Act quickly to take advantage of Dubai energy efficiency regulations

Dubai has recovered from the crash of 2008 and has placed itself in the vanguard of international moves towards sustainable development by now joining the C40 group of megacities fighting climate change by reducing carbon emissions.

Dubai’s Green Building Regulations applied initially to public buildings and now apply to all new buildings. However, existing buildings represent the greatest potential for cost-effective energy saving, and new regulations are being put in place for the audit and retrofitting of existing buildings. Recruitment has been stepped up for experts to act as energy efficiency auditors, and contractors are lining up to carry out the necessary work. Contractors and consultants need to act quickly if they hope to grab a slice of the pie.

The Executive Committee of the Dubai Supreme Council for Energy (DSCE) supervises the Dubai Integrated Energy Strategy 2030, which aims to reduce energy demand by 30% by 2030. Research has shown that some 60% of energy is used in existing buildings and the operational energy efficiency of a building is of paramount importance. The Emirates Green Building Council estimates that there are 120,000 existing buildings in Dubai that could benefit from retrofitting, and has identified 30,000 high-consuming buildings for major refits to save a million tonnes of carbon emissions by 2030.

The DSCE’s Demand Side Management programme, in line with best international practice, aims for smart building management systems and smart owners who are aware of the need to reduce waste. The programme aims to achieve savings of 30% electricity consumption and 40% water consumption by 2030, through regulations, technical guidelines for retrofits (which are expected to be introduced in January 2016), increased use of district cooling and more efficient use of electricity and water supplies. Dubai municipality plans to introduce a ranking system to assess a building’s energy efficiency, with the entry level Bronze Category based on the minimum standards required to meet the municipality’s Green Building Regulations.

Energy Service Companies (ESCOs) will deliver energy savings through performance contracting, already well established in Europe and North America, whereby the ESCO will carry out a LEED audit of a building’s energy usage, propose appropriate retrofit solutions, organise funding and subcontract the work to specialist subcontractors. This will reduce the building’s carbon footprint and save the occupiers money.

ESCOs may assume some of the risk for delivery of the energy-saving measures they propose to clients. To promote client confidence, the Regulation and Supervision Bureau (RSB) aims to support the ESCO market by developing a framework for accrediting ESCOs, based on their track record in delivering successful projects, the expertise of their personnel and their financial robustness. There will be provisional accrediting for ESCOs that have the expertise and financial robustness but not yet the track record to achieve full accreditation. Applicants require a certified measurement and verification professional and either a certified energy auditor or a certified energy manager. A subcontractor cannot be an ESCO.

Dubai Electricity and Water Authority has established the Etihad Energy Service as a super ESCO to work with other ESCOs to promote energy efficiency in Dubai’s existing building stock by developing, managing and obtaining finance for energy efficiency projects and demand-side management initiatives. In relation to public buildings, Etihad ESCO will produce detailed design plans for retrofits and subcontract building work.

The RSB has also introduced a Measurement and Verification Protocol for electricity and water saving, with a standard approach to measurement and verification based on international best practice tailored to Dubai conditions. It includes five options, to be applied in the particular circumstances. The greatest savings are expected to be found in the building envelope (insulation, fenestration and doors), and the power consumption of the heating, ventilation and air conditioning system.

There are two standard forms of contract to be used by ESCOs and their clients, one for Shared Savings, where the ESCO provides the funding, and the other for Guaranteed Savings, where the client provides the funding. Both forms comprise 57 pages of closely drafted provisions, with 20 schedules of further information and 22 pages of optional additional clauses. The provisions relating to indemnities, limitations of liability and intellectual property are of such complexity that some consultants and contractors may wish to seek legal advice. There is also a tailored approach to resolving disputes through expert determination, which will be binding up to a certain value, with the option of an appeal in court or arbitration for higher value determinations.

To summarise, there are great opportunities in Dubai for international practices with a track record in energy auditing, local entrepreneurs, technology and equipment providers and financial institutions. For those who do not yet have a track record, provisional accrediting allows a period of one year to gain a track record. As for contractors (who cannot also be ESCOs), they have the opportunity to be appointed as subcontractors to carry out retrofit works, although they will need to incorporate new provisions into their standard documentation when bidding for projects. The market is competitive and tough, especially for small specialist contractors who must implement new procedures in a challenging environment. Their costs may rise, placing them at a disadvantage versus larger businesses, but there are great opportunities for those who are sufficiently flexible and astute to take advantage of the new policy.

Daniel Brawn is a Senior Associate at Galadari Advocates & Legal Consultants, where he is a member of both the Construction & Projects and Litigation & Dispute Resolution teams. Daniel worked for many years in the construction industry before practising law and has extensive experience in advising contractors. He specialises in arbitration of construction disputes.

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