Over the past few years, the telecom industry has emerged as the biggest consumer of power. Energy costs constitute a large part of telecom operators? total costs. This expenditure is rising rapidly due to operators? efforts to increase penetration in small towns and rural regions that have erratic or no power supply. In this scenario, operators have to depend on diesel generator sets for steady power supply. The trend is likely to gain momentum in the next few years, given that the next wave of growth is expected to come from small towns and rural regions.
Therefore, telecom stakeholders including power solutions providers, operators and vendors have been taking initiatives aimed at utilising alternative sources of energy and other energy efficiency solutions like outdoor base transceiver stations, free cooling units and fuel economiser circuits to manage energy use.
Operators have adopted various strategies for energy management that include renewable energy as a key component. So far, solar power has emerged as the most viable renewable energy solution for powering towers located in remote areas. However, the solution has not witnessed significant uptake owing to the high capital expenditure associated with these systems, and the high cost of operating and maintaining them. Nevertheless, the technology remains an attractive option given the solar power cost reductions achieved over the past year and the supportive policies for the segment.
According to BRIDGE TO INDIA?s quarterly market analysis, ?The India Solar Compass?, 2 GW of solar power capacity can be installed at telecom tower sites by 2016. This market has shown signs of development with the emergence of the renewable energy service company (resco) model. The Tower and Infrastructure Providers Association (TAIPA) has been promoting this model in the telecom sector.
Emerging business models
Most renewable technologies including solar-, wind- and biomass-based power involve a large capex initially. For instance, an investment of Rs 3 million-Rs 5 million is required for a 6 kW solar-wind hybrid system. Currently, renewable power systems have a payback period of six to eight years. However, tower companies have not taken any major steps towards implementing green solutions.
These are new business models aimed at helping operators meet their energy needs through renewable sources without impacting costs. In rural off-grid areas, such models would reduce overall energy costs.
These are extensions of the pay-per-use model, under which a telecom tower company has to pay the resco for the power supplied by the latter. In some cases, operators tie up for a fixed volume of electricity per month. In other cases, a meter is installed at the site to measure power consumption from the renewable energy system. Under this model, the operator does not pay for the cost of the system, but uses the green power generated by it to operate its towers.
Volume driven
This model was proposed by TAIPA considering that the operations of around 100,000 towers located at off-grid sites are impacted by the lack of steady power supply. In the first phase, TAIPA plans to convert 1,000 diesel-run towers to renewable energy-based ones by March 2013. This would be increased to 50,000 towers by 2015 and to 100,000 by 2020.
In early 2012, TAIPA floated a request for proposal inviting non-governmental organisations and private renewable energy companies to generate and supply off-grid power to over 500 telecom towers. At least 25 rescos expressed interest in the project.
In October 2012, Pune-based Creative Mark Engineering Solutions and Mahindra & Mahindra Limited were selected by private telecom tower companies for supplying renewable energy. The rescos will establish renewable power plants near telecom towers and sell power to the telecom companies at a predetermined price based on a pay-per-use model. Additional power generated by the companies can be sold to commercial users in areas where the power plants are located.
Anchor tenant
This is a popular model and has been adopted by several tower operators availing of resco services. Under this, a resco sets up micro renewable energy plants with telecom companies as their anchor clients. While this acts as an assured source of income for the resco, the additional power generated from the plant is sold to the community.
Community led
Since the power requirement of a telecom tower is not very large, rescos often do not find it viable to set up smaller systems specifically for operators. In this scenario, operators can avail of the services of rescos that supply power from large off-grid renewable energy plants to communities without access to grid power.
Key challenges and concerns
With the Telecom Regulatory Authority of India mandating the use of renewable technologies for telecom services by 2015 and setting targets for 2020, operators have to start using renewables to power network infrastructure. However, there are several issues in ensuring this. These include:
?Location of towers: This is a key challenge, especially for solar power systems, which need to be set up in a shade-free zone for optimum output. Ideally, the space must be 10 metres from the centre of the tower base and panels should be installed facing south.
?Quality of power: The telecom industry has one of the highest uptime requirements (99.99 per cent) for continuous and reliable power supply. Therefore, operators need to deploy a solution that does not impact their service quality or increase losses. Even a minute of downtime results in huge revenue losses. Also, since telecom tower systems require constant power supply, battery storage has to be optimised according to the site irradiation trends.
?Savings in operational expenditure: The operational expenditure on deploying any renewable energy system must be lower than that for the power source it replaces. This is one of the key metrics that operators examine in order to ensure financial viability.
?Space constraints: This factor is particularly relevant to solar and biomass projects. A 1 kW solar power system would require an area of 7-8 square metres. Acquiring space is a major challenge in urban areas. However, in suburban and rural areas, land is available and solar power is an ideal solution.
?Supply chain availability: The scope of an operator?s business depends on the availability of a supply chain. Therefore, any renewable energy technology adopted for a telecom network must have a secured supply chain.
?Need for a large battery bank: Alternative energy sources require a large battery bank to ensure reliable supply, which results in an increase in costs and in the number of backup hours. Therefore, the break-even period for alternative energy systems is four to six years.
Future growth drivers
The main factors that will drive the adoption of renewable energy sources in the telecom sector are:
?Expansion of towers: With urban areas reaching saturation in terms of coverage, operators are looking at Category C cities (suburban areas) for their expansion programme. As establishing renewable energy systems at greenfield sites involves fewer issues than brownfield projects, these areas are suitable for renewable energy-based off-grid systems, as the cost of land is also low in remote regions. In order to meet the TRAI mandate, operators prefer to deploy green solutions at new sites.
?Fiscal incentives: Fiscal incentives have played an important role in promoting off-grid applications. The high capex is a key deterrent for operators to adopt renewable energy sources for power. In this context, fiscal incentives may drive adoption in the initial years.
?Rising cost of diesel: Diesel is a regulated commodity in India but is likely to be deregulated in the future. Diesel prices have been increasing, and the trend will gain momentum after deregulation. With another 100,000 towers expected to be established over the next two years, the telecom industry will not only drive the demand for diesel, but will also be responsible for about 8.4 million tonnes of carbon dioxide emissions. Moreover, diesel usage involves the issue of pilferage. These challenges are likely to force operators to adopt renewable energy solutions.
?Falling costs: A decline in the prices of solar wafers, cells and panels over the past two years has resulted in lower solar project development costs. Manufacturers are starting to achieve quality and reliability standards in the mass production of these applications. There would be further innovations as the prices of technological components are declining, and entrepreneurs are studying local conditions and assessing user requirements. Since the affordability of these applications is the main impediment to their adoption, lower costs and a corresponding decline in retail prices will be critical for driving demand going forward. For instance, the cost of electricity generation from stand-alone solar photovoltaic (PV) plants has reduced from Rs 15 per kWh to around Rs 10 per kWh in the past two years, while that from diesel generators is around Rs 15 per kWh (assuming an average diesel price of Rs 36.50 per litre and the diesel consumption of a typical genset at 0.4 litre per kWh). With economies of scale in the PV module segment, the cost of developing such projects would reduce further while diesel prices are likely to increase.
Also, increasing commercialisation of off-grid applications and technological innovation by entrepreneurs are also driving down the manufacturing cost of basic solar off-grid applications.
The way ahead
Going forward, an additional 100,000 towers are likely to be established, driven by the deployment of new technologies like 3G and long term evolution. This tower roll-out will result in a high demand for diesel, which will add to operators? opex. Though diesel prices in India have been below the cost of procurement (regulated by the government), the recent price hike and the likelihood of these prices being pegged to international market rates in the future weaken the business case for using this fuel for power generation.
Therefore, the trend of switching to renewable energy will strengthen in the coming years. The small beginnings that have been made on this front will see significant growth with more companies adopting alternative energy sources to meet their power needs. Innovations, and research and development will also play a significant role in this regard.
