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PPPs will help GCC's district cooling developers

Public-private partnerships can facilitate the Middle East’s efforts to adopt district energy platforms, with Dubai well-poised to lead the charge

Niel Coertse is an associate at Galadari Advocates & Legal Consultants.
Niel Coertse is an associate at Galadari Advocates & Legal Consultants.

In 1976, Amory Lovins, an energy policy analyst, compared the use of energy sources, such as nuclear-powered energy or fossil fuels, for spare heating and cooling services to “using a chainsaw to cut butter” – it is inefficient and an extreme waste of resources.

District energy is a proven solution that has been deployed in an increasing number of cities around the world for many years, according to the United Nations Environment Programme (UNEP) 2015 report, titled ‘District energy in Cities: unlocking the potential of energy efficiency and renewable energy’.

The report calls on governments all around the world to develop modern and affordable district energy systems to reduce carbon emissions and limit global temperature hikes to between 2°C and 3°C by 2050.

According to the paper, through the development of district energy, 45 champion cities – including Dubai – are achieving or pursuing the key benefits or policy objectives, such as greenhouse gas emissions reduction; use of local and renewable energy sources; air pollution reduction; resilience and energy access; energy efficiency improvements; and the creation of a green economy.

The Executive Committee of the Dubai Supreme Council for Energy (DSCE) is the governing body tasked with policy development, planning, and coordination, in collaboration with relevant authorities and bodies to deliver new energy sources in the Emirate. DSCE’s vision is for Dubai to be a role model in energy sufficiency and security.

For two main reasons, the public-private partnership (PPP) model has the potential to become the new standard for district energy deals, not only in Dubai, but also across the wider Middle East.

Firstly, PPP contracts have a proven track record with lenders internationally, and their system aptly lends itself to utility infrastructure development.

Secondly, Middle Eastern finance markets are familiar with the application of the PPP model to independent power projects, independent power and water developments, and wastewater treatment plants. District energy shares similarities with such utilities, making the PPP model a natural fit.

In Dubai – especially in light of the climate during summer months – it is no surprise that 70% of the electricity demanded is for air-conditioning units. Dubai has developed the world’s largest district cooling network in order to address the report, and to meet its own energy-related aspirations.

The Emirate seeks to reduce its overall electricity demand and aims to meet 40% of its cooling needs through district cooling by 2030, thereby using 50% less electricity than standard air-conditioning systems.

Nevertheless, the business model of setting up district energy systems will depend on specific local contexts, and should ensure that all parties involved with it – including investors, owners, operators, utilities suppliers, consumers, and municipalities – can achieve financial returns, in addition to any wider economic benefits that they are pursuing.

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