Financing, lack of regulations obstacles for successful implementation of District Cooling in Saudi Arabia

Riyadh, Saudi Arabia: With extreme high temperatures prevailing throughout the year in Saudi Arabia, electricity consumption is significantly high due to the vast use of air conditioners. In addition, as the population in the Kingdom is said to be growing, it calls for a cost-effective and energy-efficient comfort cooling solution, such as the District Cooling. However, despite the technological advancements, Kamal Pharran, CEO of Saudi Tabreed, says that the District Cooling industry in the country is encountering several challenges.

The primary challenge faced by the industry, he says, is financing, as it is linked to the “creditworthiness” of the developer/end-user. “The BOO/BOT [build-operate-transfer] framework,” says Pharran, “is very much structured for a single off-taker, provided he is capable of handling the financial commitments and, more importantly, is having the capacity needed to secure the financing.” Securing financing under private developments, he adds, without a single off-taker, is another obstacle.

Raising the second issue, Pharran says that lack of regulations for the District Cooling industry does not define the means by which revenue is collected. He explains: “District Cooling regulations are not in place to organise and stream-line the relationship between the end-user and the developer. Hence, billing and collection cycles are neither clear nor framed in a structure, where responsibilities and limitations are addressed for both parties.”

Lastly, as the Kingdom is huge, and resources, such as the availability of water connection points to any District Cooling plant is not necessarily available in every region, Pharran says, implementation of District Cooling remains a major challenge.