Telecom and tech companies could, and will, make billions by serving the ‘Next Billion’ customers in the developing world. However, new strategies are needed to reach this attractive market in an economically viable way. To begin with, mobile operators must adopt green cost-saving power solutions for their networks. All indications show that they are in fact doing this right now, with major implications for the industry and the environment.
The adoption of green power solutions as the strategy of choice for mobile operators going forward would prevent many million tons of CO2 emissions – enough to actually make a difference. Operators could save up to 20 percent of their total cost mass, freeing up capital to expand their footprint and make the necessary investments to serve the Next Billion customers, most of whom are living off grid or in bad grid locations – exactly where these green power solutions are needed most. And with these customers typically of the low ARPU type, using cost effective green power solutions to serve them would also help make them profitable for the operator.
No other practice in the mobile telecom industry is more environmentally harmful than powering several hundred thousand of off-grid base stations by burning diesel fuel. One single diesel powered base station can consume around 20,000 litres of diesel per year, and spew 50 tonnes of carbon emission into the atmosphere.
And no other practice is more financially onerous for mobile operators. Operating a single diesel powered base station can cost US$40,000 per year. For many operators in developing markets energy is the single largest cost item, often representing as much as 40-50 percent of total operating costs, and the energy cost item is high due to the use of fossil fuel to power base stations.
The good news is that there are alternatives to powering base stations with diesel, particularly those located in sunny and/or windy locations. There are several companies offering power management solutions based on renewable energy sources, with control systems and battery banks for energy capture and storage. And even without renewable energy sources, simply using energy efficient power systems based on intelligent controllers and batteries, power for base stations can become “green” using a fraction of the diesel currently used today.
Short payback time makes investment decision a no-brainer
These alternatives exist today, and are proven to deliver savings in fuel-related operating expenses by 20, 30, 50 and in some cases (the eSite) 90 percent, when the system is highly energy efficient and uses a sophisticated controller. Converted into hard cash, this equates to annual savings of more than US$30,000 per base station per year, making the investment decision a virtual ‘no-brainer’ with payback times of less than two years (on equipment that can last for ten years or more).
There are several hundred thousands off-grid and bad grid sites in the developing world, mainly in Asia and Africa – which are also the biggest and fastest growing mobile markets in the world. The overwhelming majority of them are powered by diesel or inefficient battery-hybrid solutions. Still, only around 3 percent of the base stations in developing markets use green energy.
So why aren’t there more green base stations out there powered by energy efficient power solutions and renewable energy? And why do network operators continue to spend so much money on base station diesel fuel when lower cost and more sustainable alternatives have existed for some time? These aren’t easy questions to answer, but I believe that there are a number of contributing reasons:
• Operators are more focused on expanding their services than on reducing OPEX. There has been a clear push to roll out services to as many potential customers as possible, as quickly as possible. The operators have always made good money, so why worry about costs now?
• Most organisations are slow to see opportunities to save. This is particularly true for larger organisations and mobile operators are typically huge companies.
• Power management is not a core competence for most operators. As such, it’s not getting the attention it needs and possibly not at a high enough management level, where the impact of the potential savings on operating expenses and bottom line would be most keenly felt.
• The business case proposition has, until now, not been compelling enough to get the attention of senior management. Renewable energy solutions are relatively new technologically and payback times have not been short enough. Also, some operators have had bad experiences with early equipment that have impacted the decisions to go ahead with the much more advanced green power solutions available today.
• Evaluating solutions will take time when several suppliers, and local options, are considered and results are evaluated over seasonal changes.
• Power related equipment is part of the passive infrastructure which, in many organisations, is purchased only on price and not performance. Focus has therefore been on keeping CAPEX budgets low rather than reducing OPEX costs in the long run.
• The diesel distribution chain is strongly entrenched in many countries, making it difficult to introduce new technologies that reduce the dependence on diesel.
On reflection, at least half of the reasons above are just poor business sense – decisions that are simply ill informed and un-thought through, such as buying inferior equipment just because it is cheaper to purchase even if it is more expensive to operate. You can also call them inexplicable – no reasonable CEO should invest in something that is so much more expensive in the long run.
So what could and should be done to change this clearly sub-optimal way of powering base stations in off-grid and bad grid locations around the world?
Luckily, no major intervention is needed as the situation is about to change by itself. Market forces are now putting increasing pressure on mobile operators to reduce their operating costs, driven by the data boom that is putting a strain on the infrastructure, and the competition which is squeezing call rates.
On top of this, the cost of diesel cannot be expected to decrease in the long run – rather the opposite. And green power management solutions are now seen as tested and efficient enough to not be regarded as a risky choice.
There are many factors that suggest that we are on the threshold of a major shift to adopt green power for base stations. One example on the ground is Airtel’s current program to roll out hundreds of brand new state-of-the-art green power solutions all across Africa. It is a clear mind shift and also takes into account the positive effects to the brand by migrating from dirty base stations to green base stations. Mobile operators do not want to be seen as environmental ‘bad guys’.
As I see it, green power management solutions are essential to reach the Next Billion customers. They are essential to the operators’ bottom lines, and their long term financial health. And they are essential for the health of our planet. Implement them and everybody wins.
David King, CEO, Flexenclosure
David King is CEO of Flexenclosure, a specialist developer of intelligent power management systems and pre-fabricated data centres for the telecom industry.