According to a report published by MarketsandMarkets, the global district cooling market size in terms of value is projected to reach $29bn by 2019, at a CAGR of 11.4% from 2014 to 2019.
The Middle East and Africa region is the fastest growing market due to rapid growth in the real estate and commercial sectors which is marked by increasing demand for power and cooling during peak hours.
Industry analysts believe that the GCC has already reached more than four million refrigeration tonnes of installed capacity, accounting for 32% of the total capacity worldwide, a reflection of remarkable growth and huge potential for the district cooling sector over the next few years if well managed.
The district cooling market is mainly driven by high efficiency of district cooling technology which results in enhanced reliability, less water and energy usage, reduction in environmental degradation, efficient use of energy and reduction in strain on a nation’s electricity grid. Issues such as inaccurate estimation of cooling demand and incoherent cost recovery models are the after-effects observed in the district cooling market which needs to be addressed at utmost priority to boost the market.
Rather encouragingly, there are signs that efforts are being made by regional authorities to introduce a robust regulatory framework.
Abu Dhabi’s Regulation and Supervision Bureau (RSB), for instance, recently announced that it is developing a detailed regulatory framework for district cooling in the emirate. The framework is expected to cover the technical, legal, and economic aspects of the district cooling sector in Abu Dhabi. A preliminary study was carried out by RSB in 2014 to study the feasibility of regulations for district cooling.
The ongoing development of regulations for the sector include requirements such as mandating the use of district cooling in areas that meet specified criteria; formulating technical standards and guidelines for the supply and performance reportage of district cooling; creating a licensing scheme for district cooling providers, contractual frameworks and standard agreements; setting price regulations for existing and new projects; compiling market competition regulations; and, implementing a regulatory impact assessment study of the framework.
Adib Moubadder, CEO of Emicool, says the district cooling provider is working on cost-saving models to reduce the cost of declared load on customers.
“The end user in the UAE is not used to receiving a district cooling service. From 2003 onwards, district cooling has grown strongly as the most sustainable air conditioning solution,” he says.”
“There was no comparative studies. But if you compare Dubai to the USA and Canada, then it reveals that the declared load charges are in line with worldwide market trend - in the range of $210 per annum per ton of refrigeration.”
Moubadder adds that regulatory bodies will ensure high levels of protection for customers and enable fair competition.
Ahmad Bin Shafar, CEO of Empower, believes the district cooling industry just needs time to build up a proper regulatory framework under which it can flourish.
“What we see is a clumsy horde of players entering the industry and promising to do everything,” he adds. “There have to be some sort of guidelines to be followed just like any other industry offering an essential service to the public.”
A government regulatory body would help to mandate district cooling in defined areas where density levels render it appropriate and also enable the establishment of a consistent national tariff for the industry, analysts says.
The body would also define the basic levels of reliability and performance required of district cooling providers, as well as accompany these requirements with technical codes to ensure quality in the design and installation of assets.
A senior analyst at Strategy& told the special report: “As a result of an unregulated market, district cooling has not been used sufficiently where it is appropriate, and it has been used where it is inappropriate. As GCC countries continue to develop their economies, this misuse of an important technology will prove costly.”
The vice-chairman of the Supreme Council of Energy in Dubai, Saeed Mohammed Al Tayer, says that the council was already planning on regulations to improve the efficiency of district cooling companies.
“The regulations will take time for implementation, but they will include thermal storage and other facilities as the Supreme Council is looking for more efficient plants with less emission,” says Al Tayer, who is also CEO of Dubai Electricity and Water Authority (DEWA).
Clinton Wyngard, temperature control manager, at Aggreko Middle East, says the market has been shrinking for temporary major district cooling plants in the last few years.
“Main reason behind this is that now large district cooling suppliers are able to serve all their customers and have the capability to stay ahead of the growing demands,” he says. “Their ability to stay ahead of the demand leaves only few smaller temporary district cooling requirements which typically occur over the summer period due to peak shedding and operational demands more commonly seen in mature markets.”
Wyngard believes district cooling companies have become more calculated with regards to sizing and delivering plant requirements across the Middle East.
“Where possible the district cooling plant providers have started to leverage the existing cooling plants over-supply and deliver cooling to up and coming projects as opposed to building a new plant and incurring a large development cost thereby reducing the requirement for medium to large district cooling plants from rental suppliers,” he says.