As India grapples with rising pollution, the need for cooling solutions that don’t add to environmental harm has never been more urgent. Despite the seasonal drop in temperatures, pollution exacerbates health concerns, making it essential to prioritise cooling systems that ensure thermal comfort and indoor air quality without contributing to outdoor pollution. With cooling demand projected to grow by 15-20% annually and potentially surge eightfold by 2037-38, adopting clean and efficient technologies is crucial.
Although India’s per-capita cooling consumption remains low compared to global standards, this rapid increase could severely impact climate and air quality if outdated, polluting technologies are used. Traditional air conditioning provides quick relief but significantly harms the environment. The path forward requires embracing innovative, sustainable cooling solutions that safeguard both human well-being and the planet.
District Cooling (DC) offers a forward-thinking solution. By centralizing cooling for multiple buildings, DC systems optimize installed load reducing power consumption by up to 50% compared to conventional methods. DC also shaves peak power demand, a crucial factor in maintaining the stability of India’s power grid. When combined with thermal energy storage, District Cooling becomes even more efficient, playing a pivotal role in advancing sustainable cooling strategies for the country.
India’s evolving cooling market
India’s cooling market has seen gradual but significant progression, moving towards energy-efficient solutions that align with the country’s climate commitments. Traditionally, the cooling market has been geared towards an approach wherein all cooling infrastructure is owned in-house and operations & maintenance (O&M) outsourced to Integrated Facility Management (IFM) companies. However, this model is beset with agency issues – Since the operator doesn’t own the cooling infrastructure, they have little incentive to ensure asset longevity, focusing instead on meeting equipment uptime and maintenance obligations. The compensation model doesn’t typically reward energy savings, leading to a “business-as-usual” approach.
Due to limitations of traditional in-house cooling models, the focus shifted toward technology-based solutions like Artificial Intelligence (AI) and the Internet of Things (IoT), which leverage data analysis and digitization to improve operational efficiency by optimizing performance, predicting equipment failures, and reducing energy consumption. While AI and IoT solutions improve efficiency within the existing framework, they don’t address the core operations philosophy. These technologies also require skilled in-house teams, often lacking, which limit their effectiveness.
Alongside these technological shifts, the Energy Service Company (ESCO) model came into prominence. ESCOs make capital investments in retrofits and equipment replacements based on energy audits and payback assessments, recovering their investment through shared or guaranteed energy savings commitments with the customer, spanning a period of 7-12 years. While ESCO models do have mechanisms built in to incentivize efficiency, they are typically focused on isolated, small technology interventions that offer quick payback, rather than transformative upgrades that may require a longer investment horizon but could yield greater efficiency gains.
A more recent innovation in the cooling market is the design-build-operate (DBO) models, where cooling infrastructure ownership remains in-house, but the design, construction, and operation of the cooling plant are outsourced, allowing the service provider to better align design and operational phases.
However, in DBO models, the occupancy risk is completely passed on to the service provider, as remuneration is based entirely on variable charges (INR per RTh or kWh). This can lead to periods of under-recovery during low occupancy or low cooling demand, potentially forcing the provider to cut operational costs such as staff or maintenance, compromising the plant’s long-term operational efficiency and overall reliability.
District cooling to decarbonize India’s cooling needs
Cooling as a Service (CaaS) is a business model that facilitates the deployment of District Cooling infrastructure and offers a more integrated and comprehensive approach to cooling. Under CaaS, the service provider designs, builds, finances, owns, and operates (DBFOO) cooling assets, eliminating the need for upfront capital investment by the customer. It is a fully funded solution where the customer pays based on a two-tier tariff structure: one to recover fixed capital investments, and another to cover utility costs based on long-term efficiency commitments. CaaS reduces financial risk for the customer and shifts operational responsibilities, including ensuring asset longevity through investment in replacement, to the service provider.
The CaaS model can mitigate market concerns such as technology lock-in, tenant preferences for in-house, service-level agreement (SLA)-based cooling solutions, by tying the provider’s revenue to energy efficiency, aligning incentives with optimal plant performance. Furthermore, penalties for cooling failures can be managed through back-to-back contracting, shifting risks to the provider. Since the provider handles capital investments and long-term performance, they are motivated to deploy and maintain the latest, most efficient technologies, ensuring peak system performance throughout its lifecycle.
As the need for decarbonizing cooling becomes more urgent, District Cooling delivered through the CaaS model is expected to gain wider acceptance. Its ability to scale across large developments and provide a more sustainable, long-term solution for India’s rapidly growing cooling demand positions it as a key lever to address the paradox the country faces of meeting the burgeoning cooling needs while honoring our climate commitments.
Sudheer Perla is Managing Director-Asia, and Archa Modi, Manager-Strategy and Market Development, at Tabreed India, a wholly-owned subsidiary of UAE-based Tabreed.
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