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Home / NEWS / ESCOs: Value of retrofit projects too small for UAE MEP contractors

ESCOs: Value of retrofit projects too small for UAE MEP contractors

by Fatima De La Cerna on May 20, 2018


The second panel at the fourth edition of the MEP UAE Conference discussed the state of the retrofit market in the country.
The second panel at the fourth edition of the MEP UAE Conference discussed the state of the retrofit market in the country.

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The current value of the retrofit market in the UAE, in terms of investment potential, is estimated at between $1.4bn (AED5bn) and $1.9bn (AED7bn).

Jesús Gutiérrez, co-managing director of Dubai-based energy service company (ESCO) Smart4Power, shared this information during the MEP UAE Conference 2018, in a panel that sought to highlight the rise of retrofitting in the country.

According to Gutiérrez, those figures are based on the assumption that around 20-25% of the total energy consumption of buildings in the country is eligible for retrofitting, which he said translates to approximately 25,000 kW/h.

IN PICTURES: MEP UAE Conference 2018

“Putting [the numbers] down in an Excel sheet, you’ll find that, in terms of investment, you’re looking at between [$1.4bn and $1.9bn] for retrofitting in the UAE,” he said.

While it sounds like a substantial amount, the country’s ESCO community is reportedly facing difficulty persuading other construction stakeholders, especially large mechanical, electrical, and plumbing (MEP) contractors, to take part in retrofit projects.

Gutiérrez explained that MEP companies are hesitant to “jump into the [retrofit] business” because they view the typical project value as “much smaller” than those of new construction projects, and therefore not worth the “hassle” of having to deal with issues like financing.

READ: UAE MEP contractors optimistic despite lack of 20% growth

In support of Gutiérrez’s point about project value, Taka Solutions managing director Charles Blaschke cited a two-tower hotel in Dubai as an example, saying that that if the property consumed about $2.7m (AED10m) to $4.1m (AED15m) worth of energy in a year, retrofitting it would yield around $820,000 (AED3m) to $1.1m (AED4m) in savings.

“That’s a lot of money, but for us to retrofit it [and] get 20% or 30% savings, the CAPEX is probably going to be about $1m, maybe $2m,” he said, adding that if Taka were to take the project to a big MEP contractor and explain that the contracting value would be around $500,000 (AED1.8m), the contractor would most likely decline.

“For MEP contractors, that’s very small,” he continued. “Why go through all the hassle for that?”

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