Fit for purpose
A new sense of proportion is leading to efficiency in district cooling
Designed to provide air conditioning to large scale developments, district cooling has had to reinvent itself to adapt to challenging times.
District cooling is a fairly young concept, and its rise to prominence coincided with the construction boom that ended only as the financial markets soured in 2008. Built in an era defined by largesse to service developments of ever increasing proportions, many of the district cooling plants were designed without careful deliberation on actual requirements.
“In the past we built plants with a capacity of 50,000 tonnes, when all that was needed was 20,000 tonnes,” says Mohamed Yousseff, managing director at SNC-Lavalin, an EPC contractor active in district cooling.
Things changed as the world economy took a turn for the worse, and the pace of property development slowed considerably. As developers struggled to find occupants for their new buildings, dead assets in district cooling plants became a common phenomenon. Some plants, already built, would simply be fitted with less capacity, says Yousseff.
Inspired by the new spirit of austerity, and more familiar with district cooling, the utilities companies and developers are now looking to take a more considered approach. “The market has matured a lot, people are more conscious of the capacity of a district cooling plant,” says Tawfiq Abu Soud, executive director at Drake & Scull Water and Power. “Three years ago, they would go and install the district cooling for the whole master plan with some additional capacity just to be safe. They didn’t dig deep inside to the load profile of each building to see what the actual need was.”
Abu Soud sees a trend towards more customised plants arising, partially because of the financial constraints experienced by the utilities companies providing district cooling. With the credit markets in turmoil, securing funding has been a difficult in the last couple of years. Even if crowned with success, the process can take up to a year.
This has left district cooling companies unable to bid for as many projects as in the past, a problem for developers who cannot open their residential or commercial buildings without air conditioning.
To solve this dilemma, property developers are moving towards building their own cooling plant. “We had a call from a property developer from Abu Dhabi recently, who said that he had a problem. His utility provider couldn’t provide him with chilled water until 2012, but his property will be ready next march, and without cooling it cannot open,” recalls Abu Soud.
ECP contractors like Drake & Scull will increasingly be dealing with the property developers, supplying them with purpose built plants for individual complexes.
“We think we can provide a better solution,” states Abu Soud. “We can build a plant fit for purpose. District cooling providers built a plant providing cooling for the whole area – so maybe the requirements are not fit for purpose for everyone.”
A more gradualist approach in the construction industry, coupled with reduced demand for new residential and office space in the region, will further accelerate the move towards more custom built district cooling applications, believes Abu Soud, who speaks of a trend towards ‘distributed energy’.
In order to avoid dead assets in a plant already completed while the rest of the complex is still under construction, district cooling providers are now looking at building a range of smaller plants in a staged process.
“The construction of a development can be phased out, but if you are building a central plant, you can only phase parts of it out,” explains Abu Soud. “So there are a lot of dead assets, especially underground, as the infrastructure for the chilled water has to be built in the beginning. There no return on investment for the capital investment. That’s why we are moving to distributed energy or localised chilled water plants.”
To improve the reliability of the system, the plant will be interconnected, meaning that a malfunctioning plant can be compensated for by the remaining capacity.
While delays arising from illiquid capital markets have caught out utility companies and project developers, it has created business opportunities for some. Providers of rental cooling solutions have flourished. “I can only guess why developers come to us,” says Roberto Bagatsing, group marketing manager at RSS, one such provider.
“But when we went to some of the projects we were hired for, we noticed that there very few cars in front of the buildings. If a new development has only one or two tenants, there is no point running a whole district cooling plant.”
Conversely, if the district cooling plant does not come online in time, developers are desperate for a short term solution. “Most of the district cooling plants have been delayed,” says Bagatsing of the situation in the UAE. As a result, RSS have been able to increase their revenue dramatically, and have worked on some of the region’s noteworthy recent developments.
The company provided cooling to the Atlantis Hotel, the Lost World theme park and the Dolphin’s Habitat in the Palm Jumeirah in Dubai from July 2007 to October 2008.
With 38 air cooled chillers in duplex configuration generating a capacity equivalent to 7,700 tonnes of refrigeration (TR), the project was the largest temporary air-cooled chiller plant connected in a single header in the MENA region, says Bagatsing. That record was later broken by RSS itself, when the company started supplying the equivalent of 13,000 TR in to the Yas Island project in Abu Dhabi in July 2009.
While those catering for temporary solutions are thriving, EPC contractors are still looking for business to pick up again, with little tendering activity in the GCC so far. “Business is improving, but it won’t go back to 2007 levels, not this year, not next year. Everyone is cautious, and is trying to work in a more phased way,” says Abu Soud.
“Last year was a weak year compared to 2008 for the whole construction business, but we can see it is picking up now,” agrees SNL-Lavalin’s Yousseff.
Drake & Scull have responded to tougher times by venturing beyond their traditional base in the UAE. “The big boys take the crisis as an opportunity to become bigger,” says Abu Soud. The company is bidding for district cooling projects in new markets such as Egypt and Libya, where a tender for the cooling of the Tripoli International Airport is in the post-bid clarification stage.
A lengthened bidding process in all markets due to the credit crunch, from around two months to over half a year, has stood in the way of securing any orders in its new target areas yet, says Abu Soud.
GCC still the biggest district cooling market
Yet despite the recent slump, the GCC is still the big hitter when it comes to district cooling. “If you attend the conferences in Europe and the US about district cooling the references are always about the projects here in the region. Here you find the projects, due to the environment, due to the temperatures in the region of 50,000, 60,000 or 70,000 tonnes. In Europe or the US, we are talking about maybe 5,000 tonnes,” says Yousseff.
And Yousseff is optimistic about the long term future of the technology. While the initial capital expenditure may be higher than for localised air conditioning set ups, operating costs are considerably lower.
“The energy efficiency is better, district cooling only consumes 50 percent as much power as conventional cooling, and you provide the developers with more space,” he says. “In all aspects district cooling is a better solution, it just needs some promotion to make the people familiar with it, because its a new business.”
After being pioneered in the UAE, district cooling is now gaining traction in Saudi Arabia, the Arab world’s largest economy, and SNL-Lavalin only recently received an order in the Kingdom.
However, there is a word of caution. The key benefit of district cooling to end users is reduced the reduced cost of air conditioning. And unlike electricity and water, where consumers in the region depend on a monopoly of state-owned utilities, the market for air conditioning gives end users a choice.
Yousseff believes that the companies providing district cooling are undermining their competitive advantage by pricing their service out of the market. “The utility providers unfortunately came up with a financial model that is very high for the end users. I’m afraid that later on, the end users might opt for the conventional solution, if district cooling is the more expensive option,” laments Yousseff.
There might be little reason to be concerned. As this market has proven, its participants are quick to adapt their business model.
Meydan – Racing against time
Drake & Scull provided the district cooling for the Meydan complex, home to the Dubai Racing Club’s racetrack.
The Nad Al Sheba district cooling plant consists of four 5000 TR electrical driven chillers modules and two thermal storage tanks which together have a capacity of 25,000 TR per hour for supplying chilled water at peak times.
The plant provides chilled water for the complex’s five-star hotel, museum, gallery, IMAX theater, the Dubai Racing club and Emirates Racing Authority Offices. Nad Al Sheba is designed to further accommodate another set of four chillers modules for future needs.
“The plant has a special design in order to speed up the construction. We have not partially submerged it like other plants, instead we built it fully over ground. The plant was ready to produce chilled water within six to seven months of breaking ground. That is quick,” comments Tawfiq Abu Soud, executive director at Drake & Scull.