Four things have combined to drive powering digital infrastructure to the top of the priority list.
Firstly, Russia’s invasion of Ukraine drove a spike in energy costs. While that spike has subsided the risk of future spikes has pushed energy costs to the top of everyone’s risk register. Secondly, energy generation is becoming more distributed and intermittent. That creates the opportunity to generate clean energy on site to power equipment directly and it also enables firms to sell power services back to the grid. Next, pressure to decarbonise networks from governments, consumers and investors is leading to changes in capex and opex by towercos and MNOs. Finally, energy demand is no longer stable, it is increasing again. The electrification of everything is driving up demand on the grid, multi-tenant 5G sites are seeing site power demand increase, and a new generation of AI has recently revealed itself as extremely power hungry.
Can towercos solve some of these headaches for their tenants? Can they create new opportunities? At TowerXchange Meetup Europe we were joined by representatives from Telefonica, Phoenix Tower International, Cellnex, Vantage Towers and Elisa to discuss their strategies, worries and hopes on providing energy services to mobile operators and others.
Energy-as-a-service
As the towerco industry matures in Europe, towercos and MNOs are increasingly exploring the potential of energy-as-a-service (EaaS) models in good grid markets. This strategic shift is driven by the need to cut costs and meet sustainability targets as described above, but multiple models exist.
Given grid conditions across Europe are normally good, there isn’t the same overriding necessity to manage power as in Africa and parts of Asia. The adoption of EaaS has been created through the widespread carve-out of towercos by operators, where power management has been separated from MNO operations by a deliberate strategy by the tenant. But even where towers have been historically acquired through sale and leaseback like Cellnex in Spain, there has been a transfer of energy equipment too.
Similarly, Shylesh Moras, SVP Operations at Phoenix Tower International, emphasised that every conversation with MNOs revolves around opex savings and ESG considerations, leading to tailored energy-as-a-service solutions. The challenge, according to Moras, is finding the right funding model for each market. Nilmar Seccomandi, Infrastructure Director at Telefonica, highlighted the potential of battery-as-a-service not only for reliability but also for comprehensive energy management. He pointed out that in Spain, over 100 off-grid sites generate their own energy, creating significant synergies.
Pricing and incentives strategies
The session also shed light on the importance of innovative pricing models and incentives to encourage investment in green energy and decarbonisation.
In some markets towercos are merely offering power as a passthrough which aligns incentives for operators towards reducing energy usage as they pay for every kWh used, but it creates no incentive for the towerco which owns onsite energy equipment and manages the grid connection to invest in reducing emissions or lowering the total cost of ownership (TCO) of energy on the site as all costs are passed through to the tenant.
In other markets towercos or ESCOs provide power at a fixed fee which enables towercos to internalise energy savings and reap the rewards of reduced TCO and reduced emissions. However, this ties tenants into a fixed fee structure for energy which reduces incentives to control power on their sites below the level agreed, potentially leaving network equipment running inefficiently. Combining pricing structures can unlock efficiency investments by both towercos and MNOs, but no simple solution has been agreed by the industry in Europe.
Sergio Tórtola, Global Operations Excellence Director at Cellnex, stressed that flexibility in pricing models is crucial to cater to diverse customer needs. He explained how MNOs often prefer pricing per kilowatt (kW) and a fixed fee structure that includes backup solutions.
Anastasios Koumparos, Head of Energy Management at Vantage Towers, underscored the increasing demand for transparency in energy management, particularly with smart meters and billing solutions. These help customers understand how their energy usage is being managed, promoting trust and accountability.
Enhancing reporting, consumption and efficiency
Managing power consumption efficiently while offering detailed reporting remains a top priority for both MNOs and towercos. Koumparos of Vantage Towers added that consulting with MNOs about their peak load requirements can prevent overdesigning energy systems, ultimately benefitting both parties by reducing costs and optimising energy usage.
Operators are now used to building 5G sites and installing equipment as required. Modern base stations can also reduce power consumption during off peak times, further driving down costs on site. Ville Väre, Business Development Director at Elisa, highlighted the virtual power plant concept they have developed, linking multiple tower sites and creating orchestration solutions to save on power costs. The value of battery backup becomes evident in these virtual power plants.
Flexibility in energy assets and Virtual Power Plants (VPPs)
The telecom industry is increasingly exploring off-grid solutions and on-grid virtual power plants. According to Väre of Elisa, virtual power plants (VPPs) provide additional services by linking tower sites, making it possible to feed electricity back into the grid while benefiting from new revenue streams. He noted that northern Europe has led the way in developing this concept.
Shylesh Moras of Phoenix Tower International added that the level of responsibility in managing energy assets varies depending on the negotiated deal, but there is substantial interest in broadening the scope of these services.
VPPs represent a revolutionary approach to managing energy by aggregating distributed generation assets like solar panels and battery storage systems into a cohesive network. These decentralised energy resources are controlled and managed through advanced software, enabling them to function as a single power plant capable of selling grid services like demand response, frequency regulation, and load balancing.
Elisa’s Väre underscored this concept by emphasising the importance of orchestrating tower sites into virtual power plants to generate new revenue streams and save on power costs. "We've developed virtual power plant solutions linking multiple tower sites to save power costs. Battery backup provides value through these orchestrated solutions," he stated. He further noted that northern Europe has been at the forefront of adopting these technologies, providing operators and towercos with opportunities to feed energy back into the grid and receive compensation.
The same technology that enables better battery and renewable energy management at cell sites enables virtual power plants, but it also enables services like EV charging or powering edge data centres. As towercos dial up investments in energy assets and energy asset management software they will want to get the maximum return from the capital they invest in energy equipment.
Collaboration as a Catalyst for Sustainable Energy Solutions
Collaboration between towercos, MNOs, and energy suppliers has emerged as a crucial catalyst for advancing sustainable energy solutions. Tórtola of Cellnex emphasized that securing long-term green energy contracts with partners is essential for stabilising energy costs, and tenants and towercos are now more open to signing long-term agreements.
Seccomandi of Telefonica mentioned that their partnership with electricity companies in Germany resulted in a remarkable 95% reduction in CO2 emissions. He noted that working closely with towercos allows Telefonica to meet renewable energy commitments while outsourcing infrastructure responsibilities. There is some optimism too about mid-term site loading as increasing demand on 4G and 5G sites will be offset by the turn off of less energy efficienct 2G and 3G networks.
The session illustrated the shifting attitudes towards energy management in the tower sector. As towercos and MNOs work together to adopt innovative models and collaborate with external partners, the potential for reducing costs and achieving sustainability goals becomes increasingly attainable.
