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Green Telecom: Business case for adopting clean energy technologies - Business case for adopting clean energy technologies

April 15, 2010

In order to resolve energy issues like supply shortage, power cuts and growing carbon emissions, the telecom sector, a significant consumer of power, is increasingly moving towards green energy options. However, in doing so, telecom operators have to factor in the high installation costs and the economic viability. tele.net speaks to vendors and industry experts about the business case for green telecom, the initiatives undertaken by some of the service providers, the role of the regulator and international trends in this space...


What is the business case for green telecom?

Nitin Gupta: The telecommunication industry has been one of the biggest consumers of energy since networks became operational 24x7. In an energy-starved country like India, telecom operators have to invest in a back-up to grid power even in urban areas. That is why operators are now looking to green telecom networking products. Going green is not just an option, but a necessity for telecom service providers in a market where margins have fallen due to the sharp erosion in tariffs.

Tower costs account for 30 per cent of the operational expenses for telecom operators. Even a marginal reduction in tower costs would translate into a huge benefit for operators. The 250,000 telecom towers in the country consume an estimated 2 billion litres of diesel every year. The consumption will only increase as operators roll out services in rural areas that are not connected to the power grid. The move from diesel to solar and other energy sources could result in savings of $1.4 billion in operating expenses for tower companies.

Operators have been using renewable energy systems to power relay towers in remote areas. Some are using mobile repeater and relay stations, which harness solar and wind energy.

Samar Mittal: If we look at the spending on energy by communication service providers (CSPs) and add potential investments required to manage energy more efficiently in the future, we see a multi-billion dollar market. And this presents a huge opportunity for suppliers and operators to build winwin energy solutions.

There are three investment domains for a CSP related to energy management: infrastructure modernisation (replacing the installed base with more energy-efficient/ products), new infrastructure deployments (capex for alternative energy-generating equipment) and energy-relevant opex. These investments open up a number of opportunities for CSPs, which can be viewed as returns on their investment.
Some of the opportunities are as follows:

  • CSPs can reduce their opex by lowering energy consumption in their networks (energy efficiency means opex efficiency).
    • In mature markets, up to 10 per cent of the network opex is used on energy.
    • In developing markets, the network opex can range from 15 per cent to 30 per cent for energy.
    • Fossil fuel prices remain volatile with a high dependency on energy consumption.
    • Real-life examples reflect the possibility of reducing this opex significantly, justifying long-term gains from energy-related investments.
  • CSPs are looking to cover new markets in rural and remote areas where grid connectivity is limited or non-existent. Therefore, alternative energy solutions such as solar, wind and hybrid create a new opportunity to build coverage in off-grid areas. The following are some of the initiatives directed at reducing the dependence on unreliable grid power:
    • An estimated 75,000 off-grid sites will be built each year in developing countries till the year 2012 through the GSM Association (GSMA) Development Fund.
    • The GSMA predicts that by 2012, up to 50 per cent of new off-grid base stations would be powered by renewable energy sources in developing countries.
    • Networks are expanding into rural and suburban areas. Grid availability and/or quality is a challenge
    • Globally, 1.6 billion people lack access to grid electricity ("off grid") and an additional 1 billion have unreliable access ("bad grid").
  • There is growing pressure on CSPs to reduce their carbon footprint and preserve the environment. An polluted environment contributes positively to an operator's green credentials, which can also be a great opportunity for carbon trading.

So, if we look at the business case, the returns outweigh the investments in the long run and there is a strong case for operators to actively consider going green. However, the real business case may vary across countries and operators. The energy solutions business case may be positive at an aggregate level but in certain cases, it varies according to the maturity of the energy sources. Wind and solar are more mature than fuel cells and therefore present a stronger business case today as compared to fuel cells. However, it is imperative for operators to have a long-term perspective rather than focus on short-term gains.

Profitability is also determined by the maturity of the players in the market. Today, the energy solutions market for the telecom sector is highly fragmented with no clear leader.

Parminder Saini: There have been a lot of concerns regarding the increasing marketing and network opex, which forms a big chunk of the total opex. Adopting green technologies will help in cutting down the network opex. Currently, energy consumption on the network is very high and operators are looking to deploy alternative energy sources that are also environment friendly. Reducing carbon emissions is very essential for telecom towers.

Munish Seth: Green technology deployment is primarily driven by the business case of reduced power consumption and greater network efficiency. Though organisations are conscious of their responsibility towards the environment, they are prioritising the cost effectiveness of the technology while deploying networks, which may not necessarily be environment friendly.

What are the factors that should be taken into account while identifying, planning and implementing alternative energy systems for communication infrastructure?

Nitin Gupta: Operators need to work on solutions that will reduce their energy bills while keeping investments in check. Indian tower companies are looking to run some of their towers on solar and wind power, but the high deployment cost of these energy sources has limited their use. An alternative is the use of energy-efficient systems on active and passive infrastructure. Tower companies will need to partner with energy management solutions providers to be able to offer a cost-effective solution to telecom operators.

Samar Mittal: Networks consume 86 per cent of the energy used by the CSPs and the majority (69 per cent) of that comes from mast sites. While planning a renewable energy-based site, there are a number of factors to be considered, such as the grid condition on that site (off, bad or in grid), the load level of the site (standard/peak), the availability of solar/wind energy sources, the location/ reachability of the site (rural/remote) and the suitability of site infrastructure.

Parminder Saini: It is important to plan an energy-efficient network. This may require additional capex but will reduce opex in the long run. Some of the factors that should be considered while designing towers are as follows:

  • Concrete towers are more environment friendly than steel towers as they reduce carbon emissions.
  • Some of the newly designed towers minimise land requirements and maintain the scenic beauty of the region.
  • Power cuts in large parts of India lead to a high consumption of diesel, which increases carbon emissions. Some equipment vendors have launched wind-powered radio base stations which do not require feeders and cooling systems, resulting in up to 40 per cent lower power consumption.
  • The operators should consider solar systems, fuel cell back-up systems, micro-wind turbines, power management and back-up solutions, and hybrid renewable energy solutions to minimise diesel consumption.

What should be the role of the regulatory and non-regulatory bodies in promoting green telecom?

Nitin Gupta: The interest in green telecom initiatives should be driven by the regulator. Once the regulator specifies it, other things will fall in place. These are still early days as far as the green telecom initiative in India is concerned. The Telecom Regulatory Authority of India has realised the need for promoting renewable energy in the telecom sector. It has recently signed a memorandum with Japan's Ministry of Internal Affairs and Communications for sharing information and best practices. Among the areas identified for cooperation are green telecom, spectrum issues, and telecom and broadcasting convergence.

The Department of Telecommunications has started offering financial support from the Universal Service Obligation Fund to mobile infrastructure providers using renewable energy in 20 areas across the country.

Samar Mittal: Corporations have been under pressure from various groups to deal with environmental issues. They need to move from compliance-driven behaviour to a more active and strategic role in tackling these issues. Consumers expect more from corporations when it comes to environmental sustainability. Today, consumer awareness with regard to the environment is higher than ever. When consumers buy tangible goods, they only consider their "greenness" and do not focus on the service provider. It's only a matter of time before the consumers develop a loyalty factor for such operators.

Stringent regulation and consultations with regulatory authorities are the need of the hour. Investment funds are being allotted for environmental technology and research. Investors look at how companies rank in environmental performance. Corporations are taking interest in various environmental activities, greenhouse gas offset programmes, etc. to improve their environmental position and image.

Parminder Saini: Base stations are the biggest contributors to carbon emissions and, therefore, active and passive infrastructure sharing should be encouraged by the regulator. This will bring down the capex and opex. The carbon footprint can also be reduced through the optimum use of infrastructure.

Munish Seth: Alcatel-Lucent has shown its commitment to the low carbon economy by signing the World Economic Forum's letter to G20 heads of state on the importance of public-private collaboration to tackle climate change.

What has been your experience with respect to promoting green telecom in India?

Nitin Gupta: Operators, vendors and infrastructure providers have realised the need to invest in green telecom initiatives. However, investments in such initiatives are yet to take off. The next couple of years will see major projects to improve energy efficiency in telecom networks. As tower companies start consolidating, there will be a greater drive to cut down energy costs.

Samar Mittal: We have been conducting trials for promoting green telecom with Vodafone.

Parminder Saini: This can be better answered by the operators. Green initiatives are still undergoing pilot testing. While some of the operators/ infrastructure companies have deployed green sites, a lot needs to be done before they achieve significant cost savings.

Munish Seth: In India, we are undertaking a number of initiatives related to green technologies:

Green networks –  We have introduced products across the customer base. The new generation of CDMA base transceiver stations (BTSs) reduces power consumption by up to 45 per cent. We will introduce another feature in GSM networks to tune the BTS power consumption based on traffic condition, thereby reducing power consumption by up to 30 per cent. These efforts will help in curbing the total ownership cost for our partners and contribute to our commitment to the environment.

Internet protocol (IP) transformation – This helps the network evolve systematically to next-generation IP and optics technology while reducing the overall carbon footprint, power consumption and ownership cost for the operator. A classic example is Bharti Airtel, which, through its joint venture with AlcatelLucent, has transformed its broadband and telephone networks to IP.

What have been the international trends in green telecom?

Nitin Gupta:  The International Telecommunication Union has been emphasising the need for introducing eco-friendly elements in telecom as well as information and communication technology (ICT)-related equipment and services. Global efforts to combat climate change will facilitate economic and social growth. However, the ICT sector itself needs to limit its carbon footprint. It is estimated that the ICT industry produces 2 per cent of the world's carbon emissions. The increased use of eco-friendly construction materials and renewable energy can facilitate the move to green telecom.

Parminder Saini: The operators have been heavily investing in projects for reducing energy consumption. However, no compromise has been made in the design of the towers as some countries are conscious about aesthetics.

 

 
 

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