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Experts: VRFs could still have a larger market share in Middle East

Industry leaders deliberated on the growing VRF market in the Middle East in a roundtable sponsored by Midea and organised by MEP Middle East

INTERVIEWS, MEP

Industry experts claim that the VRF (variable refrigerant flow) market is growing at 10%-15%, and it is worth approximately $10bn, globally. More and more consultants and building owners in the Middle East region are reportedly adopting VRF technology more than ever before, as it offers flexibility, energy efficiency and reduced footprint.

Despite the demand, there is a general belief that VRFs could have a much larger market share in the region, provided there is greater clarity on issues related to piping length, fresh air and performance, as well as operational data. 

To debate on the above issues, MEP Middle East organised a roundtable on 10 January, 2018. The roundtable was sponsored by Midea Commercial Air-conditioners and it had consultants, contractors and suppliers as participants. Below were the list of participants:

Hassan Younes, director, Griffin Consultants, who moderated the roundtable.
Peck Zhao, senior marketing manager, overseas sales, Midea 
Hadi Ismail, senior director – energy solutions and mega projects, Taqeef
Muayyad Abu Khashabeh, mechanical lead, BK Gulf
Khaled Saab, senior manager, Khatib & Alami
Khaled Derhalli, operations director, Efeco

Younes started off by comparing VRF systems with traditional systems. He asked: “What are the selling points of VRF systems in terms of flexibility and energy efficiency? How do you convince a client or a consultant to use your system?” 

Zhao answered this by saying: “Regarding the selling points, first is flexibility. The most important thing is that one outdoor unit is capable of connecting up to 53 indoor units and a single unit capacity is up to 32HP (horse power). This means 26 tonnes. And with the mini VRF, we have around 2 tonnes. So, this is a very huge range for VRFs. This is quite wider than the splits. One system can give you a powerful capacity. 

“And the second thing is that a single unit is now having one or two compressors. In the case of two compressors, if one compressor fails, the other one can keep running. So it is a more durable system with a backup function. If you have a modular design, with two or three units, if one fails, the others keep running. 

“The third is about energy efficiency. Now, the compressors are DC inverter driving scroll compressors. So it is more efficient than the constant speed rotary compressors. We operate at the best efficiency range, and the condenser coil is of very big size. It can be very energy efficient in the part load operation.” 

Younes jumped in by sharing his experience on working with VRF systems on a project and why he could not apply it. He said: “We had a residential project with three bedrooms and two bathrooms and if we wanted to use VRFs, the municipality did not allow us to put more than one outdoor unit for any apartment. So, every apartment should have only one outdoor unit. That was their regulation. And so, when we went for a mini VRF, with only one compressor, the client at that point said, if the air-conditioning has a problem with the outdoor compressor, then that could be an issue. In the end, he said that he would prefer a single-split unit. He said to put three single-splits because of their smaller capacity. So, I’m just sharing my experience, where we wanted to push for VRFs, but the client did not want to compromise on comfort, and they requested to change to DX (direct expansion). But we kept the air-handling units and the fresh air handling units with VRFs. My point here is that, how to counter such issues and also with the municipality, what’s the issue of connecting more than one outdoor unit to many?”

Saab said that he did face a different problem in one of the high-rise buildings he was working on. He said: “One of the clients insisted to provide a separate bill. He said he will not pay for anything. In Sharjah, they don’t want to place outdoor units in the balcony. In this case, we had to use a VRF system because of the height of the building. But still it’s a challenge because it is a very high distance between the highest point and the lowest point. Now, to reach this, we increased the capacity of the unit. One of the aims of the VRF system is to reduce energy. However, we increased the energy in this case.”

Ismail said that VRF will only a benefit the end user. He said: “You need to look at the infrastructure works and the amount of savings with cabling, substation, etc., when using VRFs. You take an example of 5,000 villas; if these were normal split units, [there would be less savings]. I think if we use VRFs, we save roughly two or three substations. There is an engineering exercise that has to be done and presented properly to the developers to show them the benefits of VRFs.”

Ismail reiterated the fact that VRFs cannot be applied everywhere and that it depends on the application. He also said that a lot of suppliers are comparing VRFs with chillers, which should not be done. He said: “Air-cooled chillers business will stay and will keep on growing. But the VRF market is growing faster than the air-cooled chillers. And VRFs were not made to compete against air-cooled chillers.”

Saab agreed. He said: “We don’t have to compare between VRF systems and chillers. It’s better in some applications to use VRF systems and in other applications to use chilled water system.” 

Khashabeh added to the conversation by saying that everything depends on the client and how he sees a particular system. He said: “The client will check if he is going to pay higher initial costs or the operation costs.” He said that some clients would want to keep initial costs low.

Ismail said that people don’t take all factors into consideration when it comes to price. He said: “People don’t take other factors into consideration such as the installation of the VRFs, the copper piping, the electrical switchgears, etc., and on top of that you have the cost of manpower.”

Ismail said that the prices of VRFs are totally different from what they were two to three years ago. He admitted: “You cannot compete against DX or splits when it comes to prices. But the price has tremendously gone down, say $1,200-$1,300 including installation for VRFs.

“There is a minimum of 20%-25% difference between DX and VRFs. However, from a developer point of view, you save on labour, power, cables, infrastructure, etc. The VRF system is a more comfort-based system than DX, there is no doubt about it.” 

On leakage

Khashabeh directed a question to the suppliers. He asked: “When it comes to system redundancy, do you face any problem with clients when you are selling VRF for a network and you have a common network feeding all the indoor units? For example, if you have any leakage, do you need more time just to come and fix it? 

To which Zhao responded: “About this kind of concern, take the Chinese market for example. In China, last year, the VRF market, especially the mini VRF market increased by more than 40%. Young couples want to buy an apartment with VRFs and not splits and also they are concerned about leakage or when the compressor fails. But actually, all the manufacturers are now capable to prove their quality and there’s no more concern about leakage. Because we have installed millions of VRFs in the whole world. Every year, it’s more than 1.5 million VRF units. We have never heard about leakages. No manufacturer has ever met this problem.”

Leakage won’t happen because after a 24-hour pressure test, there is no more leakage. He said that there is a helium sensor and if it detects leakage, it gives an alarm.

Khashabeh brought about another point. He said that buildings that are more than two to three years old and the defect liability period (DLP) is over with the contractors, then they are known as sick buildings. He explained: “Because all the controls that we invested in at the beginning, during construction, become redundant and the facility management company, when they come, they hire smaller maintenance companies and when there is a problem, they don’t look into any of the controls, they plug it out and start dealing with the system manually. Cumulatively, the cost will increase on the developer. And the system will not be functioning as per your original design or intent.”

Younes agreed by saying that proper functioning of VRFs would depend on how we operate the building. He said: “We cannot say that air-cooled chillers will save more, or VRFs will save more, it depends on who’s playing with the system.”

Younes then moved on to ask about water-cooled VRFs. 

He said: “I designed one like seven years ago, but it went offline. I’ve seen a lot in Canada. The issue here is that you still have cooling towers that the client will have to pay for. It’s not that huge amount. However, you have water also. So some part of the money is going from the landlord to the system. This is one point. Also, cooling towers are not easy to maintain. So, you have also the worse part of the water-cooled system still there, which is the cooling towers. In addition, if they are not designed well, they can start dripping; so there are lot all of these issues. What are your thoughts on water-cooled VRFs? You think, we will see a greater market share for water-cooled VRFs in the near future?”

Peck said: “Water-cooled VRFs are mostly used for retrofit projects to replace the older chillers. So, for new buildings, there are very few opportunities because if they choose VRF, they may choose the three-packet recovery models or at least the air-cooled heat recovery models. So, what we have for new buildings are very few.”

Younes agreed on the topic of retrofits. He said that there is a big market for retrofit in terms of energy saving. He asked: “From energy efficiency point of view or energy service company point of view, is it worth to put VRFs instead of old DX, air-cooled chillers or water-cooled chillers?” 

Ismail said in one of his projects there were three 200 tonnes Carrier chillers. He said: “These chillers were almost 20-25 years old. The client actually did not want to pay the electricity bill for the chillers so we took off the air-cooled chillers and replaced them with VRFs.”

Younes directed his questions to the contractors by asking: How do you find VRFs as a contractor? 

Khashabeh said: “From my point of view as a contractor, there is less headache for VRFs after installation for the DLP period. I mean, the stress that we have when installing chilled water doesn’t exist in VRF systems. Also if there is a problem, like the pressure testing of copper is very easy to resolve in VRFs than in chilled water. For chilled water, you have to remove everything and do it again.”

Khashabeh said that for him only two points mattered. If there is space for outdoor units for heat dissipation and if the client will agree and accept on the efficiency, then VRF is always the better option for him. 

Derhalli agreed with Khashabeh. Derhalli added: “We’ve tried VRFs in two major villas projects. One was 600 villas and the other one was 1,000 villas. All in all, it’s easier, and I can prove it’s cheaper. Though the initial cost for the equipment is expensive and I can compare it with other DX systems. For example, if you have a villa, traditionally you fix 10 DX units. Suppose the DX units on average take a price of 10 units, let’s say 15 tonnes or 20 tonnes, 50,000AED or $10,000. The price of your system is almost 60,000AED -70,000AED. This is just the equipment. Now, when you take the other items related to this, each cover piping for the traditional DX system will cost you like $300 for just the copper piping. The electrical point, the isolators, and the other group isolators are another $400-500 per point.” 

Market share

Asking a bit about the market share of VRFs and chiller water, Younes put forth the question to suppliers. Worldwide VRF has about 11% of annual sales and the chiller is about 7%, said Zhao. He elaborated: “AHU fan coil is about 6%. So, chillers and fan coil AHUs is about 13% or 14% and VRFs is now about 11% to 12%. The remaining is DX. DX rooftops is 4%, and split is about 10%, and wall-mounted is about 50%. So, most of the market is dominated by wall-mounted. And in GGC countries, VRF is less than 5% of market share.”

Khashabeh added: “The projects that we are tendering in my company is mostly chilled water systems. Mostly water-cooled chillers.”

Saab said that the trend for VRF is still not here. Saab said: “We have to take into consideration that it’s a new system here in the market. Even the clients or the consultants still need to see the results, what will happen after 10 years. Chilled water is known in the market and its feedback is available.” He said that there is still a lack of data when it comes to VRFs.

Need data

Younes agreed and said that the data is not really available. He asked: “How much are we actually paying for the maintenance of VRFs because there are not many systems running from long time ago? Maintenance is one of the big issues here. The maintenance team is not proper. They try to keep the compressors running until the contract is ending because their contracts are normally two to three years, or maximum five years. So, things would be perfect for two years, then all of a sudden all the components are failing.

“We need data on the failure rate. From a supplier point of view, this I think is what the market needs. How much is it really costing? The failure rates?” 

Ismail admitted that originally, VRF was not an appealing product for many reasons. He said: “It’s only three years ago, VRF started moving in the market. There was no proper foundation for the preparation of VRF planning. If you mess up the installation, you mess up the whole system. You end up in a project where the contractor does not have qualified people to do the installation, and then you end up being blamed for this.”

Ismail added: “We have something called as the dealers network. Dealers network is a group of small contractors. These contractors do a lot of small businesses. They are actually being trained by our technical centre on a regular basis for testing, commissioning, installation, after sales service, and backup. We can always recommend them. We have a list of 20-25 dealers, who are very well-trained in maintenance and installation. We have our own internal maintenance team on VRF. However, let’s say, you have a machine. You have one-year warranty on the machine and five years warranty on the compressor. When you deal with suppliers, this five-year warranty on the compressor applies if you do preventive maintenance. I mean, are your end users or customers aware of this?” 

Derhalli said that they are aware of this. He said: “We tell the owners that unless the product is preventively maintained even during the one year, we will not change anything under DLP.”

Emergency

Younes raised a question on the failure of VRF systems. He said: “Let’s say there are two compressors and one compressor fails. What happens to the network? You know, most suppliers, they talk about this 12 hours emergency or 24 hours emergency. And I ask this question to all the suppliers. What is happening after 12 hours? Everybody’s saying it will automatically turn off. The answers I’ve got is that the system will automatically turn off. Some others say that you can’t just reset that 12 hours and continue, but what is actually happening, is the mechanical failure of the compressor. Is it always the same problem? Different problems will come up with different scenarios? So this is also was one of the reasons we moved to DX because there wasn’t a clear answer of what happens after this 12 hours of emergency scenario.”

Peck clarifies: “For our system, we provide 24-h emergency operation. 

“First, two compressors are internally connected. If one compressor fails, the system will shut down automatically. The system will operate in a limitation mode. The system will operate at part load only to give you that basic cooling. That means, if set-in temperature is 17 degree C, we give you 22 degree C or 24 degree C. You cannot get 100 percent of capacity.”

DC vs VRF

Younes said that when district cooling is connected to villas, it’s failing miserably. He gave an example: “We worked on a project in Dubai with around 800 villas; we were doing an upgrade of the chiller plant. The delta T was like 2 degrees Fahrenheit in summer. In winter, it goes on to 1 degree Fahrenheit. And it is a direct connection. You don’t have the ability to control it. So, I would say, villas and district cooling may not be the best option.” 

Ismail remembered a similar case for a project in Yas Island. He said: “It was a big disaster. And I think because of the small delta T syndrome, people were complaining about cooling, and they ended up by disconnecting district cooling. And they financed again on installing VRF and DX for these villas.” 

Hassan added: “I would assume for villas currently, VRF is one of the best solutions. It’s quieter and better, and it offers comfort. I have seen and experienced both. So, we provided installation for a big villa for one of the Sheikhs in Dubai and we removed DX. It was a very old building. We removed decorative splits and installed VRFs. After installing VRFs, there was more thermal comfort.”

Made in china

Ismail towards the end said that Midea has been battling the perception of “Made in China.” He said: “While I assume if you are an engineer, the last item on your agenda is to know where the product is coming from. Major makes now in the industry, they have production line in China. Especially in HVAC, because I know most of them.” 

“This perception of Chinese made is becoming a barrier for us. What’s astonishing is not the end user, but the consultants who are averse to the idea. I would assume an engineer would look at the engineering part of the product. He knows that 70% or 80% of Carrier has a factory in China; the best district cooling 5-tonne units are York and they come from China. So, I am finding it difficult to sit around a table with a consultant and trying to convince him that there is nothing wrong in Made in China.”

Hassan added: “I think normally as consultants, we have a long procedure; we have to visit the factory. But sometimes clients say that they don’t want any Chinese products. So, in that case, it’s the client requirement. Some other times, you know, we cannot put three different ranges of prices under one umbrella. Because the contractor, will always go with the cheapest. 

“We also have to think about such issues. The point is that the decision should be a from quality point of view, and not from origin point of view.”

Towards the end, all participants concurred that the VRF market is here to stay and that it has been the main choice for villas. Peck concluded by saying: “We are very confident about the future of VRFs. This is a system without any water, it is energy efficient and more flexible; it has a lot of advantages over other conventional systems. 

“We still need to collaborate more to educate the market. We would like to influence the designers and the policy makers to give more opportunities for VRFs. We want to change the market.” 

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