Sustainability typically refers to three areas – environmental, social and economic. In this age of short messaging and Instagram messages, the term “sustainability” is used without any qualifier prefix to mean the dominant theme. While this article is about environmental sustainability, given the strong linkages amongst the three fields mentioned above, it will not be out of context to commence with the “economic” and “social” arenas.
The average number of mobile telephony service providers in an area has reduced from almost nine per circle in March 2012 to four from March 2019 onwards due to closures and mergers of various operators. The sectoral turbulence due to these closures and amalgamation has, directly and indirectly, impacted the employment status of many people. Surprisingly, despite the average revenue per user (ARPU) more than doubling in the last four years (from Rs 67.39 per month per subscriber in September 2018 to Rs 137.31 in September 2022) and the low price-elasticity of demand at the prevailing prices, the sustainability of business and operations of at least two out of the four mobile telephony operators is under a cloud. Positive sentiments brought in by the roll-out of the 5G network and services apart, the fact is that the number of wireless telephony subscribers in India is exhibiting saturation in the vicinity of 1,140 million. Urban wireless teledensity has dropped to 129.05 per cent (November 2022) from a peak of 169 per cent in August 2017. What is more worrisome is that this stagnation in subscriber growth has happened when wireless teledensity in rural areas is still at an abysmally low 57.54 per cent (November 2022).
It is an acknowledged fact now that energy and the associated operational costs constitute more than 30 per cent of the operational expenditure of telecom service providers. Hence, efforts are being made by various stakeholders to use sustainable energy at telecom tower sites to make the business sustainable at prevailing ARPUs. Unfortunately, despite the recognition of the need for optimisation of energy costs, the progress in implementing sustainable energy solutions has been very slow. Various factors have contributed to the same.
Firstly, the asset ownership, responsibility matrix for energy provisioning, and the impact of energy costs on various stakeholders are diverse and complicated. Further, the focus of different entities, both amongst telcos and towercos, on energy cost optimisation and commitment towards green energy are also at different levels. The existing vanilla solutions do not appear to optimally benefit operators as the end consumer, towercos as the facilitator, and energy service companies (ESCOs) as the service provider. Irrespective of the actual benefits, the feel of a win-win solution is missing.
Secondly, the liquidity position of various operators and towercos, the cost or perceived cost of capital for various stakeholders as well as their willingness to put capex in energy-saving measures are at different levels. Hence, the sector has been floating between the capex model and the opex model of renewable energy provisioning as the appropriate method to be adopted for energy cost optimisation. Moreover, the ecosystem has demonstrated difficulties in shedding the inertia of age-old energy cost reimbursement models.
Thirdly, mergers and acquisitions and sectoral turbulence have led to huge changes in the originally envisaged energy requirements at sites. Variations in power requirements have also been brought in by new 4G and 5G technologies and the co-existence of equipment belonging to multiple generations of technology, viz, 2G, 3G and 4G, at sites. Renewable energy service providers have not been agile enough to provide adequate flexibility in equipment to optimally upgrade or downgrade based on the changed power requirements.
Fourthly, particularly in the opex model of service, the lock-in period has been a contentious issue. This is because while solar or other renewable energy costs are significantly better than the costs involved in power generation through diesel generators, the alternative energy costs are still not at par with grid power rates on a cost-per-unit consumption basis. Gradually, the end-users are looking forward to costs closer to grid power costs rather than comparing with the cost of power through diesel generators. The situation has become worse because of the high expectations generated by the government, which lead end-customers to believe that reliable power supply, even at remote locations, will be available within a year or two, hence it is not wise to agree to a lock-in period of five years or more.
The fifth reason is that ESCOs have been looking at a cherry-picking model while, with the increasing number of sites, it is desired by the end-users to have a single point of interaction for operational performance in an area. A single ESCO/operations and management (O&M) company taking care of sites in an area is also economically and operationally more efficient.
Besides the above, the performance of a few ESCOs has been far from satisfactory either due to financial issues, shareholders’ discord, operational inefficiencies, or litigation. There were also errors in the appropriate selection of sites, which is a critical success factor for ESCOs. The aforesaid factors constrained the growth of sites on sustainable energy in 2022 and as per some estimates, there was virtually no growth in terms of the number of sites on sustainable energy.
However, with the launch of 5G services, the increase in the number of sites and increased overall energy requirements, the use of sustainable energy has become more relevant. The Ukraine war and other global geopolitical events have led to rising energy costs. Thankfully, successful 5G auctions have created a positive investment sentiment towards the Indian telecommunications sector. With developments in battery technology, hydrogen-based energy solutions and geothermal energy, more flexibility and efficiency are being exhibited by sustainable energy solutions, which makes it easier to arrive at win-win models of sustainable energy adoption. From 2023 onwards, not only are a larger number of sites expected to be rolled out with sustainable energy solutions, but business sustainability requirements are also likely to push sustainability measures on the energy front. This, in turn, is expected to accelerate the creation of a sustainable ecosystem comprising people, the planet, and profits.