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Mideast district cooling firms' revenues to reach $2.63bn by 2016

Revenues of the Middle East district cooling companies are expected to increase from $1.11 billion 2010 to $2.63 billion in 2016, said a new analysis from Frost & Sullivan.

The Middle East experiences the longest summers on earth, with temperatures ranging between 35-55 degrees Celsius. This has created a fertile market for district cooling, which is expected to grow at a healthy compound annual growth rate of 15.4 per cent from 2010 to 2016. A spate of construction projects worth nearly $1 trillion across the Gulf Cooperation Council (GCC), especially in Saudi Arabia, Qatar, and Abu Dhabi, has thrown the market open to district cooling. Consumers and real estate companies realise that district cooling offers the best cooling services at better rates than traditional cooling methods.

New analysis from Frost & Sullivan, Analysis of the District Cooling Market, finds that the market earned revenues of over $1.11 billion in 2010 and estimates this to reach $2.63 billion in 2016.

"Even though the initial capital investment is higher than conventional air conditioning, operating costs are considerably lower," said Frost & Sullivan Building Technologies Industry Manger for Middle East, North Africa and South Asia, Kumar Ramesh.

"The district cooling process is more energy efficient as it consumes 40-50 per cent less energy than localised air conditioning systems."

This energy efficiency will appeal to companies investing in high-profile construction projects, as they are conscious of the impact of their buildings on the environment. While they are now demanding cost-effective and energy efficient cooling systems like district cooling, the governments in the region are also becoming increasingly aware of the need to employ environment-friendly technologies.

The high capital investments required for district cooling also lowers the availability of credit for huge projects, which hampers the growth of small- and medium-scale district cooling firms - especially in the UAE. To overcome this credit crunch, many developers are now availing alternate credit facilities such as public-private partnerships (PPPs).

The market also has to strive to address mounting customer resentment regarding higher charges due to discrepancies in the billing system and capacity charges incurred by district cooling suppliers. Moreover, the scarcity of fresh water is hindering the functioning of district cooling central plant towers.

"Market participants can alleviate these issues to some extent by installing smart meters at the destination level for measuring the exact usage and enabling accurate billing," notes Kumar Ramesh. "They should also keep an eye out for innovative technologies that allow them to use deep sea cooling and treated sewage water (TSW) in the central plant."

All these measures can go a long way in helping district cooling companies to tap the abundant opportunities presented by the lucrative Middle Eastern market.

© Emirates 24|7 2012

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