District developments

Indeed, those involved in real estate are already well informed about the advantages of district cooling over its conventional predecessor, air conditioning. Though this new utility makes sense for everyone involved, right down to the individual tenant of an apartment, it is those in charge of developments on a mass level, i.e. the master developers, who are the first to see why they should opt for district cooling.

Cooling masterplan

“The master developers like Nakheel are aware that district cooling is benefiting them,” says B.S. Prashanth, business development coordinator at Palm District Cooling. “Emaar, Dubailand, Reem Island, ALDAR – all these big developers definitely know that district cooling is the answer for their developments.

“For the master developer, when we come into the picture, we are basically part of the infrastructure for them so they will not have a headache and can concentrate on their core activity. At the same time, it helps them reduce the infrastructure cost for power – we cut down the power by nearly half.”

Prashanth makes a good point. District cooling consumes something in the region of 40% less electricity than air conditioning (though it should of course be noted that district cooling does use large amounts of water) – and this in turn means than less power infrastructure is required for a development, in terms of installing substations and so on. Operational and maintenance costs are considerably reduced.

One of the larger developers, Abu Dhabi-based ALDAR Properties, has demonstrated its faith in district cooling by setting up a 50:50 joint venture with cooling provider Tabreed. When asked why ALDAR had decided to go in for district cooling, marketing and communications director Ousama Ghannoum makes the reasons quite clear.

“Energy efficiency. It is an environmentally-friendly technology and you can control it. When you say 17 degrees, it is 17 degrees,” says Ghannoum. “It is always financially viable when you have large-scale developments like ALDAR because it is not like a villa – we are creating communities, so I think it works very well for us. The foundation prices would probably be lower also because you do not need to install chillers and so on.”

ALDAR recently signed a further agreement with Tabreed for the supply of its projects at Al Raha Beach and Yas Island with 400 000 and 600 000 tonnes of refrigeration respectively.

“Al Raha Beach is a typical example,” says Ghannoum. “120 000 people will live there. It is a stretch of 10 km – district cooling will work very well for us.”

Another example is Downtown Jebel Ali, a development being carried out by Limitless, the real estate development arm of Dubai World. The Jebel Ali development will stretch for 11 km on Sheikh Zayed Road and will consist of 326 buildings, 237 of which will be residential.

Downtown Jebel Ali is divided up into four zones, each of which will be district cooled. René Stelder, project manager for infrastructure at the development, cites less spatial requirements and better building aesthetics as further advantages of the concept, in addition to energy efficiency.

Market potential

The staggering size of these projects shows just how lucrative the district cooling market is going to be in this region. Palm District Cooling’s Prashanth, who recently returned from the EuroHeat conference in Copenhagen, reported that the technology being used in the Middle East was no surprise to the Scandinavian delegates, who use the same concept for both cooling and heating depending on the season, but declared themselves “amazed” by the size of the market here.

But ALDAR’s strategic tie-up with Tabreed is no isolated example of how property companies are trying to secure their cooling infrastructure for the hot climate. Palm District Cooling’s major shareholder is Istithmar, an investment company with a considerable focus on real estate in the UAE and overseas. Since Istithmar is part of Dubai World, Palm District Cooling has good connections to other group companies such as Nakheel and the Jebel Ali Free Zone Authority (JAFZA).

Empower (the Emirates Central Cooling Systems Corporation), has a strategic partnership with Dubai Properties and a good client base in the Dubai Holding companies, such as Dubailand and Dubai Media City.

“Three or four years ago, people said they did not need district cooling,” says Ahmad Bin Shafar, Empower’s CEO. “Today with the price situation and all the growth happening, they prefer to go with our solution. District cooling pricing is fixed for the next 25 years, subject to the increasing of the other utilities, namely electricity and water,” he adds.

“Dubai Properties understood the value of adding district cooling, which would give them saving on their peak requirement, because you reduce your electricity requirements by 30%, so you are optimising your requirements.”

Building the case

But if the master developers have now unequivocally given firm backing to district cooling, where does this leave the individual building developers?

Bin Shafar believes it is just a question of time before people become aware of the benefits. “People always show resistance to the new things. When they started with the internet, people said they didn’t need it. Nowadays, they use it for their travel plans and it is cheaper for everyone because there is no human involvement. It is the same for district cooling – it is a new investment. Sooner or later it will be known.”

“When it comes to the building, we are now shifting the building owner from the traditional system to district cooling,” adds Samer Khoudeir, sales and marketing director for Empower.

For the individual building developer, there is the benefit of cooling being provided from central plants, which removes the need for having chillers on the roof of a building. This is a significant advantage, given the premium put on space in Dubai these days, since the roof could house a swimming pool or other leisure attraction instead.

“I think if they have a piece of land to develop on Sheikh Zayed Road in Dubai and the whole road is linked to this system, they will go for it,” says Ghannoum. “But if you are going to develop a separate building and you do not have the infrastructure ready, I think it would be debatable.”

The same is true for retrofitting. Khoudeir says district cooling’s penetration level with today’s mega-projects is at 100%. But for projects already built with a conventional system, there would need to be a district cooling network in the vicinity to warrant switching systems. If there is one in place, the developer would have to contemplate replacing the chillers.

One design consultant for district cooling projects said individual developers are often reluctant because a lot of infrastructure is required, but pointed out that “the payback is there”, suggesting a recovery period of 5-10 years for the initial capital investment in district cooling is possible, assuming that the system is operated efficiently.
Prashanth puts the reasons for smaller developers’ persistence with conventional air conditioning down to “a lack of education”, or someone “not giving them the correct information”. He believes it is a learning process and there is still work to be done.

“The smaller developers are not as exposed to this technology but we are almost there with our public awareness campaign. We would like people to use district cooling but at the same time we do not want to force them – they have to be given a choice.”

Tenant savings

All of the benefits discussed so far ultimately translate into a saving for the tenant of the property. But whilst the PR campaign is yet to fulfill its mission of converting all of the sceptical developers, there is also a need to educate an unsuspecting public about the system which is keeping their lodgings or work premises cool.

Not that they should take much persuading. “The tenants are paying something for district cooling but they are saving 30-40% on their bill,” says Bin Shafar, whose company will be billing tenants of the Jumeirah Beach Residence (JBR) individually.

“For the first time, they now have control of district cooling in terms of running the system,” Khoudeir points out.

“Beforehand, the bill went to the building owner and he would split it among the apartments. Today, the user of the product has the chance to reduce his consumption simply by setting the temperature to whatever he wants. Previously he did not take care because he was not paying directly and would just set it to the lowest.”

Prashanth believes that as UAE residents start to buy properties rather than rent, they will begin to pay more attention to whether or not they want to make the investment in an air conditioning unit or opt for something district cooled instead.

“In the short-term, people have a different mindset because most of them are staying in rented apartments which have AC units built inside. They have not invested for the capital cost of air conditioning, so they are only interested in the electricity bill. Buying the AC unit is not at the expense of the tenant but of the owner of the building.

“The capital cost is something we put in our tariff on a long-term basis. When you add the capital cost and the consumption cost together, we are much cheaper,” Prashanth explains.

We would like to go in a direction where an end-user would like to choose a property on the basis that it is district cooled. Maybe in 5-10 years, when all the new properties are being used, this will happen.”

According to Empower, this scenario has already occurred for some of its larger clients, such as the American Hospital and Harvard College, who insisted on district cooling.

“They automatically asked who the district cooling provider was. The universities and hospitals in the United States all go with district cooling because it is a very healthy environment and it is very efficient,” says Bin Shafar.

“We need to standardise Dubai as an international city with green buildings and a very healthy environment. We do not want to have the cloud in Hong Kong, or the pollution in LA. We need to create a lot of customer awareness and we need to sell it to our financial institutions. Everyone needs to be convinced about this. We want everyone to know that district cooling is the future.”

As for residents moving into their new homes, they will find information is on hand to learn about this new utility.

“There is a team at JBR, where people are introducing district cooling, explaining what it is, how much we are charging, how much they will save, what the benefits are and so on,” Bin Shafar points out.

For its part, Palm District Cooling is encouraging potential residents for the shoreline apartments on the Palm Jumeirah to contact them if they have any queries about district cooling, while ALDAR properties is giving the concept a good deal of attention in its welcome packs for residents.

“As part of the pack we prepare for the tenants, when they sign in and collect the keys, we will obviously include a big chapter on district cooling and its advantages, in particular on the environmental impact,” says Ghannoum. “We will include the information along with maintenance fees, garbage collection and so on. We are preparing something for Al Raha Gardens, which has not been distributed yet, but it will have answers to all of these questions.”

Conference calling

After industry body IDEA’s (International District Energy Association) latest conference in Arizona, district cooling’s big hitters will descend on Dubai at the end of October for another round of discussions at the International District Cooling Symposium.

Whilst Prashanth is hopeful that having the spotlight on the UAE will help to attract more technology, contractors and consultants to the region, Bin Shafar is more bullish in his anticipation of the conference.

“Previously we were trying to learn something from their experience. Now, I think it is time to flip the coin – they have to learn from our experience. Their size and growth is limited, to 5 000-10 000 tonne plants. By 2008 or 2009, Empower is going to have 400 000 – 500 000 tonnes operational.”

Those figures serve to reiterate the sheer size of this market in the UAE and the wider region. District cooling will soon be a term on the lips of every shrewd investor.