The second afternoon of the TowerXchange Meetup Africa & Middle East turned its attention to key considerations and solutions when managing cell site power. From tackling the low hanging fruit on existing infrastructure, to the widescale deployment of new technologies and the potential and limitations of the ESCO model.
Understanding your energy consumption profile
For any operator or towerco, the first step in any energy initiative is developing a thorough understanding of your energy consumption profile. It is impossible to manage what you can’t measure and so you first must understand what power is being consumed on your sites. Even in Europe where almost 100% of sites are on-grid, you need to understand what you are using in order to be able to reconcile your utility bill. Only once you have these metrics in place can you then look to negotiate with your suppliers.
Across the sub-Saharan African region, the energy profile of an MNO or towerco’s sites varies drastically, from the robust grid in South Africa to more challenging markets such as the DRC. Any decisions that are made on tackling energy generation and efficiency need to be backed by figures in order to inform your choices and monitor their impact.
Tackling the low hanging fruit
Huge savings can be made by first making sure that the equipment you have on site is being properly used and maintained. Fixing a faulty air conditioner or ensuring that a diesel generator is operating in the correct phase will often have a bigger impact and a much better ROI than deploying the latest piece of technology.
Spending the time and money to ensure that your contractors know how to work with the equipment and are able to service it properly will yield huge savings and is an absolutely critical step. Avoid rushing to deploy capex and first focus on optimising the existing equipment that you have on site.
Replacing suboptimal configurations with tried and tested solutions
When inheriting a tower portfolio from an operator, towercos often find that the energy equipment is sub-optimally configured. Whilst it may not make sense to reconfigure the sites as soon as you take over the assets, the emergence of key events such as the addition of a new tenant may present an opportune time to undertake such works. Often a towerco may have a portfolio strategy that is yielding strong results across their other assets, such as the deployment of deep cycle batteries, and this will therefore be the first port of call in upgrading energy infrastructure.
From capex evaluation to assessment of TCO
Whilst the upfront cost of new technologies is important to take into consideration, the panel underscored the importance of evaluating the TCO of new systems. Simplifying site design is key, not only can a overly sophisticated system be challenging to configure but a lack of standardisation between sites can make maintenance inefficient. Designing a simplified and low maintenance system that requires fewer site visits can have a significant impact on TCO. What’s more putting in place robust preventative maintenance schedules will reduce the amount of reactive site visits and help to control costs further, whilst standardisation between sites helps achieve efficiencies with your contractors.
Comparing performance in the lab, in pilot studies and in widescale deployment
The panel were all in agreement that there was a huge array of fantastic technologies in the market, each with the promise to contribute to impressive savings. Whilst in the lab environment these solutions reliably perform to expectations, and in pilot studies they often perform highly, deployment on a wider scale and a longer term basis can often yield drastically different results.
Firstly, a lab is a controlled environment, immune from the variables that can be found in a network setting. Whilst pilot studies expose technologies to a network setting, the focus that pilot studies receive from vendors as well as tower owners, coupled with their limited scale and study length provides different conditions to a full-scale deployment. In order to assess the true ROI of a system and thus assess its suitability for widescale deployment, extensive testing in the field is required, a key area of focus for the Vodafone Procurement team. The ROI that is promoted by vendors may not always be the same in the field and it is important to understand this difference in order to inform your decision making for major procurement activities.
The success of the technology in the field is also influenced by the expertise of your staff and contractors in installing and maintaining the equipment according to manufacturer’s guidelines. The equipment needs to have the correct maintenance and management to ensure that it reaches it full potential, and without this in place it is doomed to failure. There is no point investing large sums of capital in new technologies if you then fail to install, configure and maintain them correctly, offered Helios’ Alex Leigh.
The panel explained that tower owners were increasingly wanting to see vendors incentivised to ensure the success of their products in the long run, and observed that an increasing number are offering full service warranties. Whilst a full service warranty will increase opex, it is important to make sure that a technology is correctly managed to ensure it is delivering on its advertised ROI.
Scalability is another key component that needs to be carefully assessed prior to making purchasing decisions. Whilst a piece of equipment may function optimally in a single tenant scenario, many fail to meet up to expectations when the load on a given site is increased through the addition of new tenants. With the towerco business model based on multiple tenancies, it is of fundamental importance to make sure that technologies adjust well to increases in load.
The role for renewables
The panel were questioned on their appetite for and experience with renewables. Helios observed that when you look at solar you can see very good solution that works well in low consumption single tenant scenarios. There are still some question marks however on how well solar works when you start adding more tenants.
Vodafone commented that they had deployed lots of renewable solutions at big data centres and switching centres, but when it comes to base stations, the ROI is harder to achieve and so this hasn’t been deployed at such scale yet. As the price of solar continues to come down however, the business case will start to stack up.
Towerco of Madagascar have trialled a wind project, offering an interesting alternative to solar, solar being by far the leading renewable technology being considered by cell site operators. Vodafone commented that they had been conducting some assessments into fuel cells in niche markets and continue to assess a whole array of different technologies. At the moment the ROI of most renewable options means that deployment can’t be justified, that being said, it is important to continue trialling and testing technologies to ensure that all alternatives are being considered in the future.
Adoption of the ESCO model
The ESCO model has continued to gain traction in sub-Saharan Africa with companies including both Millicom and Airtel in the process of adopting the model. A strong degree of uncertainty about the viability of the model does however still exist, particularly amongst towercos in the market.
Speaking on the matter the panel questioned the ability of ESCOs to deliver a better job than the towercos have. With towercos having learned operational lessons over the past 7-10 years, power has become a core competency. Excellence in improving site uptime through improved power management is one of the towerco’s core USPs when speaking to MNOs, towercos themselves have specialised in power provision, they don’t need an ESCO to bring specialist expertise to tower operations. The panel commented how towercos often make a significant part of their margins on power and taking power out of the equation would sacrifice some of this benefit.
Whilst the ESCO model has been more widely adopted in India, it was commented that the there is a much more established network of skilled engineers in the country than in sub-Saharan Africa, which lowered the level of risk. Vodafone have signed ESCO contracts in India (and also parts of Europe) but that doesn’t necessarily mean that the model makes sense in Africa.
Another challenge for ESCOs is that they are generally smaller unproven entities and as such, their cost of capital is higher and more volatile than that accessible by towercos and MNOs. New financing solutions will be required to make the ESCOs more competitive.
The differing structure of contracts in place between MNOs and towercos also affects the appetite for a towerco to adopt the ESCO model and is something that needs to be carefully considered when considering an agreement.
Several comparisons were drawn between ESCOs and towercos in their early days; ESCOs need to convince tower owners they have the expertise to do what tower owners have been doing for years; ESCOs are faced with the same challenges that towercos face, whereby clients want fixed costs but also upsides to savings; and ESCOs may need to buy existing power assets in place on sites and look to carve out teams, similar to the strategy deployed by towercos.
The panel also observed the towerco business model works with multiple tenants and so it is rational for ESCOs to look for further synergies through shared infrastructure. Efficiencies all come into play with sharing and the business case is tough if you’re just providing for one client. The ability for ESCOs to extend power to factories, industrial power users and the local community all present new revenue streams. Whilst CSR is a component in extending power to off-grid communities, it also delivers real benefits to the MNOs and thus ultimately the supply chain. Providing power to a community along with connectivity increases their purchasing power which in turn strengthens operator revenues.
Whilst the ESCO model is coming to the region, panellists felt that rollout would be slow as various parties test the waters and the business model becomes defined. When connected to the grid, MNOs pay the utility by power consumed with different tariffs available; such thinking should be applied to ESCO discussions.
