District Cooling or Building Chillers in Saudi Arabia: A Worked Cost Comparison

An illustrative comparison for a Saudi mixed-use project choosing between its own chiller plant and a district cooling connection, over upfront and running costs.

Cooling is the largest energy load in Saudi buildings, and large developments increasingly choose between building their own chiller plant and connecting to a district cooling provider that supplies chilled water through a network. District cooling is also an investment sector in its own right, often tied to smart city and giga-project plans. The worked example uses illustrative inputs to show how a developer compares the two options over time.

The situation

A developer is planning a large mixed-use project with offices, apartments and retail, and a district cooling provider has offered a connection. The developer wants to compare that offer with building its own central chiller plant.

Assumptions (illustrative)

• Assumed peak cooling demand: 5,000 refrigeration tons.
• Assumed own plant capital cost: SAR 9,000 per refrigeration ton.
• Assumed district cooling connection and capacity charge: SAR 6,000 per refrigeration ton, paid upfront.
• Assumed annual consumption: 5,000 tons multiplied by 2,500 equivalent full-load hours.
• Assumed own plant running cost: 1.0 kilowatt hour per ton-hour at SAR 0.18 per kilowatt hour, plus SAR 900,000 a year for operation and maintenance.
• Assumed district cooling consumption tariff: SAR 0.30 per ton-hour; plant room area saved: 1,500 square metres worth an assumed SAR 4,000 per square metre.

Step 1: Upfront cost of each option

Own plant: 5,000 multiplied by SAR 9,000 equals SAR 45,000,000. District cooling: 5,000 multiplied by SAR 6,000 equals SAR 30,000,000. Difference: SAR 15,000,000 in favour of district cooling.

Connection charges vary widely between providers and are a key negotiation point.

Step 2: Annual cooling consumption

5,000 multiplied by 2,500 equals 12,500,000 ton-hours.

Saudi buildings run cooling for most of the year, so consumption is large even outside summer.

Step 3: Annual running cost of each option

Own plant: 12,500,000 multiplied by SAR 0.18 equals SAR 2,250,000, plus SAR 900,000, giving SAR 3,150,000. District cooling: 12,500,000 multiplied by SAR 0.30 equals SAR 3,750,000. Difference: SAR 600,000 a year against district cooling.

District cooling usually costs more per unit of cooling, because the tariff repays the provider's plant and network.

Step 4: Break-even on capital alone

SAR 15,000,000 divided by SAR 600,000 equals 25 years.

On these assumptions, district cooling stays cheaper for 25 years before the higher tariff catches up.

Step 5: Adding the value of space saved

1,500 multiplied by SAR 4,000 equals SAR 6,000,000; total upfront advantage SAR 21,000,000.

Space freed from a plant room can be sold or leased, which strengthens the case for connection.

Step 6: Tariff test

At SAR 0.40 per ton-hour: 12,500,000 multiplied by 0.40 equals SAR 5,000,000; difference against own plant SAR 1,850,000 a year; break-even SAR 21,000,000 divided by SAR 1,850,000 equals about 11.4 years.

The consumption tariff and its escalation clause decide the answer, so they deserve more attention than the connection charge.

What changes the answer

• The district cooling tariff and how it escalates over a long contract.
• Electricity prices for the developer's own plant, which are set by regulation.
• Actual cooling demand, since oversized contracted capacity is paid for whether used or not.
• Replacement of own chillers during the building life, which is not included above.
• Who pays the tariff in the end: owners, tenants or the developer through service charges.

What the numbers tell you

• Negotiate the consumption tariff and escalation terms as hard as the connection charge.
• Size contracted capacity from a careful load study rather than a rule of thumb.
• Count the value of space saved and the risk transferred to the provider.
• Check how cooling charges will be passed to buyers and tenants, and how that affects sales and leasing.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

If a Vision 2030 programme or market trend is shaping your investment case, Domira can test it against real land, construction costs and local demand in the city you are considering before you commit capital.