will see the demand for housing going up, and the demand for utilities increasing – trade levels have already increased by 30 per cent because of what’s happening in the region. We expect there is potential coming not just for Empower but for the whole city – it’ll have a positive impact on all of us.”
But while an increase in population will provide a welcome boom in the real estate market, it’s not without its problems.
With water infrastructure already stretched to capacity, electricity demand in the Middle East has been conservatively tipped to increase by between 12 and 15 per cent a year. Bin Shafar is quick to point out that district cooling – a far more efficient system than traditional air conditioning –could be a key to reducing requirements for power, and also pressure on grids during peak times.
“Take a traditional system – say you build ten towers on the Sheikh Zayed road, each with a capacity requiring 1,000 tonnes; you’ll need to build a capacity of 10,000 tonnes,” he says.
“But actually you are building 12,000 tonnes, because each consultant will give you at least 20 per cent contingency. So you build 12,000 tonnes and ask Dubai electricity to provide you for 12,000 tonnes, whereas your actual maximum need at the peak is 10,000, with utilisation perhaps only 8,000.”
“With the district cooling model, we will install 9,000 tonnes of capacity, give you 8,000 and use 30 per cent less electricity than traditional methods; and that’s on a small scale. Imagine if we do that for 200 to 300 towers across Dubai.”
Alleviating pressure during peak periods is a key point, and while district cooling already has obvious advantages over air conditioning in this respect, developing technology is set to ease pressure even further.
“One of the current concepts is to use thermal storage tanks to help reduce the load on peak times,” explains Bin Shafar. “In a crowded city there’s real demand at peak times, and at these times the authorities could allow the power to go elsewhere by utilising thermal storage. I would expect major changes in the industry to take place about every ten years.”
A Wider Scale
Efficiency in water usage is also something the implementation of district cooling on a wide scale will help to increase, with the technology already proven to be 50 per cent more efficient than conventional cooling through air conditioning.
At a time when the region’s groundwater supplies are at an all-time low and desalination costs still high, Empower has already shifted most of its main plant rooms to use treated water from Dubai municipality.
After it’s used once, the water is then taken to the plant room, recycled and used again – a move Bin Shafar cites as the “the real efficiency in our operation,” hoping it will help to reduce Dubai’s dependency on potable water.
With 38 plants in Dubai, a target of one million cooling tonnes by 2015 and $125 million profit on $477 million turnover in 2010, there is certainly ambition driving Empower. So what’s next for the company?
“Empower will be one of the world’s blue chip companies within the next five years – this is my aim,” Shafar says with a smile. “The target is to do it earlier, and to come up with new techniques in district cooling.
Being a leader in this industry, we have to take a lead in a lot of things; for example we are doing the standard guidelines for district cooling plants.
We are also trying to convey our knowledge to universities, where there are people specialising in electro-mechanics, mechanical engineering, electrical engineering and similar fields. There’s going to be huge investment in the future.”
This investment in education is something Shafar feels is important to the industry. With around $20 billion invested in district cooling in Dubai, the sharing of knowledge gained, the education and awareness is an important part of the industry’s development.
“Dubai has close to a million tonnes of district cooling generated capacity,” he says, “and it’s worth it to have engineers with clear understanding. With this much investment in one industry it’s worth imparting the knowledge, whether here or globally. Education is very important.”
In terms of competition, Bin Shafar is very sure about what he sees is the future of the industry. “Competition is a very healthy practice which I strongly believe in, but you have to maintain, not just lead,” he says. “You can lead for two seconds and come back, but the challenge is to sustain it and stay there.”
“There is great potential and opportunity for Empower in the region,” Bin Shafar summarises. “I’m very conservative about moving before having clear vision and direction; on investment such as this I don’t carry risk. It’s a nice unique model, district cooling.
The minute you put it on track, that’s it; it will fly by itself, but you have to control the costs; costs are very important.”
Meet Ahmad Bin Shafar
With a BSc in Business Administration in Management from California University, Mr Ahmad Bin Shafar is CEO of Emirates Central Cooling Systems Corporation (Empower), having occupied the position since February 2004.
Bin Shafar has more than 15 years’ experience in senior management positions, including eight years with Standard Chartered Bank in the areas of corporate and retail banking, finance, marketing and customer relations.
Also chairman of the board of directors of Empower Logstor
Insulated Pipe Systems (ELIPS), a strategic joint venture between Empower and Logstor, he has been a key speaker, lecturer and panelist at a number of high-profile, industry specific conferences and trade shows across the world.