Generate or die
The UAE has a power generation market that is worth $200m and growing.
Generators are considered a necessary evil on construction sites, but the UAE's power generation market is now worth around US $200 million and growing, reports Shikha Mishra.
To buy or not to buy - when it comes to generators, that is the question.
And the answer unanimously is to rent, as the rental market for generators shows higher growth as opposed to the sale market.
The requirement for generators is very high and sustained as the rate of construction in the region is growing at a rapid pace. It will take a while for supply to catch up with demand.
The generator rental business is booming simply because there is a shortage of new equipment.
According to market experts, even if a customer has the capital to buy a new or used generator, in all probability it won't be available.
Waiting lists for new generators are as long as 24 to 36 months. And at the rate at which projects are kicking off in the region, that is a month too many.
Julian Ford of Agrreko, says the Middle East generator rental market is doing exceedingly well, as compared to markets in other parts of the world that are not showing similar expansion.
"The requirement for generators is very high and sustained, as the rate of construction in the region is growing at a rapid pace. It will take a while for supply to catch up with demand," he says.
The main reason why companies rent equipment is flexibility - it gives contractors the ability to bring in power when needed and dispense with it when not required.
Most construction companies, according to Ford, would rather focus on building activity and not on gathering equipment.
Generators at a construction site are considered a "necessary evil."
They are essential on sites often located in remote areas that might not be connected to the main power supply.
In view of the current shortage within the grid power in the UAE, diesel generators are becoming the lifeline on UAE construction sites, thanks to the ease of start-up.
Generators are used during the construction process to power everything from the offices on-site, air-conditioning and power tools to heavy equipment.
Power failure on a construction site can critically affect an on-going project and cause delays.
Renting a generator set ensures that a contractor does not have to worry about breakdowns or malfunctions.
Most rental contracts include regular servicing and a replacement in case the generator cannot be repaired.
This minimises down-time and construction activity can continue without hold-ups.
The sale versus rental decision by a client is largely driven by the duration of the project.
"For a project which might take a year to complete, the client normally prefers to rent a generator and if the project duration is longer than a year, the favoured option is to buy. Rentals can be a difficult business to manage as the operator is required to have the necessary skill set and the infrastructure to offer service support on a 24/7 basis," says Arup Roy of Zenath Environmental Engineering Services.
Recent reports claim that generators rank second behind trucks of all onsite construction equipment in terms of daily sound energy produced. However, to reduce noise pollution, the UAE government has mandated the usage of "sound attenuated canopies" with all generators as this drastically reduces the noise levels.
Fernando Calle of Himoinsa Middle East says that regulations on sound and gas emissions levels are getting stricter all over the world, including in the UAE.
Himoinsa is one of the largest manufacturers of generator sets in the world, ranging from 1kW to 2MW. The company set up an office in the UAE in 2004 to cash in on the potential of the generator rental market.
"The majority of our sales are from selling to generator rental companies and business is looking good - I have seen it grow by almost 70% in the last four years. Most companies prefer the renting option rather than buying outright as the capital investment to buy a generator is on the high side," he says.
Himoinsa Middle East's gensets for the rental market are treated to perform under the most corrosive environment with a covering of thicker paint, which offers a greater resistance.
The sets are designed to work under the most extreme environmental conditions of high temperatures, humidity and adverse weather.
"We are also the first company to introduce the remote GPRS-based generator operating and fault tracking mechanism in the UAE. The first pilot project using this device was done for Du, and in future all Du sites will have this facility."
Most rental companies agree that apart from rising fuel costs, environmental issues are becoming major concerns, so a rental company offering fuel-efficient generators will perform well in the market.
A simple option to save energy is to use multiple generators of varying loads and sizes instead of one large generator on a construction site.
The power load at a construction site is never constant; it can either be very high or very low depending upon the type of activity.
Multiple generators can be run parallel to share the load.
When the load is lower, additional generators can be cut off and when higher usage is required all the generators can run simultaneously.
Industry sources estimate the UAE's power generation market will exceed US $200 million (AED734.6 million) by the end of this year, of which 25% will come from the power rental business.
And with the construction boom in the region expected to sustain itself and grow over the next few years, the market for generators as an associated industry will continue to flourish.