District Cooling Market

Market Overview

Despite attaining maturity, in several regions globally, the district cooling market is expected to witness growth from USD 7.11 billion to USD 19.17 billion during the forecast period, with a CAGR of 13.2%.

District cooling is a system in which chilled water is distributed from a central cooling plant to buildings through pipes for space cooling and process cooling. It provides chilled water for industrial, residential, and commercial purposes with the help of closed-loop network pipes. The three major elements of a district cooling system are the cooling source, a distribution system, and end-user installations. By functionality and technicality, the system is similar to district heating. Globally, district cooling is used to reduce the strain caused by the ever-increasing demand for improved air conditions due to rising global temperatures and climate change, which account for around 70% of peak electricity demand. The use of district cooling helps create an economy of scale, which drives efficiency and reduces costs.

Market Dynamics

Cost-Effectiveness and Energy-Efficiency to Drive Applications

A district cooling system can achieve an efficiency rate ten times higher than a traditional cooling system. The cold water used in these systems is used directly from free sources such as lakes and seawater or can be produced from absorption or electric chillers. Cost-effectiveness and energy efficiency are the significant factors expected to propel the demand for district cooling systems in the market. The residential boom and government policies for environmental conservation are driving the district cooling market growth in the Middle East, especially in the GCC countries. Recently, district cooling players in the market have been facing major challenges, including credit crunch and customer complaints about over-charging.

Demand for District Cooling Systems to Rise in Tandem with the Need to Curb Greenhouse Emissions

Global warming caused by greenhouse emissions has raised the average global temperature and become a prominent factor behind the growing demand for district cooling systems. The Paris agreement, which took place in 2015, stipulates that countries must review their greenhouse gas contribution and strive to mitigate the global average temperate by two-degree Celsius above pre-industrial levels. This agreement has brought all nations into a common cause to undertake this zealous effort to combat climate change. Governments provide incentives and tax rebates to people who are switching towards green technologies. Additionally, the adoption of the Kyoto Protocol has set internationally binding targets on countries to reduce greenhouse gas emissions, which entails shifting to refrigerants with a low carbon impact.

Factors and Opportunities Expected to Trigger District Cooling Market in the Future

• Technological advancements in CHP systems and rising investments in infrastructural development
• Rising demand for energy-efficient and sustainable means of cooling technologies
• Use of sewage-treated effluents for district cooling
• Emergence of district cooling systems with a low carbon impact
• Development of efficient district cooling systems that offer sustainable cooling and are low on maintenance costs

Segmental Analysis

Absorption Cooling Systems to Account for a Significant Market Share by Production Technique Due to Their Superior Characteristics

Absorption cooling systems use waste heat from heaters to generate electricity. These systems also use refrigerants such as lithium bromide and ammonia that have low boiling points to provide the required cooling. The absorption cooling segment is likely to hold a significant share in the market during the forecast period. These systems use heat instead of mechanical energy and have low operating costs as compared to cooling systems that use moving mechanical parts. Currently, the market for absorption cooling systems is growing, owing to their cost-effectiveness, low maintenance, and low-noise and vibration-free operation. Stringent government norms that are nudging industries to design and manufacture products to reduce their carbon footprint will bolster the demand for absorption district cooling systems. Additionally, escalating electricity prices and electricity shortage in various regions of the world will also positively impact the demand.

Cooling Needs in Industrial and Commercial Facilities to Drive Application of Electric Chillers

Electric chillers are cooling systems that make use of compressors and motors to drive cooling in the system. These systems are widely used in large industrial and commercial facilities for space cooling and refrigeration. They have the largest energy expenditure and electricity costs compared to other district cooling system types. Furthermore, these systems need periodic maintenance and replacement of moving mechanical parts and also have high operation noise, which may hamper the growth of the segment during the forecast period.

Investments in Residential and Commercial Sectors to Create Application Areas for District Cooling Systems

The residential segment is likely to witness significant growth, owing to the growing demand for efficient and sustainable cooling solutions in the housing and development sector. Residential and commercial sectors will see resurgent investments during the forecast period, which will bolster the demand for district cooling systems in the market.

Regional Analysis

The Asia-Pacific district cooling market is likely to witness significant growth during the forecast period, owing to the rapid growth of residential and commercial construction sectors, especially small industrial parks, special economic zones, and other areas with a high concentration of large retail establishments. Increased government expenditure in the infrastructure sector of developing countries and new policies of private investments are fueling the demand for district cooling systems in Asia-Pacific. Japan is hosting the Summer Olympics in 2020, which has prompted massive investments in the country’s construction sector, which is, in turn, positively impacting the demand for district cooling systems. Another key factor that is propelling market growth is a rise in the IT industry in countries such as India and China, which has seen increased investments in the construction of IT hubs.

The district cooling market in the Middle East and Africa is expected to gain a subsequent share during the forecast period, owing to hot climatic conditions and increasing investments in infrastructure projects. Major players in the regional market form strong relations with real estate dealers to enhance their market position. Strong growth in the hospitality sector, the emergence of new hotels, and shopping malls in the Middle East region further add up to the expansion of the market. Moreover, government initiatives, product innovation, and regulatory measures that mandate the replacement of conventional and outdated cooling systems are propelling the growth of the global district cooling market. Qatar is experiencing resurgent growth in the construction sector and will host the 2022 FIFA world cup, which will act as a catalyst to the growth of the district cooling market. The proximity of the African countries to the equator and fluctuating global temperatures due to climate change will bolster the demand for cost-effective district cooling systems in the Africa market.

Recent Developments

• Emirates Central Cooling Systems Corporation (Empower) has connected 1552 refrigeration tones(RT) of district cooling in the 1/JBR tower project, which comprises 163 residential units
• India’s first district cooling system will come up in Amravati, capital of the state of Andhra Pradesh. The Andhra Pradesh government has entered into a contract with UAE-based international cooling providers for the state’s government buildings’ cooling requirements
• Emirates Central Cooling Systems Corporation (Empower), which is the world's largest provider of district cooling services, introduced the world’s first autonomous district cooling plant that uses artificial intelligence, which will be demonstrated in Jumeirah in Dubai at the 20th Water, Energy, Technology and Environment Exhibition (WETEX) – 2018
• Emicool, a leading UAE-based provider of district cooling services, announced that it would be providing district cooling services at Dubai Investments Real Estate Company’s Mirdif Hills project. The company is expected to deliver 15,000 tons of refrigeration (TR) of chilled water from its utility to the site through pipes and various heat exchange stations

District Cooling Market Segmentation

By Production Technique

• Free cooling
• Absorption cooling
• Electric chillers

By Application

• Commercial
• Residential and institutional
• Industrial

By Region

North America

• U.S.
• Canada
• Mexico

Europe

• Germany
• France
• Italy
• U.K.
• Spain
• Russia
• Poland
• Rest of Europe

Asia-Pacific

• China
• India
• Japan
• South Korea
• Australia
• Vietnam
• Indonesia
• Malaysia
• Singapore
• Rest of APAC

South America

• Brazil
• Argentina
• Colombia
• Rest of South America

Middle East

• Saudi Arabia
• UAE
• Oman
• Qatar
• Bahrain
• Rest of Middle East

Africa

• Nigeria
• Tanzania
• South Africa
• Ghana
• Rest of Africa