In Africa and developing markets in Asia, towercos began life offering power as a service to their customers. With poor or no grid connection, the business case was easy to make. The provision of power was a value-added service, ridding the MNOs of the operational complexity of managing their sites when they had been sold to towerco partners. Towercos became experts in providing power, driving energy efficiencies and improving site uptime. Plus, the economics of shared power infrastructure made sense, sizing power equipment to serve multiple tenants provided economies of scale. In markets where the grid is widespread and reliable, there has however been little impetus for towercos to provide such as service.
Yet as a function of the type of deals that have been done, some towercos in developed markets still provide power – but in nearly all cases, as a pass through. In this instance, the towerco is responsible for managing the grid connection, controlling the meter and owning the on-site AC-DC power plant consisting of rectifiers, distribution, systems, controllers and a UPS. They may also provide back-up power to sites in the form of batteries and diesel generators. In Europe for example, when MNOs carved out their own towercos (such as Vodafone’s formation of Vantage Towers), the power elements on site were generally transferred to the new towerco. The same has happened in a certain sale and leaseback transactions between MNOs and towercos.
This has led to a complex situation where towercos may provide power as a pass through in some countries and not others, then even within the same country they may provide power as a pass through on some sites but not others, and then at a site level, to some tenants and not others. In the US and Latin America however, the trend has generally been for MNOs to own all power equipment and manage the grid connection, with each tenant having parallel grid connections, DC power plants and back-up power on sites.
Why is this? Put simply, it’s just the way it has always been and there has been no drive to change things. MNOs have always been responsible for providing their own power, this has worked well for them, it hasn’t caused much in the way of operational headaches, and power hasn’t traditionally been seen as a problematic cost base. And the old adage, if aint broke don’t fix it, rings true. MNO engineers see the handing over of power to a third party as the introduction of a risk which doesn’t yield reward.
But could we see this change?
There are several pieces of logic which could justify this. Firstly, having multiple DC plants and sources of back-up power on a site is a duplication of infrastructure, and the removal of parallel infrastructure to deliver cost savings is the thesis that the towerco model is built upon. When equipment comes to its end of life, should each carrier deploy capex to replace this or should they moved to a shared opex-based solution?
Secondly, the amount of power consumed by cell sites is set to increase, with network data consumption going up by 25-30% year. An average 5G cell site is running around 8kW but as more spectrum is deployed and adoption goes up, this is expected to increase to 10-12kW. Efficiencies in new generations of RAN equipment will offset some of the load increases, but the general trend is still up. Layer onto this the possibility that mobile edge compute and IXP connect power could move to the tower and sites could see another 10-15kW on top of this. Towercos caution that the load of cell sites in 5-10 years from now will be very different and advanced preparation is required. Whilst the US has not seen the same sharp jumps in electricity costs that have been seen in other geographies, power bills as a function of increasing load are going to go up. As a result, energy cost reductions may start to see more targeted management focus – with ESG objectives and green bonds further motivating this.
Furthermore, there is a general consensus that MNOs have poor data on their site level energy consumption. This has led to oversizing of back-up power systems and also leads to less informed negotiations with power providers. Plus, if carriers are to justify spending on new technology features – such as RAN equipment with intelligent sleep modes, how can they effectively measure their ROI without such baseline data. It is becoming increasingly clear that more needs to be done.
What’s more, other ideas regarding energy on cell sites are starting to be discussed. One is the concept of peak shaving – deploying energy storage solutions or alternative power generation sources on sites to reduce the amount of grid power consumed during peak hours when energy costs are higher. There have also been discussions about towers acting as virtual power plants, with owners receiving grid ancillary service revenue for balancing fluctuations caused by an increasingly high penetration of intermittent renewable energy generation on the grid.
Investing both capex and manpower into better monitoring and managing the provision of power to site, and exploring new revenue streams draws into question who is best placed to do this? Should this be a priority for MNOs or should their investments and brain power be spent elsewhere?
For towercos reporting carbon emissions, Scope 3 emissions caused by tenant active equipment energy consumption accounts for the most significant portion. Towercos looking to access sustainability linked financing are under pressure to have more accurate reporting, as well as pressures to reduce emissions; taking more of an active role in powering sites would give them more control.
But is the investment worth it? Can they make a return? And is there an appetite from the MNOs for a towerco to take on this role?
In the US, there has been little pressure from MNOs for towercos to develop an offering. For US carriers the biggest challenge is about getting power to a new site in a timely fashion - it has been reported in California for example that a new cell site can wait 24 months for a grid connection. US Cellular, the only major US carrier that still owns its towers and which also leases space to third parties on its sites has been providing a power offering to new tenants in a number of instances. To enable more rapid co-location, US Cellular’s towerco business shares their power infrastructure whilst the tenant brings their own power in, in some cases also offering the power on a more permanent basis. But more generally are tenants looking for a power solution? Generally speaking, in the US, not yet.
South of the border in Latin America however, the winds of change are upon us. Towercos report increasing pressure from their MNO tenants to develop a power offering to help curb electricity bills and towercos are looking at the proposition seriously. In markets with good grids and relatively inexpensive electricity costs, it is harder to make a business case that make sense for all parties, but with a desire to better serve their customers, towerco teams are looking to build models that meet the approval of their CFOs.
Whilst regional and national differences exist, across the board however, the message is clear that MNOs and towercos need to get a better handle on current and projected cell site energy consumption. Big changes are ahead and being prepared is key. Multiple variables will influence cell site load and better dialogue between MNOs, towercos, OEMs, energy equipment vendors and utilities will be required.
To meet with towercos active in Latin America and further discuss their views on power, join this year's TowerXchange Meetup Americas on 10-11 June in Miami, Florida.
