New air conditioning technology to make significant savings for Saudi Arabia


One consequence of Saudi Arabia’s strong economic and population growth in recent years has been a major surge in construction, with new neighbourhoods, industrial estates, office complexes, hotels and hospitals all going up around the Kingdom.

Given the country’s hot weather – summer temperatures regularly reach upwards of 40°C – the new developments have brought with them higher demand for air conditioning (a/c) and, subsequently, a surge in electricity usage. This places a considerable burden on energy suppliers, as a/c accounts for 70% of total power consumption. As a result, greater focus has been placed on efforts to increase efficiencies in the electricity sector, with one major beneficiary being the district cooling (DC) segment.

A Growing Market

Saudi Arabia is now one of the world’s largest markets for DC, with a string of major investments in the pipeline. Three basic systems are used to cool buildings in the region: the traditional window unit, mainly used for single rooms and small buildings; central a/c systems, which use a condenser located on a rooftop or basement, for larger buildings; and DC, whereby a central plant supplies chilled water by pipe to a cluster of buildings around it.

Some years ago, Saudi Arabia began to outstrip the UAE as the GCC region’s largest DC market. In 2013 business consulting firm Frost & Sullivan valued the region’s DC market at $1.7bn, with the Kingdom accounting for $468.2m of the total – a 26% market share. By 2015, according to research firm TechSci, that share had grown to $670m, with the volume – measured as tonnage rate (TR) – rising from 1.35m TR in 2013 to 1.74m TR. The estimated numbers for 2016 were a value of $800m and a volume of 1.99m TR, while the compound annual growth rate for the market value was 18.3% between 2011 and 2015.

Urban Advantage

DC, which works best in areas of high urban density, possesses several advantages over conventional cooling and a/c systems. One of these is that it requires much less maintenance: if split systems break down, they require individual repair work, while DC systems are typically more efficient and easier to manage, reducing costs. DC also creates a flatter demand curve, lowering peak demand. This is because DC enjoys load diversity, which means that because it supplies coolant to a variety of buildings – from apartments to workplaces – it can spread load, typically supplying more to workplaces during the day and more to residences at night.

“Thermal storage in DC also allows for peak shaving,” Kamal Pharran, CEO of Saudi Tabreed, a national DC company, told OBG. “This is when refrigerant produced at off-peak prices is used during peak hours.” This can be particularly useful, as the price differential between the electricity tariffs during peak and off-peak periods can be particularly dramatic.

In recent times the Saudi Electricity Company has been encouraging consumers to install smart digital meters, rather than use the older, electromechanical meters, by offering lower off-peak rates. A company using a smart meter and consuming more than 1000 KWh per year pays around $0.0373 per KWh during peak hours in the off season (October-April) and $0.0267 per KWh during off-peak hours. In the high season (May-September) the differential rises, with the higher rate reaching $0.0693 per KWh and the off-peak rate coming to $0.04 per KWh. A recent Saudi-Egyptian study suggests that savings of up to 43% in electricity bills may be possible if a system using DC shaving is utilised during the height of summer.


DC installations can also be more specifically tailored to a community, unlike the one-size-fits-all units of a split system. Thus, over time, the initial higher costs of building a large facility and the associated pipework are offset. Similarly, as it is a closed system, its reliance on water for cooling is kept at a minimum. Savings could also be achieved in the future if DC systems use treated grey water rather than just desalinated water, which is significantly less expensive than other varieties of coolant.

Regardless of the variety of water used, DC is proving increasingly dynamic, suggesting a bright future for the segment. Saudi Tabreed has so far invested over SR8bn ($2.1bn) in the Kingdom, with the average project valued at SR100m-200m ($26.7m-53.3m).

Future Technology

One of its flagship projects is with Saudi Aramco. In 2010 Saudi Tabreed won a 23-year contract to design, construct, finance, own, operate and maintain a major DC operation for the oil and gas giant’s Dhahran complex.

Full operation commenced in February 2013, with the facility initially using eight York centrifugal chillers, each with a 2500-TR capacity. A further 7000 TR comes from a thermal storage tank, giving the system a total capacity of 27,000 TR.

In 2015 a further expansion was launched, adding 5000 TR, with the engineering, procurement and construction contract going to Canada’s SNC-Lavalin. The now-32,000 TR plant provides coolant along 15 km of pipework, supplying an office complex, employee communities, a hospital and a data centre via 11 energy transfer stations. Operations and maintenance is handled by Saudi Tabreed’s STOM.

The project also highlights Saudi Aramco’s commitment to DC as a future technology. This is evident in its education and training of future generations of DC specialists. The company has stated that it wants to move to 100% Saudiisation at the plant by 2025. With the current percentage of Saudi employees at 40-50%, this would require the training of more local engineers in this new state-of-the-art technology.


Saudi Aramco has addressed this challenge by sending a yearly quota of high school diploma graduates to the Higher Institute for Water and Power Technologies in Rabigh, on the Red Sea coast north of Jeddah. This Saudi-only vocational college places these students on its two-year programme in DC and heating, ventilation and a/c. Between 20 and 30 students per year are currently being sent by Saudi Aramco to take part in the programme, with around 80% going on to become the firm’s employees.

Other recent DC projects include the expansion of the Jabal Omar Development Company scheme in Makkah. This $40.2m contract – also won by SNC-Lavalin – adds 10,000 TR to the existing 25,000-TR project. Another major operator is the UAE’s DC Pro Engineering, which is working in a joint venture with the Saudi Technology and Investment Company (Taqnia) to expand its presence in the Kingdom. DC Pro aims to generate 50% of its revenue from projects based in the country by 2020, while also claiming 30-40% of the existing Saudi DC market.

Like Saudi Aramco, Tabreed is aware of the need to provide energy-efficient solutions for companies and institutions, particularly at a time when traditional government energy subsidies are being scaled back. A large part of the firm’s effort has thus been aimed at reducing the amount of energy that goes into each TR of refrigerant. This has meant major investment in modernisation and refitting of old systems.

The hikes in electricity tariffs are also coming at a time when the government is making a stronger push than ever to engage the private sector in more areas that the state has usually dominated, a scenario which creates many opportunities for DC investors. “The current cash shortage and privatisation drive by the government is only going to lead to more outsourcing,” Pharran told OBG. “Smarter investment in long-term cost savings will be more likely, as entities begin to focus on their core businesses.”

Meanwhile, the Electricity and Cogeneration Regulatory Authority has mandated that all future government projects with cooling requirements larger than 15,000 TR use DC systems. The next step is to ensure that DC systems are part of new construction projects from the planning stage. This radically reduces costs, as the system can be built in rather than retrofitted. While this might require a shift in some developers’ mindsets, local DC providers are keen to ensure that the years ahead bring greater awareness of this highly beneficial technology. With such a large potential market, Saudi Arabia could also be well positioned to become the leader of the Middle East market, which a 2017 Global Market Insight report forecast would be worth around $12bn by 2024. Indeed, companies such as Tabreed are already major players in the region – the company owns 63 DC plants in the UAE, three in Qatar, two in Oman and one in Bahrain.

The roll out of DC could also involve integration with renewable energy systems for optimum energy efficiency. “Combining DC with other efficiency measures, such as photovoltaic systems and external wall insulation, would enable the Kingdom to achieve near net-zero buildings,” Mazhar Bari, consultant at the King Abdullah City for Atomic and Renewable Energy, told OBG. Indeed, numerous options exist for efficient displacement of electrical power in cooling, including hybrid evaporative cooling and direct DC chillers.

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The Report: Saudi Arabia 2018

Utilities chapter from The Report: Saudi Arabia 2018

The Report: Saudi Arabia 2018

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