Typically, what are the questions you put to yourself as the CEO of a District Cooling utility company?

When the crisis happened [in 2008], a lot of economic strains were there in the market, especially in the real estate market, where people were not able to cover the cost. There was also a lack of understanding in the market on how to benefit the customer from such a technology. Any sort of District Energy is supposed to be a form of cheap and reliable energy, it cannot be a substitute for the conventional way of cooling in a more expensive way, so the way we in South Energy look at it is from the planning stage. We work with the master developer from Day 1 to ensure that we try to design something that is cost-effective from Day 1.

Every business is a commercially driven one, and inefficiencies have to be covered somehow. Either you cover it up with your operating costs or you cover it up with your tariff. Eventually, the one that has to pay for this is the customer. So, what we do is we take a step back. We put ourselves in the place of these customers, who invest into real estate. They connect to this kind of service. We look at their perspective – are we offering them something better, a substitute for conventional cooling that is cheaper for them? Or, is it helping with commercial gains in the long term? Is it a win-win situation at the end of the day?

That’s why we started looking at adopting different ways of building our plants, walking away from conventional District Cooling plants. You can see 10-year-old District Cooling plants – they just look like any other District Cooling plant around the region. We spent a good amount of time before starting the company, looking at how we can reduce the capex and, in return, be able to offer cheap tariffs, how we can reduce our capacity charges for the customers. We kind of educate the customers that if you adopt conventional cooling you will have to face an upfront capital investment, that you will have to put in your own assets, which are not your specialisation to maintain. I mean, we end up having customers, who specialise in aviation, industrial manufacturing, logistics and so on. Even in the case of VIP tenants, we try to convince them in such a way, showing them the facts and the numbers and educating them that by opting for conventional cooling they are investing into an asset that has no return and has shorter life span, whereas when it comes to District Cooling, technology evolution always takes place in the water-cooled side more than the air-cooled side.

Air-cooled chillers were very static up to four years ago from a technology perspective, but water-cooled chillers and District Cooling schemes keep on improving and improving, and manufacturers keep on introducing improvements on existing assets, which can improve efficiency in the long run. And the assets have a longer span of life, so when it comes to depreciation and return over investment, you are looking at a much longer period.

Of course, the District Cooling scheme should be more sustainable when it comes to pricing, and it could mean moving away from a conventional District Cooling plant to modular packaged plants of smaller size and have a network, where multiple District Cooling plants, scattered around the project, supplement each other in a ring network and feed the energy to the customers.

Ismail Almarzooqi

So, you are speaking of distributed cooling, then? 

Yes, the reason we went for this is because we found out that everybody knows that most District Cooling is designed for peak-load capacities. We get that peak load in Dubai for a maximum of 3-4 months a year; you end up with partial loads across the year. And so, when you build large-capacity plants, you face partial load issues. And it is difficult to start staging the chillers to maintain efficiencies and a low operational cost in terms of energy consumption and water consumption, which in turn, would enable us to optimise tariffs and pass savings to customers. So, we walked away from that, and we started looking at how we can master plan with our mother company, Dubai South, in such a way that we move away from gigantic plants and a centralised network. We looked at how we could reduce pumping equipment and the footprint of the land required. The result of the search was that we achieved commercial gain by adopting this kind of a scheme, because we were able to fit our plants in areas of the project where there was no commercial value and, thus, were able to give back commercial land to the developer.

Now, you can use this land for development and increase your return on the project. At the same time, it allowed us to prove dynamics by adopting smaller plants scattered around the project. The hydronics required to flow the energy into the network and so on become easier and cheaper, and in return, it reduces our capital investment, because we are moving away from conventional plants with massive civil structure work and a lot of heavy machinery and customised equipment. If you adopt smaller-sized, integrated plants, much of the equipment can be found off the shelf, so that reduces a lot of capital expenditure.

We ran all sorts of financial and technical analyses to see which model performs better. We understand that conventional District Cooling plants that exists in Dubai today have adopted very reliable design, and when it comes to District Cooling, reliability is of utmost importance, but we are willing to take that risk, build smaller plants and pass the saving to the customer.

For example, in one of our projects we found out that by adopting this kind of a scheme, we are able to offer low-capacity charge to customers compared to the market rate. The market rate ranges between AED 750 and 880; we are able to achieve AED 600 as capacity charge and maintain a healthy return. And customers enjoy the benefit of having a cheaper service compared to other replacements in the market. And to achieve this, all it took was planning from Day 1, to understand how we can work with the master developer to optimise the process. We do understand the challenges.

When you say optimise, do you mean optimising the reticulation network? 

Yes

How did you achieve this? Did you take advantage of the existing utility corridors to lay out the piping for the scheme?

Yes. We adopted this approach in the aviation district. The initial design for the section had one single plant room of 40,000 tonnes of refrigeration (TR) capacity. We decided this was not efficient – in the sense that it would be efficient only in peak-load conditions. It would cost us a lot of money to build it in terms of civil and structural works and also to accommodate the equipment inside it and, then, to maintain a large plant. So, we designed the entire distribution of the energy around the project.

The philosophy we came up with was to build modular, packaged, unmanned plants, remotely monitored and remotely managed from a command control centre. The objective was that we distribute the load. Most of the time, the load profiles build up over time; they don’t come in one stage, and many, many, many District Cooling players in the past have made the mistake of preparing the plant and overbuilding it. And to fix the whole economy of it, they would not be in a situation where they can offer lower tariffs to the customers. So, what we adopted was an approach of developing in phases. If we take it as a district, what do we do to optimise it? How do you ensure from Day One that there is no wastage, because the wastage goes back all the way to the power generation plants. The moment I store an extra load that is unused, I am reserving an extra capacity of load of electricity and utilising extra load of capacity in a substation that goes back all the way to the 400 power generation stations. It has a chain effect on the overall economy and the government, and it is not healthy for anybody, and it does not even allow you to reconcile the financials to a stage where you can help customers in times of financial stress. We adopted the approach of developing in phases. We began to develop plants in a ring network and to phase the load in a plug-and-play manner.

What is the typical capacity of each plant?

The capacity is between 11,000 and 15,000 TR.

And is this with thermal energy storage?

Yes. So, it reduces a lot of cost, because eventually the cost of the installed capacity is much cheaper. And it allows you to modulate off-peak times and ensure chillers are running   at sweet point, and so you reduce your carbon emissions. And the beauty of this is that when winter comes, let’s say we are off-peak, the cost of maintaining the scheme comes down, because you are supplementing the network with two plants, and if you need half of the load, you can alternate between the two plants day-wise, week-wise or month wise. Of course, we need to maintain water quality and water circulation, but we avoid all the unnecessary maintenance that you have in terms of a conventional District Cooling plant. I am referring to the civil maintenance, the upkeep of cooling towers, the concrete basins and so on. And it allows you to lower operation cost in terms of the manpower you require, which is not possible with conventional cooling plants. These plants are designed and fitted to be able to operate for 25 years minimum without any retrofits, and they are steel structures. So, if they are maintained well, you don’t have any replacement cost.

If a requirement is to meet a partial load, you can load the entire plant, and when winter comes and you need only 15,000 tonnes, you don’t need to run a 30,000-tonne plant. You can run a 15,000-tonne plant during winter in full capacity, so it allows you to manage that curve from peak. And if in winter one plant goes off completely, the other one can run to maximum capacity, so you are always running at sweet point.

We found out that even the footprint is smaller, and in some places, we are able to fit our plants into the plots of customers. In some places, we are able to reduce the footprint from, let’s say  60,000 square feet, down to 40,000 or 45,000 square feet.

How does your approach help address the need for proper hydronic balancing, given that it is the bane of many District Cooling schemes?

To be honest, the network is still under construction here, but that’s not going to be an issue, because when we design the network and design the plants we take into consideration the pressure requirement, the head calculation for the distribution pumps and so on. Hydronic balancing requires active management. Usually, networks are left as they are from the day of testing and commissioning, but the way you balance the network in the winter season is different from how you balance it in summer. You do not require to pass the same flow that you are passing in summer during winter.

A lot of people may neglect this aspect. They don’t rebalance systems – they keep it as it is for the peak load. What we do actively here is we rebalance our systems seasonally when winter comes. We start rebalancing our systems before winter, and throttle it to reduce the requirement of the flow. We maintain pressure that way. We found that this is a really significant step, resulting in energy saving in terms of pumping.

What would that saving be in terms of percentage?

It would be not less than 10% when it comes to the pumping, because what happens is a chain reaction. If the valves are open, to maintain the pressure I have to keep on pumping at the same force of summer during winter. But when you start rebalancing for winter season and you throttle the network for a certain flow that you need to achieve to maintain comfort, your pumping speed goes down significantly by 20% almost, or even 25%.

Could you take us through your approach to using renewable energy and Natural Gas in a District Cooling scheme? I have heard you are open to the idea.

We are exploring the possibility. Dubai South is a 145-square-kilometre development, and one of our main objectives is that we reduce the strain on the environment and the government infrastructure as much as possible. We are a self-sustained city for sewage today. All the sewage that gets generated in the city gets treated in our own sewage treatment plants, and we use the water for irrigation and, sometimes, in our own District cooling plants, when we have excess water.

So, do you use the TSE as make-up water for your cooling towers? 

Not yet, but there is such a plan for future plants, the reason being lack of interconnectivity in infrastructure at this stage. We are currently using the water for the upkeep of the plant. We do use TSE rather than potable water if we have to wash down the cooling towers.

Just to reconfirm, you don’t have a network for TSE yet, correct?

Not yet, but in the long term, all plants have to be moved to a TSE-based operation. We don’t have enough TSE. The development has a small population, and the recycled generated capacity is 30 million gallons, which is not sufficient for full operation of a District Cooling plant. However, we are working with Dubai Municipality to bring in two TSE lines into the city, which will start supplementing the current capacity, and we can start using that water for our District Cooling operation in terms of energy.

With reference to your earlier question on Natural Gas, the plan is to have an LNG line into Dubai South and start using that for the airport. That’s going to be done by our sister company, Dubai Aviation Engineering Projects, and we plan to adopt the energy resource into District Cooling plants. We are looking at trigeneration, but in terms of trigeneration we are first proceeding with solar. We want to supplement our plants, wherever we can, with solar. Existing plants have a lot of land around them. We do understand District Cooling plants take a huge load of electricity to operate, and you need a lot of space if you want to supplement the current energy profile with solar. We are looking to supplement the profile with 2-5% solar energy. If five per cent of my load for operating a District Cooling plant comes from renewable energy that’s better than having the entire load coming from power generation plants.

Renewable energy is cheaper and also addresses carbon emissions. We would like to reach a tipping point, because we can work a lot on our capacity charge by improving our capital investment strategy. We can reduce the capital investment required by adopting efficient schemes. However, we are very linked to the DEWA tariff, when it comes to consumption tariffs. We need to adopt different sorts of energy generation measures that will reduce the cost of energy that goes into the plant. 

Have you explored the possibility of tapping into geothermal energy? Have you conducted a technical feasibility study to that effect?  

Not yet, to be honest. It is challenging in our area – we have a high water table around our projects. We don’t think we can achieve much in terms of geothermal at this stage. At this stage, we are very concentrated on optimising as much as possible, and supplementing our plant with renewable resources to reduce the carbon footprint.

Geothermal is possible but is not cost-effective. We do believe it will come as the technology evolves.

Could you talk us through your engagement with Singapore Power, and what the agreement means for South Energy? 

Again, it is driven by our objective of building something that is unique, and to prove to the market and consumers that District Energy is actually an alternative solution that is cheaper and a much more reliable solution. Our partnership with Singapore Power is strategic on the District Cooling side of it. In South Energy, we are not only a District Cooling company, we invest in ventures related to renewable energy, we invest in retrofits, we invest in different spectrums of energy resources.

We have been around the world looking for people with technology and with the right engineering mindset, so we can partner with them and bring the technologies to Dubai. The objective is to develop something that gives a cost benefit to the customers.

We are currently working with Singapore Power on DCP 2, in the aviation district. It will be our first modular packaged plant, and recently, we have come up with a very challenging but brilliant scheme in order to reduce operational cost by 20%. It will adopt a series counterflow approach and parallel installation of chillers. Also, when we discuss modular, interconnected plants, we are looking at macro-sized energy management of these plants, but what we did with them is that we went into details of the plant itself – on how we will manage partial load and how we are going to avoid losses of energy during partial-load stages.

Speaking of chillers, what is your responsibility in terms of using the right type of refrigerant, post the Paris Agreement and the Kigali meeting? What is the direction you are taking, though the phase down of HFCs in Article 5 Group 2 countries, to which the UAE belongs, is only in 2028? 

In 2028, the production will stop – the service and the maintenance will continue for many years to come, and we have actually been discussing this with our partners, like Trane and York. Currently, most of our chillers are running on R-134a, so we can say that is the good son of the refrigerant being phased out. We are phasing them out, so we are in discussions to retrofit our chillers to adopt a new refrigerant. We do understand that we will lose capacity with the adoption of newer refrigerants, but at the same time, our responsibility to the environment supersedes whatever commercial gains we have from using this kind of refrigerant.

Could you talk us through any measures you are taking to help customers reduce the cooling load in their buildings? I am referring to a holistic approach that focuses on building performance with a view to mitigating climate change.

When it comes to energy distribution and energy consumption, it’s a chain reaction. Our plants will suffer if the buildings that are being built and connected to our plants are inefficient. And the impact of the inefficiency goes back all the way to power generation plants. Our approach to District Cooling is based on reaching out to customers. We do understand most of our customers are not HVAC experts. At the same time, a lot of the consultants that provide services to these customers in terms of design and construction supervision may not have even been in the operation side of HVAC maintenance and performance monitoring; they look at the design parameters to achieve a certain amount of cooling and comfort level. So, the offer in South Energy is that every customer that is going to connect to our District Cooling plants benefits from a review of the entire HVAC design of his building, to make sure that it is efficient. In the review, we have found many cases where the HVAC designs have been 30-40% overdesigned to capacity. Following this, we come in to suggest improvements.

The review is a process that the customer has to go through for a nominal fee of AED 2,000. The fee, I must add, does not even cover our cost of review, design improvements and so on. As an initial step, we give customers guidelines on aspects to adopt while designing the buildings. Traditionally, we have found that District Cooling companies are always focused on the ETS room and its components. We do understand the whole operation starts from the ETS room, but if we only focus on the ETS without looking into the secondary system and the inherent inefficiencies and problems, we are just going to allow people to build oversized capacity buildings, which would require oversized capacity plants, which would sit idle. So, it is a chain reaction. That is why we hand out a set of guidelines for them to design the HVAC system. They apply for a no-objection letter from us, where we review the completed design and suggest improvement, wherever we find that there is unrealistic load calculations. We go into load calculation and educate the customer to resolve issues.

 Do you charge the customer for Low Delta T? 

It is in the clauses, but we haven’t charged customers, because we feel we are responsible for Low Delta T, not the customer. At the end of the day, the customer is a commercially driven entity, who is seeking experienced people to help him manage his energy use. So, we optimise our customers, and we go back and optimise our plants accordingly, and make sure they are sized and built to the correct capacity. And we do consider and give a lot of time to diversity calculations. We optimise the design for the whole district and reduce cooling load significantly.

So, we are saving capital investment and future operational expenditure for not having oversized cooling equipment. We also help achieve a sustainable ecosystem, where you don’t take extra load of electricity that you don’t need.

Surendar Balakrishnan is the Editor of Climate Control Middle East magazine, and Co-Founder and Editorial Director of CPI Industry. He may be contacted at surendar@cpi-industry.com