Regulation, awareness, innovation and conservation are the four pillars on which Sweden’s robust HVACR sector rests. The industry insiders bemoan the fact that the GCC states have been slow to recognise the importance of the four cardinal factors, leading to a slight disjoint between European players and the regional markets.

Sweden’s economy has bounced back after the recent global downturn. Due to growing consumption, both private and public, and export and stock building, the growth ended at 5.5% according to the National Institute of Economic Research, Sweden. This has had a positive impact on the HVACR sector. Experts from Systemair Middle East, DEW-Kylsystem, FläktWoods and REHACT AB are unanimous in their opinion that regulation, awareness, innovation and conservation have, together, played a pivotal role in helping the sector weather the economic storm to emerge stronger. They also agree that the GCC states lag behind in these very areas, and have to pursue them with the same rigour as Sweden, if they hope to reinvigorate the market in the region.

Regulation, awareness, innovation and conservation are evidently interlinked and complement each other. Heightened awareness at both public and governmental levels about rising energy and environmental costs has spurred sustainable innovations and strict product and market regulations.

KEEPING A WATCHFUL EYE

Niklas Engström, Managing Director, Systemair Middle East, Dubai, corroborates the above-stated view. He believes that the key reasons behind the Swedish HVACR market’s success lies in its strict regulatory framework, which has encouraged the development and implementation of environmentally friendly and energy-efficient products. “Swedish HVAC manufacturers are market trendsetters on a global and European scale,” he claims. “The HVAC business has been successful in advocating for stricter building codes with regard to indoor air quality and energy efficiency.”

He points out that Sweden, unlike other countries, strictly complies with EU building codes and energy directives. Among those, the country has implemented a pan-European directive entailing stricter efficiency requirements for motors of HVAC products. Other regulations include standards for indoor air quality, requirements for low specific fan power (SFP) for fans and air handling units (AHUs), as well as energy declarations of buildings. He reveals that environmental awareness is quite high in the country, particularly among government and municipality sectors, adding that ISO 14001 certification is often a requirement.

Putting the situation in perspective, he says: “Owing to Sweden’s cold climate, buildings are airtight to save energy. In airtight buildings, there is a need for ventilation to enjoy good indoor air quality. In order to further save energy, emphasis is placed on low SFP and heat recovery, which drive demand for energy-saving products.”

Lars Olof Johansson, Director, DEW-Kylsystem, Dubai, adds another dimension to the analysis when he says: “In Sweden, we have lived in an atmosphere of high energy prices. The 1973 oil crisis had a dramatic effect – we learnt to save energy. And we know how to do it.”

Saibal Majumdar, Director, Middle East Operations, FläktWoods, Dubai, agrees and says: “In Sweden, 85% of the lifetime cost of HVAC equipment is the energy expense. Only 10% is the initial investment and five per cent is spare expenses. This makes Swedish consumers extremely conscious about the energy efficiency of the equipment and long-term benefits, which is not the case in the GCC.”

According to Svante Bengtsson, CEO, Rehact AB, Dubai, local authorities can actively contribute to promoting energy-efficient solutions in the GCC countries. “The Estidama initiative is one good example,” he says. “But it needs to be revised on a regular basis. Softer regulations might also work. Making it mandatory to provide the calculation of expected energy use during a year and making energy performance clearly visible will encourage the end-user to compare things other than price.”

CURRENT TRENDS

Majumdar observes that new residential buildings as well as refurbishment projects is seeing a rapid growth in Sweden and that, currently, all HVAC installations are primarily focused on energy efficiency. He cites the following examples:

• Air handling units with energy recovery
• Chilled beams with VAV-function, and smart controls for energy-saving mode, normal mode and boost mode
• System solutions with integrated functions for AHUs, chilled beams, ducts and controls.

Bengtsson adds: “Lower distribution temperatures, slow air flow and energy efficiency are features buyers look for in products. Pointing out the difference between Sweden and the Gulf region, he says: “The outdoor climate creates different demands on the systems. Sweden has icy winters, whereas, the GCC states have sandstorms.”

Majumdar concurs, but with a caveat: “The cold and dry ambient conditions in Sweden are completely different from the hot and humid conditions in the Middle East. However, the major difference is actually much beyond the ambient conditions. The Swedish market is far more conscious about the energy efficiency of the equipment and the impact on the lifecycle cost of equipment. The GCC market is yet to catch up with this global trend.”

On similar lines, Engström says: “Another growing trend in the Swedish HVACR market is the use of electronically commutated motor (ECM) technology in fans, air handling units and pumps, among other products. ECMs allow for lower energy consumption, as well as tighter control of the motor.” This is a trend Engström would like the Gulf region to embrace.

THE WIDE GULF

The experts believe that the Gulf countries could learn from the Swedish model, particularly in terms of regulation, standards and building code compliance – an area where a lot more needs to be done. Also, there is not much awareness about market trends and innovation. Not wanting to take the risk of trying innovative technology, even if it translates into cost saving and energy efficiency, is another challenge suppliers face in the region.

Bengtsson thinks that though one cannot make a sweeping statement that the HVACR market in the region is solely governed by cost, and that customers are making do with the cheapest components available, he does concede that it is not an uncommon practice. “Customers are used to comparing one product with another, but it is sometimes difficult for them to estimate the quality aspect,” he says.

Engström and Majumdar are inclined to take a slightly harsher view. “My experience is that quite often, the Middle East customers are not able to compare apples to apples,” Engström argues, while Majumdar categorically says, “This is the most prevailing and commonly practised characteristic in the GCC region.”

He presents a detailed analysis to support his view: “A lot of energy resources are consumed to maintain the right temperature and air quality. With ventilation representing a third of the consumption, we have a lot to work with. We can also affect both heating and cooling through the ventilation system. Together, that means that you can make an impact on somewhere about half of the total energy consumption of a building when focusing on ventilation. That’s something worth considering. If you focus only on cheap components, you will never achieve the targets for energy-efficient ventilation. Within the industry, we use an analysis approach called “Lifecycle Cost” when designing ventilation systems. It balances the cost of better components and smarter system control with savings in maintenance, and energy costs over the systems’ lifetime. Not surprisingly, a smarter system comes out on top. About 85% of the lifetime cost is typically energy costs – 10% initial investment and five per cent maintenance.”

Engström points out that though designers are taking SFP and AHUs into account while designing energy-efficient systems, there is too little awareness among consultants in the Gulf region about the importance of the SFP value in the design of energy-efficient ventilation and AC systems. He calls for greater efforts to lower pressure drops in the ducts systems. “High pressure drops are costing millions, possibly even billions in unnecessary energy costs for ventilation and AC systems,” he says, adding that in Sweden, low pressure drops systems are widespread.

He believes that the GCC market is quite conservative when it comes to adopting new technology. “There is some reluctance to change from the old-fashioned commonly used American technologies (to more modern ones),” he says. In his view, Swedish companies operating in the region will be able to offer competitive prices as long as their products are compared to products of similar quality and features.

Johansson is of the view that there are a number of examples of technologies and innovations that companies from Sweden in particular, and Europe in general, can introduce to the region, which can bring down operating expenses (OPEX) to a fraction of what they are now. “For these innovations to come here, people need to be less afraid that they cost more; eventually, you will save much more through reduced OPEX,” he says. (For Johansson’s detailed analysis of the HVACR sector in the region, see Box: Bridging the gulf)

Bengtsson observes that alternative products to suit the GCC market might prove beneficial. He gets into specifics and says, “We see that our new type of decentralised, low-temperature HVAC has the qualities often demanded in the GCC market – high capacity, high quality, small installations.”

Majumdar claims that FläktWoods’ products like energy recovery Fresh air AHUs, Econet with controls for optimised performance, the Pinnacle system with HRW wheels ensuring energy recovery in varied types of application and Pinnacle and Chilled beam combination are energy-efficient cooling solutions. “The GCC countries with hot and humid conditions can benefit to a great extent from such products,” he says.

All four experts express the opinion that regional governments need to introduce building classification for energy usage, establish laws for indoor air quality, raise awareness of lifecycle and energy costs and enhance efficiency of fans and AHUs as a benchmark with SFP. As Engström sums up, “Low SFP equals to the amount of energy that is needed to move a unit of air.”

CONCLUSION

The final report card on the HVACR sector appears to be interesting, if a bit ambiguous, with the experts who are familiar with the trends in Sweden and the ground reality in the Middle East, giving a slightly different picture. They, however, speak in unison when they say that they would like to see the region adopting the mantra of awareness, regulation, innovation and conservation more seriously.

Speaking about the HVACR market in Sweden, Bengtsson is sanguine when he says, “It is faring reasonably well today; we are not affected.” Agreeing with Bengtsson’s view, Engström asserts that the Swedish HVACR market did not experience a major decline during the downturn, as market values decreased only by a few percentage points. “The HVACR industry is heavily engaged in construction projects, with retrofit assignments representing roughly 60% of those,” he reveals. He also observes that the country’s high degree of internal, social and political stability has had a salutary effect on the market.

However, though Majumdar concedes that Sweden has seen a positive trend, he says on a dissenting, if a slightly cautious note. He thinks that there are many actors on the HVACR market who are fighting to get their piece of the pie in the post-slowdown era. He explains: “The global downturn has affected most countries worldwide. The dampening public consumption globally will affect the Swedish economy. Because of the downturn, there has been a decline in new-builds and refurbishment projects, which has affected the HVAC market in Sweden during the last two years – approximately 20% on a national level. Growing residential prices are behind us, interest rates are going up and production of new apartments will not be able to meet the demand in a short time. New residential buildings are getting more focused on the expanding regions, where building plots are limited and expensive. Thus, the Swedish market is highly competitive.”

Alluding to the GCC states, Majumdar points out to a different kind of a challenge – competitors offering products with low price (and low quality) trying to make inroads into the market. He believes that it is, therefore, important to explain the conundrum about lifecycle costs versus purchase cost to buyers. “A well-built and energy-efficient HVAC solution is always better than a cheap solution in the long run,” he reiterates.

Bengtsson predicts that players from Sweden and other European countries might face a stiff competition in the region from the emerging Asia Pacific markets. He echoes Majumdar’s contention that it is going to be a competition between price and quality. “We always view the energy system as a whole,” he says. “This means, some parts will be more advanced and expensive (than others) in order to safeguard the performance of the whole system. It is important that our customers realise that quality is important for the long-term profitability of the buildings.”

Majumdar concedes that competition can be healthy and prove to be a learning experience. But he introduces another variable into the discussion when he points out that very often, products from new markets struggle to match the performance and the quality of established ones, for example, from his company – FläktWoods. “They are developed and industrailsed over hundred years of experience and R & D,” he says. “Recognising the affinity of the market to select products mostly based on initial cost, we operate in niche markets where the end-user looks for quality products and recognises the importance of an energy-efficient product that offers lowest lifecycle cost.”

Bengtsson, envisages a change in attitude in the Middle East sector, with tightening of regulation on the cards. “I expect that with stricter regulations regarding energy use, the interest for our type of hybrid ventilation will become more and more interesting for the end-user,” he says. “We expect our business to grow rapidly as people get more and more interested in best practice.”

Majumdar gives the example of Europe to show how best practices can yield efficacious results: “The EU legislative body has implemented the EPBD (Energy Performance of Buildings Directive). Following the Kyoto protocol, the European Union has set a target to reduce energy consumption. For buildings the target is set at a 22% reduction by 2014. The 160 million buildings in the EU use over 40% of Europe’s energy and create over 40% of its carbon dioxide emissions. Therefore, the Commission of the European Union has issued the EPBD. All local authorities have ratified the directive, which is viable for all buildings.”

Speaking with reference to his company, he says: “To address the needs created by the EPBD, FläktWoods has poured a lot of effort into creating the e³Concept. Our solution is a broad approach, leaving no stone unturned to achieve optimum results:

• High-performing components
• Utilising the latest technology to create smart solutions
• Massive R&D investments
• Systems and components are designed together

Majumdar concedes that the scenario is different in the GCC states. He puts the onus of regulating the region’s market on local authorities, if they are serious about cost reduction and energy efficiency to meet international standards. He believes that unfortunately, at present, contrary to the major HVACR markets, the drive to promote energy-efficient products in the GCC states is more a voluntary initiative rather than statutory requirement. Added to this, there is no incentive to invest in energy-efficient and environment friendly equipment, he observes.

Johansson thinks that attitudes, globally and in the region, are bound to change, either voluntarily or under pressure, as alarm bells have already started ringing. “After the Fukushima disaster in Japan, there is a decisive move in Europe towards wind, wave… anything, as long as it is not nuclear,” he says, prophesying that the winds of change will also begin to blow in the region, ushering in an era of sustainability.