The single biggest challenge to being able to offer stable and reliable mobile phone services in Africa is power. Or more precisely, the lack of reliable power at telecoms tower sites. Hundreds of thousands of towers across the continent are located in areas without access to reliable electricity grids – or indeed, any electricity grid at all – and they typically have to be powered by diesel generators 24/7. And as the networks expand into ever more rural areas, the problem is getting worse as Africa is the only region in the world where the population is growing faster than the rate of electrification.
TowerXchange: Please share with us the context in which you see a growing need for ESCOs?
Carita Tissari da Costa, Sales Director, Flexenclosure:
The power challenge has vexed mobile network operators (MNOs) for years, as well as more recently, the towercos which have been acquiring towers from MNOs. Managing the supply of reliable power is not a traditional core business competency of either of these two groups. So just as the MNOs’ divestment of assets to the towercos came from a desire to refocus on their core telecommunications service offerings, that same desire to focus is now driving the next evolution in the industry’s dynamics – the rise of the energy service companies (ESCOs).
The growth of this new ecosystem of MNOs, towercos and ESCOs is being enabled by a new generation of hybrid power technologies – systems that have been specifically designed from the ground up to operate reliably in even the harshest of environments and over the lifetime required for an ESCO’s business model to make good business sense. The result is a set of very compelling reasons why outsourcing power requirements to an ESCO should be a no-brainer to MNOs and towercos alike.
TowerXchange: What might be some of the arguments for an ESCO then?
Carita Tissari da Costa, Sales Director, Flexenclosure:
The first is significant opex savings. With an average single-tenant telecom tower site powered 24/7 by a generator consuming about 28,000 litres of diesel per annum, it’s not hard to see how site power costs can account for 30-60 per cent of the total operating costs of an MNO or a towerco. Implementing the latest generation of hybrid power systems though, such as Flexenclosure’s eSite x10, can significantly reduce opex by decreasing diesel consumption by 70% or more. And these savings can increase further if the power loads are reduced, there is intermittent grid power available and/or solar energy can be harvested. And opex savings are not just made on the cost of diesel. By outsourcing power to an ESCO, the MNO or towerco no longer has to worry about generator maintenance, spare parts, or the cost of an operations team on standby 24/7 to manage power failures, site break-ins, fuel theft, et cetera.
Another major reason is freed-up capex. According to the GSMA, Africa will need tens of thousands of new towers in the next couple of years, yet capex budgets keep tightening as mobile markets become more competitive and much of Africa struggles with economic downturn and forex issues.
When a telecom tower site is powered 24/7 by a generator, that generator will run for 8,760 hours per year and will need replacing every three years, not to mention replacement costs of other legacy power equipment. From a tower operator’s perspective, this budget (and effort) would be far better spent expanding network coverage, rolling out revenue-generating services or on customer acquisition activities – and by outsourcing power to an ESCO, that’s exactly what they can do with the freed-up capex.
TowerXchange: And what about additional benefits of an ESCO, perhaps less related to capex and opex?
Carita Tissari da Costa, Sales Director, Flexenclosure:
All respectable organizations across the globe today are looking at ways of reducing their carbon footprint, so for MNOs and towercos, this means cutting carbon emissions. With an average single-tenant telecom tower site with a 2kW power load running 24/7 on diesel generators producing over 75kg of CO2 emissions per year, tower operators have very big footprints. By implementing the latest hybrid power technology – such as the pioneering eSite x10 – annual carbon emissions for the same site can be brought down to below 20kg per site. That’s a significant drop with equally significant benefits to the environment and to a tower operator’s corporate social responsibility aspirations. And as before, lower power loads, partial grid availability and/or solar energy can further reduce a site’s carbon emissions.
TowerXchange: On an operational level, how might working with an ESCO change things for tower owners and/or operators?
Carita Tissari da Costa, Sales Director, Flexenclosure:
Its means more risks are outsourced and complexity reduced. Managing power at telecom tower sites is prone to risks related to both the generation and the delivery of power to the active telecom equipment. By outsourcing all responsibility for power generation and delivery, a tower operator can effectively unburden themselves from all the complexities and distractions that power comes with, even at those sites that are connected to an electricity grid. A Power Purchasing Agreement (PPA) with an ESCO will detail agreed SLAs and KPIs, with penalties for non-performance. The result of signing up to such a “power-as-a-service” contract would be the tower operator’s moving from having to manage the operational power complexities for all its sites to simply managing an insurance policy of sorts on its outsourced power risks.
TowerXchange: When it comes to investing in new energy technologies, we’ve often heard that the business case or incentive is not there for a MNO or towerco. But this would be different for an ESCO?
Carita Tissari da Costa, Sales Director, Flexenclosure:
Yes, for tower operators – whether MNOs or towercos – historic investment in telecom tower power equipment can be a significant obstacle when trying to justify investing in newer power technologies now given it’s not core to their business focus. However ESCOs don’t have this issue though. Their investment strategy will be to implement the latest hybrid power systems offering the most reliable long-term performance, so it makes absolute sense for tower operators to unload their legacy equipment and pass the power baton to ESCOs to run with.
TowerXchange: Lastly, how might you summarise the ESCO opportunity for Africa and Asia?
Carita Tissari da Costa, Sales Director, Flexenclosure:
The general consensus in the industry is that approximately 50 per cent of all telecom towers in Africa will have implemented outsourced power in the coming five years. Whatever the actual number, it is clear that outsourcing power to a specialist ESCO will have far-reaching benefits.
It will release MNOs and towercos from the burden of managing inefficient and unreliable legacy power equipment. It will create a new industry segment within the larger telecommunications ecosystem, thus increasing employment opportunities and skills levels. It will have significant environmental benefits. And most importantly, it will support the “connection of the unconnected” – the quest to bring mobile telephony and online access to the hundreds of millions of people across Africa who still remain beyond the reach of networks today.
