The call for HVAC retrofits in the United Arab Emirates and in Dubai has received a push after the targets for energy efficiency were laid out by the Dubai Supreme Council of Energy (DSCE), in the year 2016. However, industry representatives have mixed reactions as to whether the HVAC retrofit equipment sub-industry is experiencing an upward growth or a downward spiral in terms of market size, project performance and equipment quality. Giving an estimate of the current market size of the HVAC retrofit equipment sub-industry is Janis Strelits, Business Development Manager, Gerab Energy Systems. He says, “As per our experience, the retrofitting market is huge and the figures vary by 15–20%.”Elaborating, he says, on a yearly basis, the total chillers installed base over the past 10–15 years has been approximately 40,000 air-cooled chillers. “In the coming 2-3 years, our aim is to retrofit approximately 10% of that figure and in terms of worth it amounts to AED 200 million,” he says. Echoing Strelits is Adnan Sharafi, Executive Director, Gerab Energy Systems. He asserts that the market is growing each year with an increase of AED 100 million. “Today it’s all about building confidence in the market,” says Sharafi. In addition, Charles Blaschke, CEO, Taka Solutions, gives an ESCO’s perspective and estimates the market size in the United Arab Emirates to be AED one billion, in the GCC region to be three billion and in the Middle East to be five billion.

Adnan Sharafi, Executive Director, Gerab Energy Systems

While highlighting the emerging trends influencing the HVAC retrofit equipment market, Strelits says, “Today, in Dubai, especially, there are a number of people moving into District Cooling.” However, when required, not everyone has the money to carry out retrofits. Pointing to another emerging trend, he says, today there are ESCOs and energy financers, which were not available a few years back. On the other hand, Blaschke points to another pressing issue and says: “Today, it’s less about the quality of equipment being manufactured and more about the quality of work being done by the ESCO. Finally, the ESCO provides the guarantees and as long as it’s a quality ESCO working on a project, it serves the purpose.”Blaschke predicts that the market will see growth and asserts that as compared to five years ago, there exists a better awareness of retrofit projects in the industry. “The overall understanding of performance contracting has improved; however, there seems to be a missing link with regard to its translation into actual project value. The market is confused, and customers today are also confused,” he says. “Plans are in place and everyone knows that there is an opportunity, even the government is doing its bit to contribute, yet there also exists a problem when it comes to contracts,” he asserts. Today, customers have tried getting into retrofit projects on their own and have ended up with contracts that were not fair and, as a result, it has caused people to take a step back, he adds.

Charles Blaschke, CEO, Taka Solutions

Elaborating on the various concerns with regard to sourcing equipment for retrofits from suppliers and dealing with quality equipment, Strelits highlights another issue. He says, “We approached an organisation, did a demo and found out that the equipment used was cheap.” Pointing to education as the overall solution, he says, the purpose is to explain to the market the difference between cheap and quality products. Blaschke, on the other hand, says that some ESCOs manufacture their own equipment, while Taka Solutions relies on suppliers. Elaborating on how the supply chain is secured, he says, “As per our supply chain, it’s all about whether the supplier will guarantee that the equipment will perform.” Adding, he says, as per contract, the suppliers get paid only once the products perform. In addition to this, Blaschke brings to the fore the issue of a lack of trained Measurement and Verification professionals. “Having skilled and well-trained Measurement and Verification (M and V) professionals is extremely crucial,” he says. “As many as 90% of ESCOs today do not have skilled people and this has a direct implication on the ability to prove savings. This issue goes back to qualifying the ESCO and ensuring that they are well equipped,” he adds.

Janis Strelits, Business Development Manager, Gerab Energy Systems

Another challenge is involving the consultant in retrofit projects, says Blaschke. “The role of the consultant is important. As an ESCO, personally, if a project does not have a quality consultant, we do not bid on the project,” he asserts. Pointing to it as another missing link, he says, “We are in a good position because we finance all our projects and we maintain a good track record.” However, the market performance, he says, is directly related to the way projects are taken up and handled on the contractual side. “It is important to ensure that everything is in place from both the client and theESCO end before any project is taken up, to avoid any issues regarding cash-flow. In addition to having a quality consultant, who is then responsible to carry out the calculations post the retrofit,” he says. If the customer is not educated enough, he will most-likely misguide the ESCO and, as a result, the desired energy savings won’t be achieved and will give rise to payment problems, Blaschke says, adding that “Suppliers and manufacturers need to put their skin in the game and, today, there is a need for them to work on their business models.”