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Is tariff the major issue in accepting district cooling?

by Rajiv Ravindran Pillai on Jul 6, 2017

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The rising demand for low-cost and efficient cooling systems forecasts the global district cooling (DC) market size to reach $80bn billion by 2026 clocking a double-digit CAGR. Industry experts predict that district cooling companies operating currently in the Middle East have a total annual revenue of around $3.5bn.

District cooling can offer numerous advantages over conventional cooling. The technology has advantages for areas of high cooling density, which means densely populated areas with a heavy demand for air conditioning.

However, current market structures in the GCC make it difficult to recognise and capitalise on those benefits. In many cases, power prices are relatively low, making district systems appear viable only at extremely high levels of cooling density. In addition, property developers often fail to appreciate the advantages of combining their cooling demand and are wary of the technology because district cooling requires significant initial investment.

Currently, there are no formal regulations on who should pay for the capital investments (displayed on bills as capacity or demand charges) on district cooling in a development. The common practice is developers passing on these costs to end users on top of their consumption charges which “makes district cooling appear artificially expensive” according to Booz and Company’s study on ‘Unlocking the Potential of District Cooling, the Need for GCC Governments to take Action’.

As the knowledge partner of this special report on district cooling, George Berbari, CEO of DC PRO Engineering, enlightens us on the technical issues surrounding the district cooling industry, particularly those involving tariffs. He says: “I believe that today it is the role of the Dubai government to find a balanced solution where DEWA, district cooling, and the end users are all happy if you want this industry to survive. Right now, DEWA is happy, the district cooling utility is happy, but the end users are not happy.”

It is no secret that the major bone of contention for accepting district cooling is the huge tariffs associated with it.

Perhaps, an educated revision of the billing structure and an overall mindset change could make district cooling more attractive to the end users than cheaper, but inefficient, methods of cooling.