District cooling in the Middle East - a Singapore solution?
District cooling remains an emerging utilities industry in the Middle East. There are significant benefits of district cooling, however these benefits often come at the cost of limited flexibility for subscribing consumers as well as perceived lack of control over quality and pricing. Moreover, district cooling providers can also face issues arising from the various demand, collection, succession and assignment risks associated with district cooling. To date, no comprehensive measures have been taken to address these issues in the Middle East.
In a pioneering district cooling market such as Singapore, the situation is markedly different. The risks associated with demand, collection and succession/assignment are largely ameliorated by the provisions of the District Cooling Act 2001 and the powers conferred on the Energy Market Authority (EMA) as the sector’s regulating authority. For example, whereas regional providers seek to control demand and succession risk through contractual mechanisms and phased construction programmes, in Singapore demand risk is expressly dealt with in the Act and provides that consumers must use district cooling where it is available. Moreover, in Singapore, tariffs are regulated by the EMA thereby reducing the perception that tariff adjustments in this sector are arbitrary and not adequately bench-marked.
The regime in Singapore provides an invaluable example of a legal framework within which district cooling industry can survive and thrive. Whether, however, the Singapore model can provide a model regulatory solution for the Middle East remains to be seen.
Joanne Emerson Taqi and Hugh Murray have recently had an article published on these issues in Gulf Construction magazine.
To obtain a copy of the article or more information about district cooling, please contact:
Joanne Emerson Taqi