Why Polar Power is moving up the value chain

TowerXchange: This isn’t the first time we’ve interviewed you about Polar Power, so please give us a short introduction to yourself and the company?

In 1979, I co-founded Polar Power and started delivering solar photovoltaic power systems to remote locations worldwide. Polar Power has become a leading end-to-end designer, manufacturer and distributor of DC generators for the telecom, marine, oil and gas, military and automotive industries.

Today, starting in Namibia, we have moved up the value chain and now provide engineering, design and construction services for towers so that we can put out technology to work in the most efficient and effective way possible. We intend to spread through Southern Africa once we are established in Namibia, but in time we may be building towers across the world, including our home market, the US.

Polar Power is publically traded on Nasdaq under the symbol POLA. This gives our customers transparency on Polar’s financial strength along with the confidence that we will be around for long into the future to service their needs. Polar directly employs 165 employees comprising of manufacturing, engineering R&D, customer service, and administration. Most of the company’s management is made of highly experience engineers. We are a very hands-on team and we do understand the real technical challenges of our customers. One of my favourite pastimes is to visit rural communities to explore (and put into practice) ways to improve the lives of people by providing power and cooling.

In the 1990s we pioneered Hybrid Solar Systems using DC generators and this enabled us to lower both the capex and opex while improving upon the system reliability. In 1995, Polar was the first company in the telecom industry to introduce DC generators as a prime power replacement to AC generators. Polar was also the first to incorporate DC generators into Solar Hybrid systems. Actually, our first product in 1979 was a solar powered vaccine refrigerator for use in remote areas worldwide, developed in cooperation with the World Health Organization, NASA, and the U.S. Agency for International Development. Since 1995 and continuing, our focus has been improving every component within the system through engineering innovation, new production tooling and raw material sourcing. A few very simple components can cause a functional problem that requires one or two expensive maintenance trips to the site for corrective action.

Within our Los Angeles headquarters, we manufacture in volume our own alternators, controls, engine accessories and enclosures. We have also developed, alongside Bosch and Toyota our own LPG engines, with a 15-25% fuel efficiency advantage over its predecessors.

TowerXchange: What has prompted the shift from being a manufacturer and provider of energy solutions to engineering and construction?

Recently there has been a trend towards simplifying supply chains. That means cutting down on the number of suppliers and reducing the variety of installed components and service providers. This allows for easier supply chain monitoring, and the building of longer relationships between buyers and sellers, but it also involves some compromise in cost and quality. If you reduce the number of suppliers you work with it reduces your capacity to bid down prices to the most competitive level, and it reduces your ability to explore more suppliers to find the highest quality product.

At the moment only around 10% of African cell sites are using DC gensets, and that means 90% of cell sites are missing out on a cleaner, cheaper, easier to use alternative to their AC gensets. Part of our strategy will be to bring our expertise and DC genset products to market through our construction business.

We have always offered a quality product and worked well with sophisticated buyers, but many of those constructing towers are not sophisticated buyers of energy solutions. The traditional energy solution is a standby or temporary diesel generator but these are not designed to be long-lived when used autonomously, or to have the flexibility and finesse required of modern telecoms infrastructure. A genset which works when someone is always there to check the oil is not appropriate near the Namib Desert. So to get the right energy solution installed at site we have had to move up the chain and start constructing the towers.

Today, if you point to a site we will put a tower there, and if you’re not sure what type of tower would work best on the site we can help you with the engineering services to decide what tower would be optimum. For example, at some sites wouldn’t require an elaborate foundation and so we could save you money and time. Right now, we are helping to install the radios and helping to calibrate the antennae, but we don’t do site acquisition. We are engineers, so there are some things we are comfortable with, and some things which belong to someone else’s skill set.

TowerXchange: There are more mature and larger markets around the world, why are you entering Namibia first with your tower construction business?

Namibia is a wonderful market to work in. And a beautiful country as well. First of all, for a small market, there is already an existing tower industry that has done a lot to professionalise the tower industry in Namibia.

Overall, Namibia is an easy country to do business in, with reliable payments and banking infrastructure and is part of a Southern African Customs Union. That zone includes Botswana, Lesotho, Namibia, South Africa and Eswatini. It also has close regional ties with Angola, Zimbabwe and the other 14 members of the Southern African Development Community. Namibia is also just a pleasant place to live, safer than many other countries and a good place to base a regional team.

We are working for a major telco in Namibia to help them in their roll out. They have ambitious plans to add hundreds of towers to bring universal coverage to Namibia’s populated areas. Many regions of Namibia have very limited wireless broadband, especially in rural areas. That’s a big problem in a country with such potential as a tourist destination. Namibia has some of the most amazing wildlife, but without the reassurance of quality telecoms infrastructure they will be unable to maximise the potential of Namibia as a tourism destination.

We want to make an impact here. We are setting a precedent for our way of doing construction and engineering. We want other countries and companies to see how we are incorporating power systems into our build and design and our innovative way of running and servicing the sites.

TowerXchange: Tell us more about your approach to solar and hybrid systems, and what role alternative fuels can play in improving the operational efficiency of towers.

There have been some amazing advances in photovoltaic cells, but now they have reached a level of efficiency where you can buy them as a commodity, the real value add comes from taking a systems approach to your energy set-up. There’s very little cost you can pull out of a solar module, but there is often a lot of cost you can pull out of your overall energy system by making it work smarter. For example, a fuel-based back up can save you a lot of money relative to a battery back-up system. A system which is powered 80-90% solar and 10-20% fuel can have lower overall cost, especially when opex costs like ground rent and battery maintenance are included. Although the land used by extra solar panels is usually relatively minor, because the tenant is a large corporate, and the need for power is usually acute, rental costs can inflate.

Often people’s default picture of a genset is a diesel generator, but there are alternative fuels which we are really excited about. There are big advantages to diesel in terms of familiarity and ease of transport, but that doesn’t mean towercos, telcos and their managed service providers shouldn’t be leading the way in exploring alternatives. For all its benefits, diesel can be dirty, smelly, polluting and also cause vibrations and noise which disturb neighbours.

Alternative fuels like liquid natural gas (LNG), compressed natural gas (CNG) or propane can fuel engines engineered for long life, but the modified petrol engines operating on gas have given this application a bad reputation.. We have worked with the propane council and they have been telling us about 80 years old tanks they’ve discovered, still sealed and the fuel was still good. Unlike diesel you don’t need to treat them to stop algae or use additives to stop them gelling in cold temperatures. We have found that these alternative fuel engines have three of four times the life expectancy of diesel engines. We worked with Toyota and Bosch to design and build the ideal gas (LPG and natural gas) engine, and includes our own alternator. We plan to start to deploy this engine into the field at the end of Q2 2019.

There are some key ways that we are reducing the total cost of the energy system. First of all we reduce the maintenance on your starter battery by eliminating it, we use a capacitor instead which is more reliable. Because we’re not using diesel we’re also not using a fuel injector. If water gets into your diesel and that passes through your injector it will seriously reduce its lifespan which again pushes up maintenance costs and site visits. The alternative fuels also work well at a lower rate of compression so your bearings, crankshaft, pistons, et cetera all take less punishment and last longer. All across the engine we’re reducing the wear and tear it will suffer in normal operation and taking out components which can go wrong.  To also reduce maintenance and greatly improve fuel economy we removed the parasitic load of the engine including all V-belts, belt driven alternator, belt driven water pump, and the charging battery alternator.

TowerXchange: What is holding back the greater adoption of alternative fuels? Are the distribution networks there for it?

We’ve been deploying alternative fuel generators for nearly 20 years. For example, in the US, if a tower is on federal land you cannot burn diesel without a special permit. Even on military sites, natural gas and propane is used. So there’s a market for them and the technology is proven. At the moment there is an infrastructure deficit, but with the potential efficiency gains, it will be worth investing to fill that gap.

Towers and telcos wouldn’t be the only market for these fuels. Deforestation is a major issue in many places in Africa, and many hours a day are spent just collecting wood to burn. A propane distribution network displaces that and gives every family that uses propane a couple of extra hours a day to do more valuable work. Fuelling telecoms sites creates the sort of throughput that a distribution system needs to get started, but once the market for cooking fuel is live it doesn’t require any subsidies.  What we can do with alternative fuels we can do with other aspects of the telecoms value chain to push rural development. It is a big opportunity.

TowerXchange: As something of an outsider to tower construction, how do you want to see site development change?

There’s a big opportunity for rural development, which in my view, we are missing out on because we as an industry aren’t involving the whole value chain created by telecom site development. On current lines, the business case for connecting rural sites is lacking, but of course, without connectivity it will take even longer for those reason to develop strong business cases for investment.

But for the last 25 years, we have seen banks enter rural areas and put in a power systems for a remote ATM. Today, you don’t need an ATM to access banking services, but you do need wireless broadband. The development also supports safety and security services which are essential for attracting tourists. Bringing it back to our roots, it also enables the storage of vaccines and for medical treatment which supports the development of future generations of producers and consumers.

So the whole pie grows, it helps commerce, health, tourism, finance, security, education. But the issue is we’re not collaborating.  It’s not an easy problem to solve, to coordinate all the different parties who would benefit and crystallise it into a viable investment plan, but it is what is needed. Sadly we cannot rely on government programmes to connect rural areas because they move to slowly.

In developing areas the two most important areas are power and broadband and that is what the tower industry provides. A power system alone in many areas would be great, but it needs to be maintained and telcos can provide, or contract for, maintenance. Broadband and low-cost power go hand-in-hand. How you monetise that power generation and justify that maintenance cost is another question, whether you can give access to your generation for charging batteries or use excess energy to power a school, and your independent systems, fuel service and maintenance personnel are shared. Or perhaps the schools or local business enterprises generate power and sell to the tower company, these are some of the options.

Once upon a time, a major beverage company investigated using solar generators in remote locations so people could enjoy cold beverage in rural areas. Years later when people moved to the cities they still enjoyed cold that beverage and kept buying it because they remembered it had been there when they were young. Viettel are using this strategy in Tanzania, going to rural areas, winning customers, and then keeping them and banking a lifetime of income far in excess of the cost of the capex required to reach that rural community. There’s so much more value add possible in the telecoms industry, but it requires even more coordination.