Dubai's power structure is proving a goldmine for generator manufacturers.
When thinking of plant machinery, what's the first thing that comes to mind? Excavators, dump trucks, piling rigs? How about the generator? Often overlooked in favour of the more impressive looking equipment, the generator is the unsung hero of any plant, and this is never more true than in Dubai.
Despite DEWA's claims in August that power shortages in the region are simply 'speculation from developers', and its announcement last May that it would invest an extra US $13.6 billion (AED50 billion) into supply, it's an open secret in the construction world that demand for power exceeds supply - and looks set to for sometime to come.
Meanwhile, powering Dubai's construction sites, completed projects and even labour camps is proving a lucrative business for generator manufacturers and rental agents, who are filling in the gaps left by DEWA.
"Demand is astronomically high compared to previous years because of the current projects," says Shameem MP, assistant manager for sales and marketing for generator rental agents Swaidan Trading, part of Al Naboodah Group. "And we expect it will continue for the foreseeable future; we don't see it coming down."
"The obvious field for generators is the construction projects," says Georges Khoury, area sales manager for generator producers SAKR Power Systems.
"Because of the exponential increase in demand, DEWA can't keep up with the production capacity, so sometimes they will rely on such a thing as a stop-gap until they build their own production."
This view is supported by Julian Ford, marketing and business development director at Aggreko, who are supplying temporary power to Festival City, the three Palm projects and the Burj Dubai: "There haven't been power cuts, so the grid has sufficient power capacity, but the challenge is actually getting the power to all the new developments, hotels, offices and malls, which can take some time"
It's widely acknowledged that many of DEWA's power problems arise from distribution rather than capacity. "DEWA is not able to supply power because many of the development and construction is happening outside of their distribution area," says Shameem. "For example, the area after the Dubai Marina. This kind of requirement pattern has been going on in the area for the past couple of years."
"Once a building is completed, businesses are under pressure to open the doors as quickly as possible so that they can start to generate revenue and a return on the investment," says Ford.
"However, it can take time to connect the building to the utility grid for a permanent power supply. So Aggreko's rental solution is ideal to fill the short-term gap between the finishing of a building and getting a permanent power connection by providing temporary power plants."
Although Dubai is a prime example of distribution problems, it is not unique to the region and the difficulty faces the Middle East as a whole, with almost 20 per cent of the world's export of portable generators consumed by countries in the Middle East.
Saudi Arabia, Iraq and Kuwait are just a few of the many countries turning to distributed power, finding that the installation of a smaller and perhaps temporary plant next to the consumer is more cost effective, and more manageable, than running transmission lines from a big plant further afield.
Again, this is proving a lucrative business for those in the generator market, who use their equipment to produce the energy, which is then sold to the utility company and finally passed on to the consumer.
"The project is operated and maintained by the rental company and will sell power to DEWA," explains Khoury. "We charge them by the kW."
While filling in the gaps is proving to be a goldmine for generator manufacturers and rental companies across the region, with Saiwadan reporting 30% growth year on year since 2004, this in itself brings problems, and again it is in terms of supply. Manufacturers are finding that components, especially engines in this case, are running short of demand. In a culture where time is money, waiting for a generator is not an option.
"The business is based on availability," says Shameem. "If you don't have it in stock then they will go somewhere else. The projects work on deadlines, especially in Dubai. When you hear about a project in a newspaper there is somebody already at the site with a nail and a hammer. There is always going to be a backlog."
Less established companies, particularly from the Far East, have spotted the gap and are jumping on the spill-over in the hope of making a quick profit.
"Let's face a fact, the generator business is not that tough to get into," says Khoury. "To build a basic generator is not really that hard. To build a quality generator, that is another issue. Because of the availability of Chinese products, which are trading at about 25 per cent less than ours, there is no shortage of buyers."
While this equipment would, on the surface, seem to be the solution to a contractor's tight budget and schedule, it is often not as good a deal as first imagined.
The equipment is often substandard, lacking the ability to stand up to the harsh environment of the region and service and maintenance is usually not on offer. Often the machines aren't adapted to suit the fuel in the Middle East, which has a higher water content than the rest of the world. In short, they are "simply not up to the task", according to Ford.
"The main issue with buying from these companies is sustainability and good service," says Khoury. "When it breaks down and you cannot fix it you just have to throw it in the bin. There's nothing you can do about it.
"If we charge a bit more than other brands it's because we provide service. We ensure that the customer gets power at the end of the day, whether he rents or buys."
Although these new companies may be cashing in now, it would seem their time is probably limited. If a generator fails a site goes down. Without aftercare the generator is likely to be consigned to the scrap heap, creating a situation contractors can't afford to be in, and potentially losing more than it would have cost to shell out for the better quality product. "People are learning by experience," says Shameem.
While at first glance it would seem likely that buyers will soon enough overlook the cheaper brands, it is also possible that they might suit the current situation. If contractors are simply waiting to be hooked up to the grid and are confident their situation is temporary, many may believe there is no need to invest in the more expensive products with aftercare, when a quick and cheap, if not long-lasting fix, is available.
Despite the increased competition, those in the industry are confident they will be able to continue to report booming trade in the future, as their component supply catches up with their needs and property owners tire of waiting to be hooked up to the grid. Furthermore, a possible change in legislation may provide yet another surge.
"There is a trend that is hopefully going be translated into law that any high-rise building will require a generator," says Khoury. "In Sharjah that's already the case for buildings of eight floors or more. In Dubai it's up to the individual developers to do this. You can expand easily in Dubai."