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Construction boom 'heats up district cooling market'

Dubai, June 22, 2009

District cooling is fast emerging as the most viable cooling solution in the Middle East, where temperature frequently exceeds 45 degree Celsius and AC requirements consume 70 per cent of the power during peak demand, according to a study.

Frost & Sullivan in its recent 'Analysis of the District Cooling Market in the Middle East Region,' finds that the market had netted $580 million revenue in 2008 and estimates this to reach $2 billion in 2013 at a compound annual growth rate of 28 per cent.

As power shortage is rampant in this region, the governments are turning to district cooling to cool buildings, as it is a cheaper and greener alternative to air conditioning, say Frost & Sullivan research analysts Suganya Rajan and Darwin Kishore Selvaraj.

This solution can not only mitigate the power crisis in the GCC countries but also help reduce carbon footprints through increased energy efficiency and lower CO2 emissions, it said.

Multinational companies will be attracted to this market due to the prospects presented by the investor-friendly laws, improved standards of living, and high disposable income, which has set off a retail boom in the region.

With the GCC becoming home to the biggest shopping malls in the world, there is a distinct need for district cooling in not only the residential sector, but also the commercial sector.

The UAE alone is expecting to have 80 million sq. ft of office space by 2010, widening the scope for district cooling companies.

'The market is also expected to benefit from the environment-consciousness of governments, high oil exports, abundance of energy, a construction boom, and harsh climatic conditions,' the duo noted.

Among all Middle Eastern countries, Saudi Arabia seems to have the most untapped potential, with more than $100 billion worth construction projects underway.

Its rapidly expanding industrial base and population have increased the demand for power, which averages an annual growth rate of nearly 5 percent. The rising air conditioning needs account for almost 70 percent of this growth in power demand.

By 2013, the district cooling market is expected to have an additional capacity of 4.5 million tonnage of refrigeration (TR), mainly contributed by Saudi Arabia and Qatar, they added.

'Although there is a continuous rise in the demand for power in almost all GCC member countries, power is still provided at subsidized rates for the residential sector,' said Suganya.

'This puts a huge drain on the region's utilities, as power costs account for around 50 percent to 60 percent of the district cooling production cost,' she pointed out.

District cooling production also requires copious water, which, like electricity, is limited and therefore, expensive in the GCC.

Currently, district cooling plants use potable water, but the search is on for a technology that will allow them to use non-desalinated seawater. Even though a few plants are already using seawater, the corrosion-resistant equipment needed will increase their equipment cost.

The current credit crunch will make it even more challenging for companies to acquire the systems required to deal with this issue. As district cooling is a highly capital-intensive market, huge investments are required to meet the additional capacity required.

'Market participants can blunt the effect of the reduced capital by concentrating more on small projects that require less time in commissioning and that can guarantee quick returns,' remarked Selvaraj. 'When big projects are split into smaller units, the limited capital will be sufficient to start the project,' he added.

Analysis of the District Cooling Market in the Middle East Region is part of the Building Management Technologies Growth Partnership Services program, which also includes research<


Tags: Construction boom | district cooling market |

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