At some stage, every construction or finished project requires power rental when there’s no access to sufficient or permanent grid power. On a construction site, temporary power drives equipment from the early enabling works to the final commissioning stages powering large piling, hoisting and lifting equipment as well as small tools.
Power rental is attractive because it’s less capital intensive and end users are better off focusing on their core competencies without the need to worry about equipment inventory, maintenance, depreciation, and how it affects their bottom line. A temporary power setup can be deployed with a quick turnaround time. If required in the future, they can be upgraded from temporary power systems to provide continuous power by installing redundancy in the system. All these advantages have led to increase in demand for power rental in the construction, utilities, oil & gas, manufacturing and events sectors.
Globally, the power rental market is projected to reach $20.64 billion by 2022, at a CAGR of 8.49%, from 2017 to 2022. The Middle East market is projected to reach $5.1 billion by 2019. In the UAE, demand for temporary power is increasing, driven by energy demand from infrastructure projects for the World Expo 2020. In Saudi Arabia, infrastructure development, growth in manufacturing and demand from off -grid areas is creating more demand for temporary power.
Two recent deals exemplify this trend. Dubai-based Rental Solutions & Services (RSS) bought more 400 JCB’s RS range of rental specific generators with power outputs from 60kVA up to 1MW. RSS said the company would put the generators to work across construction and infrastructure projects, events and utility applications throughout the Middle East. Jeddah-based rental business EJAR procured 50 Doosan 9/235HA portable compressors providing 23.4 m³/min (825 cfm) of compressed air at a rated operating pressure of 8.6 bar (125 psi). The company plans to rent the compressors to the construction, utilities, manufacturing and oil and gas industries.
A large number of suppliers, variety of brands and low risk make power rental attractive, but this doesn’t mean end users are aware about how to select the appropriate power equipment and maximise cost savings.
PMV Middle East speaks to Boben Matthew, general manager of UAE-based power rental company Ace Power, about utilisation trends, demand and opportunities in the power rental sector. Ace Power is primarily involved in the short-term power rental business, supplying gensets for periods ranging from 1 day to 12 months for construction, events, manufacturing, warehousing, utilities, and hospitality projects.
Boben Matthew, general manager, Ace Power.
According to Matthew, short-term power rental has the highest demand in the UAE as users tend to plan only for the initial 3–4 months of a project while waiting for a temporary grid connection from local authorities.
“Generally, our clients don’t plan long term for power rental, except in locations where temporary grid power is inaccessible. We don’t sign fixed lease contracts; so the customer has the flexibility to extend the rental period, weekly or monthly. The majority of our rental equipment is supplied to construction sites in electrified areas where our customers need to wait for 3–4 months to get connected to a grid,” he says.
Matthew estimates the power rental business in the GCC and UAE to be worth approximately $1.2 billion. The UAE market is worth $170-180 million, of which Ace Power claims a market share of 2.5%. Competition is fierce with at least 40-50 small, medium and large companies occupying the remaining market share. According to him, growth opportunities lie in power rental for large projects and power on demand for load management.
“Power rental for projects constitutes 25-30% of the GCC market. Project-based requirements involve hiring equipment for longer durations ranging from one to three years. This leads to better utilisation and optimisation of equipment as they are not moved from place to place. Over 90% of the business in the UAE is based on customers opting for certain generator capacities only because they’ve been used in previous projects. In most cases, they are unaware about generator capacities, the various loads at which they operate and their related variable costs. This could be disastrous as many generators operate at 30–40% of their capacities. The solution is to opt for generator synchronisation,” says Matthew.
Power on demand
Ace Power introduced power on demand solutions in 2017. This involves using a combination of two or more generators with automatic synchronisation features to supply just the right amount of power as per load variations. If the load is low, only one generator functions, and as the load increases, other generators get switched on automatically.
Matthew points out that while power on demand and generator synchronisation are not new concepts, market acceptance has been slow because of low awareness about power optimisation and its long-term savings.
“Power on demand optimises energy usage; instead of running individual generators at 30-40% capacities, combining generators can reduce power generation by 50% because they operate at the optimum levels of capacities according to the load. The challenge we face is that generator synchronisation increases the rental costs by approximately 20% due to additional cabling and control panel installation requirements. However, in the long run, this configuration will result in huge savings as the consumption of diesel will reduce significantly. The savings will be noticeable in as early as three months,” he says.
Matthew illustrates how generator synchronisation results in power savings. “A construction site using 20 tower cranes could use 20 x 250kVA generators to supply 5000kVA. A power on demand solution reduces that requirement by synchronising 10 x 250KVa generators to provide a total of 2500kVA, which is sufficient to power 20 cranes. This results in power savings of 50%,” he says.
Another overlooked savings component, according to Matthew, is the improved efficiency of diesel engines in new gensets.
“There’s a thumb rule to measure a diesel generator’s efficiency: every kW of power generated requires 0.28L of diesel. Generators with high efficiency have reduced the diesel requirement to 0.25L/kWhr. The difference of 0.03L translates into huge savings. If customers are aware about the costs of power production and the savings calculations, they’ll opt for efficient engines and synchronised generators instead of bargaining on rental charges,” he adds.
Examples of Savings Calculations
Single genset with an efficient engine
Scenario: 1MW continuous power runing 24 hours for 30 days
Approximate cost of diesel: AED10/gallon (1 imperial gallon = 4.5L)
Savings: {(0.28-0.25)L/kW x 1000kW x 24 x 30} x 10} / 4.5L = AED48,000.00 per month
The rental charge of a 1MW generator is approximately AED48,000 per month.
Replacing multiple gensets with synchronised gensets
Scenario: Three generators operating individually to power three departments in a hospital for 24 hours
1 x 400kVA running at an average continuous load of 50% for 24 hours
1 x 800kVA running at an average continuous load of 50% for 24 hours
1 x 800kVA running at an average continuous load of 50% for 24 hours
Total power requirement = 2000kVA
Total power produced = 1000kVA
Average fuel consumption per month = 33,920 gallons
A power on demand configuration could replace the three generators with 2 x 500kVA synchronised generators to operate at various capacities
Average fuel consumption per month with synchronised generators = 32,000 gallons
Savings: 33,920 – 32,000 = 1920 gallons per month = AED 19,200 per month
The rental charge of a 500kVA generator (24hrs) is approximately AED12,000 per month.
Engine Performance
Currently, Ace Power has a fleet of 200 gensets ranging from 15kVa to 1250Kva and powered by Cummins engines. Matthew indicates that well-maintained gensets can last up to 10 years. Nevertheless, the company increases its investment by 15–20% to procure new gensets, but one component remains unchanged. Ace Power sources its engines only from Cummins and manufactured in India.
“Cummins offers the best performance for both standby and continuous power in the Middle East environment. The engines manufactured in India comply with India’s strict regulations on emissions and noise levels and are certified by the Automotive Research Association of India (ARAI),” says Matthew.
Regulating engines for emission and noise levels at the manufacturing stage has its advantages when they are finally installed in gensets. According to India’s Environment (Protection) Second Amendment Rules, the maximum permissible sound pressure level for new diesel generator sets with rated capacity up to 1000 KVA manufactured on or after 1st January, 2005 shall be 75 dB(A) at 1 metre from the enclosure surface. The diesel generator sets should be provided with integral acoustic enclosure at the manufacturing stage itself. Furthermore, the Central Pollution and Control Board (CPCB II) emission norms for diesel gensets introduced in 2013 regulates emissions like NOX and CO into the atmosphere and mandates engine manufacturers to improve fuel efficiency by 15%.
“These regulations are significant because most of the gensets available in the UAE have noise levels around 83dB and there’s no restrictions yet on the import of such engines. The lower engine noise levels may not be apparent at a construction site, but it can make it a huge difference on event sites,” he says.
Ace Power aims to enhance its preventive maintenance services this year through load testing and load bank supply as well as implementation of telematics on gensets to monitor machine operation and energy usage remotely.
“Our rental agreements also include maintenance of the equipment. We perform schedule maintenance every 250 hours whether or not a machine is running because the battery will go idle if the machine is not used for some time. We offer 24×7 support as an additional service,” he says.
Matthew also comments about one of the UAE industry’s biggest pain points, the payment delays affecting the cash flow of suppliers.
“The power rental business is a credit business, and bad debts account for 2–5% of the revenues of suppliers in the UAE market. With regard to payment delays, we offer a grace period of 90 days after which we terminate the rental agreement,” he says.
“We can only protect ourselves through mechanisms like advance payments, customer validation and referrals, document verification and face-to-face meetings to qualify and approve new companies. I believe exchange of information among suppliers is crucial in order to keep track of defaulters, seek arbitration and avoid future risks,” he concludes.
