Tabreed’s focus on district cooling systems in India

Tabreed is a UAE-based company specializing in district cooling solutions across the UAE and other GCC countries. Now, Tabreed is aiming to establish partnerships with real estate companies and corporations to introduce district cooling systems in India.

We spoke with Sudheer Perla – Managing Director – Tabreed Asia, to understand more about district cooling and Tabreed’s plans for India.

Could you provide us with a brief background about Tabreed?

Tabreed is a UAE-based company listed on the Dubai Financial Market and has been operating for about 26 years. Essentially, we are a cooling utility—similar to power, gas, or water utilities found in other parts of the world. We specialize in designing, building, owning, and operating large-scale cooling infrastructure, commonly referred to as district cooling, as well as providing cooling as a service for space cooling requirements.

Currently, we are present across the GCC countries, as well as in Egypt and India. In terms of operations, our installed asset base includes about 1.3 million tons of cooling infrastructure. This enables us to provide cooling services for various real estate projects across the GCC, India, and Egypt. At present, we deliver cooling services to approximately 475 million square feet of built-up area, which includes commercial buildings, malls, airports, public infrastructure like metro stations, hospitals, hotels, and more.

Some of our landmark projects in Dubai include cooling the world’s largest mall, the Dubai Mall, and the world’s tallest tower, the Burj Khalifa. Instead of developers setting up their own captive cooling systems, our approach offers a more energy-efficient, sustainable, and cost-effective alternative to meeting long-term cooling needs for buildings.

Globally, our primary shareholders include Mubadala, an investment arm of the Abu Dhabi Government, and Engie, a French company focused on renewable energy. These two entities, along with the public float in the UAE, form the majority of our ownership.

For India specifically, we have established a joint venture with IFC, creating a platform in Singapore called Tabreed Asia. Through this platform, we are focusing on investment opportunities and projects within India.

Could you explain what exactly district cooling is? How does it differ from the cooling solutions provided to individual buildings or standalone institutional complexes? Also, could you highlight its key benefits?

District cooling can be understood in two broad aspects: the technology and the business model. While much attention is given to the technological side, I’ll briefly touch upon both. Essentially, district cooling addresses the growing need for thermal comfort and cooling. Traditionally, people plan standalone cooling systems using unitary window units, central plants in basements, or on-campus systems.

District cooling is a concept where the demand is aggregated instead of individual buildings managing their cooling demand separately. This aggregation can happen on a small scale with three to four buildings or on a larger scale with hundreds of buildings, depending on the level of upfront planning. District cooling leverages scale and efficiency benefits by aggregating demand and using a centralized source for cooling production and supply. In simple terms, it involves planning a central district cooling plant that produces cooling and supplies it to various buildings through an insulated pipe network.

This approach has significant advantages. One key benefit is diversity. For example, a residential building may require cooling mostly at night, while an office building uses it during the day and a mall during the evenings. A single district cooling plant serving all these buildings can significantly reduce the cooling capacity needed. On average, this approach can result in a 30% reduction in installed cooling capacity compared to individual systems.

Additionally, the equipment used in district cooling systems, such as industrial-scale chillers, is far more energy-efficient than traditional alternatives. On average, district cooling systems reduce peak energy demand and overall energy consumption by up to 50% compared to standalone systems. This makes district cooling not only more sustainable but also more cost-effective in the long run.

From a business model perspective, operators like us design, build, own, and operate these systems. We provide cooling as a metered service and charge based on agreed tariffs for consumption and demand. In this sense, we function like a utility, taking on the risks associated with designing and managing cooling systems, which ensures a more sustainable and cost-effective solution for end-users.

The centralization of cooling infrastructure also opens up opportunities for diverse energy sources to power the cooling plants. For instance, we can utilize city gas for absorption-based cooling systems, grid power for vapour compression systems, or even waste-to-energy solutions, which are still emerging. Renewable energy sources, such as solar power or open-access electricity, are also viable options. This approach, sometimes referred to as district energy, allows us to combine multiple energy sources to meet cooling needs while working towards decarbonizing urban environments at scale.

Finally, since cooling essentially involves removing heat and humidity from indoor environments, heat rejection is a critical component. District cooling systems can utilize both air and water-based heat rejection methods. In many cases, plants include captive sewage treatment facilities to recycle treated sewage effluent for heat rejection. This aligns with a circular model, particularly in the Indian context, where water recycling, open lakes, and water bodies can meet water requirements. By combining diverse power sources, efficient equipment, and circular practices, district cooling provides a cost-effective and energy-efficient way to meet urban cooling needs while promoting sustainability.

Why do you think district cooling is relevant in India now? It seems to be a relatively new concept here.

Absolutely, I agree. Unfortunately, the situation we are in today is driven by extreme climate events and the increasing heat stress we are all experiencing. Just a few years ago—7 to 10 years back—cooling was considered a luxury, more of a choice. However, it is now becoming an inevitable necessity, especially given the last three summers, where thermal comfort has become essential in our urban built environments. We can no longer rely on just fans or opening windows like before, as urban heat islands and extreme heat stress continue to escalate.

District cooling, or cooling in general, is increasingly becoming a central and essential need—not only in India but across the global south, including regions like Southeast Asia, South America, and Africa. These areas are witnessing an accelerating trend of rising temperatures and heat stress, which has even resulted in deaths. This growing demand for cooling has become fundamental.

Even within the Indian context, over the last seven years, if you look at the renewable energy capacity we’ve added—solar, wind, and so on—it’s significant, and something to be proud of. However, the growth in cooling demand has been outpacing the growth in energy generation capacity. Most of the renewable energy we are adding is being consumed by cooling needs, whether for space cooling, data centers, or other energy-intensive applications.

This has put us in a sort of treadmill situation—where the more generation capacity we add, the more heat we produce, and the higher the cooling demand grows, creating a feedback loop. Already, this summer, about one-fifth of our peak energy demand went towards cooling. The India Cooling Action Plan has forecasted that within the next 10 years, 45% of the country’s peak energy demand will be allocated solely to cooling.

Continuing with business-as-usual approaches—like installing window units, basement chillers, or simply aiming for green building certifications—will not help us achieve our climate goals. It’s becoming clear that we need a more holistic approach to balancing energy supply and demand. So far, energy efficiency discussions have been limited to technical fixes—like upgrading pumps, equipment, or automation—without addressing the demand side comprehensively. District cooling offers a large-scale, holistic solution to improving energy efficiency.

Given the heat stress we face and the rising cooling demand, it’s becoming inevitable for India to adopt district cooling more broadly. Otherwise, we risk being trapped in a self-fulfilling negative feedback loop, which will hinder both our climate goals and people’s basic requirements. This solution, however, demands planning and a shift in approach, as it introduces a new sector and a new way of managing cooling.

While it may not have been relevant in the past, district cooling is becoming increasingly crucial now and will only grow in importance over the next 5, 10, or 15 years. It’s something we can no longer avoid. I would encourage reframing the energy transition narrative into a “cooling transition.” Focusing on a cooling transition would automatically address the energy transition more holistically, but that’s a separate discussion altogether.

So, how do you aggregate the demand? Do you, for instance, discuss the proposition with different establishment owners in the vicinity as a group, or do you primarily collaborate with local authorities, get listed as a utility provider, and then offer cooling as a service?

Unfortunately, it has to be all of them, not just one or the other. We’ve been actively looking at India for 5-6 years. We’ve realized that because the market construct doesn’t support something like this, there is a need for some level of awareness, conditioning, and creation, along with growing the business. So, we’ve been approaching it so far at 3 or 4 levels.

One is supporting all conversations at the centre, state, and city levels regarding the need for sustainable cooling. We’ve been working with various think tanks, civil society organizations, universities, and government ministries to raise awareness, with the ultimate goal of pushing for some policy initiative. Through this engagement, for example, the India Cooling Action Plan came out in 2019, a very well-thought-out document from MIFCC (Member of the International Financial Consulting Committee), the ozone cell, addressing short, medium, and long-term interventions. And now, the Bureau of Energy Efficiency is actively looking into this. Earlier this year, they published district cooling guidelines, seeking feedback from the market before mandating it and making it more complex. These guidelines discuss what district cooling means, how it can be incorporated in planning, its benefits, and provide a toolkit for developers and government institutions. It’s great to see the Bureau understand and publish this, and we’re seeing many follow-up initiatives already gaining traction across various ministries at the centre, exploring ways to enable the market. That’s one approach.

We’ve also seen some states and cities take the lead in this area. Tamil Nadu, for example, is actively addressing extreme heat and looking at this more holistically. They have set up a District Cooling Committee under the State Planning Commission to assess what policy changes are needed, both on the generation side and for building planning and pollution control. They’re including district cooling as part of Chennai’s new master plan, which includes heat maps and zones for implementation. We believe that policy is critical. Wherever it makes sense for urban planning to include district cooling upfront, there should be a policy push. That’s the only way to enable large-scale adoption, and we’ve been supporting this in any way we can.

Next, at the government entity level, such as SIDCs (State Industrial Development Corporations) and those planning industrial parks or large-scale real estate projects, we engage with them to offer investment, take on the risk, bring in FDI, and create new green jobs in an emerging sector. We’ve already been awarded two projects so far. The first was in Amaravati, Andhra Pradesh, where the state government and municipal corporation saw value, changed the master plan, ran a tender, and awarded us a 32-year contract to build and operate the cooling infrastructure. When the government plans for the whole zone, people have no choice but to take from the provider as a utility. A similar approach was taken in Hyderabad, Pharma City, for an industrial park. The city saw value in adopting district cooling because pharmaceutical manufacturing requires process cooling, which is energy-intensive and inefficient if done individually. They changed the master plan, ran a tender, and awarded us the project last year. So, this is the next level of engagement, working with various government bodies during the planning process to incorporate district cooling upfront at the right scale and size.

Beyond that, we still face challenges on the B2B and market side because there are existing market frameworks and value chains from architects, consultants, contractors, and OEMs, all of whom currently have a share of the pie. We’re advocating for a shift from a siloed, fragmented approach to an end-to-end lifecycle approach, but there are more barriers than just environmental and cost-benefit issues. So, we’re focusing on conversations with top-tier developers who see value in a holistic approach. We’ve signed a 30-year contract for a project in Gurgaon, where they saw the benefit of a lifecycle approach. In this case, we don’t call it district cooling, but rather cooling as a service. We set up the cooling infrastructure within their campus, as they would typically do themselves, without a third-party or utility model. We invest the money and recover it over 30 years. These projects are smaller in scale for us since we prefer larger utility-scale projects, but we’re seeing a growing demand for cooling.

On the market side, we are also engaging with top-tier developers to encourage them to adopt an outsourced model rather than an in-house model. That’s essentially the approach we’re taking right now.

Are any incentives or subsidies currently available from the policy perspective, either on the supply or demand side?

Currently, there’s nothing in place. Unlike solar, which required financial subsidies until it reached grid parity and the market took off, in this case, we are dealing with a situation where it is already cheaper than alternatives. It’s already 25% cheaper on a lifecycle basis. So, what’s really needed is more in terms of creating an enabling environment, mandating, licensing, and zoning. While we’d love to have subsidies, I don’t think it’s the best use of financial resources. What’s necessary is more planning. However, what could help is addressing the challenge faced by CGDs, where there’s always an issue with finding the anchor demand. Someone sets up the infrastructure, but the challenge is finding the first customer who can make the project viable in the early stages until critical mass is reached. In such cases, mechanisms could be put in place to mitigate the return, ensuring it remains cheaper. Otherwise, the first customer will have to pay much higher, making the economics unfeasible, and the whole project gets stuck. So, a more targeted intervention could make sense, but at the moment, there’s nothing available for us.

How do you address the infrastructure requirements? For instance, if you need to provide cooling as a service or district cooling in an already densely populated commercial area, such as a Bandra Kurla Complex (BKC) in Mumbai. How do you approach that, and how much real estate or infrastructure space is needed to set up your project?

There isn’t a simple, straightforward answer because it completely varies depending on whether it’s retrofits or existing dense areas, based on the specific characteristics of each location. It’s good that you mentioned BKC, as we actually have an MOU with Mahatma Phule Renewable Energy and Infrastructure Technology Limited (MAHAPREIT), a Maharashtra State Government entity, to explore BKC as a potential site for retrofits and planning. Despite the presence of many green buildings and central cooling plants, there’s still a clear benefit to implementing this. However, in the Indian context, we typically see that there’s still a significant amount of new construction happening, including data centers, airports, and so on. These are, of course, the easiest to implement because they can be designed to be future-proof, and this market alone could be huge, as India is already one of the largest cooling markets in the world. So, we don’t necessarily need to rely on retrofits to scale. But when it comes to retrofits, it depends. BKC, as a location, is actually quite suited for retrofits because there’s at least some level of clarity regarding how the infrastructure was planned and how we can dig up and lay pipes. But in general, retrofits in India would be quite challenging.

Regarding geographies, are you primarily focusing on tier-I cities right now, and what are your plans moving forward?

Yeah, India is vast, and there’s growing demand everywhere. Our current focus is on the metros, specifically Mumbai, Pune, Bangalore, and Hyderabad. These are about 6 or 7 cities, which are already large markets. Within that, we’re primarily targeting commercial and industrial customers—larger, more sophisticated ones—because this requires a systems-change approach compared to their current methods. It becomes challenging if the developer is sophisticated enough to understand the value proposition. So, that’s where most of our focus is, along with specific cases like working with SIDCs and similar entities in certain states, such as MIDC in Maharashtra and TSIC in Telangana, among others.

Aside from a lack of awareness, have you observed any other specific challenges in the Indian market?

Awareness and planning are the biggest missing pieces. The more that comes in, the faster the market will move. But there’s also the tendency to stick to the status quo rather than embrace change, despite all of us saying we love change and constantly talk about it. I think the gaps we’re seeing more and more are related to the general orientation towards quality and execution. Across projects, contractors, OEMs, operators, IFMs, and so on, corners are often cut, and we tend to be penny-wise but pound-foolish. I wouldn’t want to generalize, but we see it quite frequently. As a result, when trying to compare something that takes into account ESC aspects, HSE aspects, lifecycle considerations, and so on, it becomes difficult to make a fair comparison. We also see a lot of competency gaps, especially in attracting skilled workers to operate our plants. There is a skill set gap, and we want to invest in that. Still, unless we take responsibility for addressing the competency and quality gaps in construction and commissioning, it becomes a challenge to build and operate plants the way we are used to doing outside. So, that’s a big part of the market gap.

However, the positive side is that, as a country of engineers with an orientation towards innovation, there’s a strong focus on integrating new technologies. The drive towards innovation and incorporating new solutions is extremely vibrant here, which is great. The creative solutions we can come up with here are not as easily found outside.