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Telecom Energy Management: Need for a strategic shift

October 31, 2011
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To offer a perspective on the energy issues faced by telecom infrastructure companies, its availability and emerging power solutions, tele.net recently organised its second annual conference on “Energy Needs of the Telecom Sector: Managing costs, Approaches, Options and Innovations”. The following pages present a series of excerpts from presentations and panel discussions by industry analysts, operators, infrastructure providers and energy companies at the conference...

Abhishek A., Senior Manager, KPMG

Over the past few years, energy costs have increased as a percentage of telecom revenues. This has become a key issue for the sector as, in the current environment of tariff wars and high 3G spectrum prices, it is impacting the profitability of operators.

To tackle this increase in operating expenditure, telecom tower oerators are looking to explore energy-efficient solutions in network design and maintenance.

Current status

Mobile subscriber numbers have witnessed steady growth over the past several years, crossing 850 million in July 2011. At the same time, ARPUs have dropped with the entry of new players in the market and intensifying competition, thereby adding to cost pressures on network maintenance and profitability per site.

For large operators, power and fuel account for about 26 per cent of the total network operating cost. As a percentage of gross mobile revenues, this accounts for 5-8 per cent.

Composition of energy cost

Energy consumption by telecom operators can be broadly divided into three categories – use by base transceiver station (BTS) sites; core switch sites; and corporate offices as well as other requirements for maintenance, retail outlets, etc.

Core network elements account for 86 per cent of the energy requirements. About 65 per cent of the total energy is consumed by the BTS sites or radio access networks. Core switch sites contribute around 21 per cent of the total consumption. This share increases for companies having enterprise business operations or data centres. The third segment, corporate offices, has a share of around 14 per cent in total fuel consumption. Though this has been constant for several years now, the share of BTSs in fuel usage has been growing.

At a passive site, diesel generators (DGs), electrical works and battery racks account for around 33 per cent or about one third of the total capex.

Power equipment accounts for 34-36 per cent of site capex. The cost of passive infrastructure for a ground-based tower (GBT) is around Rs 2.5 million and for a rooftop tower (RTT) is about Rs 1.4 million. The key equipment deployed in the case of GBTs and RTTs are DGs, air conditioning (AC) facilities, batteries, battery racks, cables, etc.

Primary power consuming elements on the active side of a telecom network include BTSs, microwave radio equipment, switches, antennas, ACs and trans-receivers. ACs and BTSs alone consume 70-80 per cent of the DG output.

High cost of using DG

As 40 per cent of the existing telecom towers are in regions experiencing power shortages (even urban, semi-urban, rural areas, etc.), costs increase on account of DGs required for operating equipment and towers, and for cooling requirements.

The cost of a DG set may range from Rs 300,000 to Rs 1 million depending on the wattage and type. Based on the number of hours of operation and tenancy, fuel costs vary from Rs 100,000 per annum per site per tenant to Rs 600,000 per annum per site per tenant.

The cost of operating a DG set for eight hours a day over a five-year period and at a tenancy of 2x is Rs 1 million to Rs 1.4 million, beyond which it may need to be replaced. Fuel and spare theft contributes another 10 per cent to fuel costs.

Benefits of sharing

Power and fuel expenses reduce significantly with an increase in tenancy – each additional tenant reduces the cost per tenant by about 20 per cent.

Fuel and power costs are around Rs 20,000 with one tenant, Rs 30,000 with two tenants, Rs 35,000 with three tenants and Rs 42,000 with four tenants. Accordingly, power and fuel costs per operator reduce from Rs 20,000 to Rs 15,000, Rs 12,000 and Rs 10,000, respectively.

The emerging scenario

India’s telecom tower base would reach about 530,000 by end-2014. An estimated 84,000 additional towers are expected to be set up in rural areas and 93,000 in urban areas in the said period.

While the rural segment will be a major contributor to this growth,  mobile network operators need to look at innovative business models for improving their operating margins, especially in these areas.

The tower companies are moving to fixed power cost models, both with operators and vendors (fixing the consumption matrix). This will minimise disputes and pilferage. Also, new technologies are being tested to reduce the energy expenditure.

Alternative energy solutions are being explored by most operators. These can be classified into three types:

Off-grid solutions: These solutions, based on solar and wind power,  reduce the generator runtime by up to one-tenth, fuel consumption to 2,000 litres per year, and CO2 emissions per site to 5 tonnes per year.

Bad grid site solutions: These are relevant to sites with limited grid availability and/or low grid reliability. These sites are typically located in rural and suburban areas.

Green energy solutions: Most energy companies offer green energy control systems to capture site-related parameters to provide improved site maintenance and a remote monitoring solution. This provides an interface for remote data collection and helps reduce the opex.

However, the business viability of alternative energy solutions is a critical aspect. Most of these options are currently unviable due to cost constraints. These technologies are at the incubation stage and involve high capital costs. Large-scale production of this equipment may reduce costs over the next few years.

A new approach

Besides the limited availability of grid power and high cost of diesel, several other issues and challenges are being faced by operators and tower companies on the energy front. For instance, unlike a captive load, power usage in telecom is a distributed load. It, therefore, becomes a challenge in terms of management and control of events at the site.

Moreover, telecom sites have been installed over a period of time and, therefore, have highly variable configurations (indoor, outdoor, single tenant, multiple tenant, etc.).

In light of all these issues and challenges, a strategic shift is needed in the telecom energy management space. Four years ago, operators outsourced/hived off their tower operations into separate tower companies in order to focus on their core area of operations. It is time that the telecom infrastructure industry starts thinking on these lines. There is a need for tower companies to recognise their core elements of operation and those which can be outsourced to specialised agencies.

Given that energy costs account for 45-50 per cent of the network opex, there is an urgent need to build a model based on specialised energy management companies. The renewable energy services company (RESCO) or the energy services company (ESCO) models are two examples of such entities. Promoted by the Tower and Infrastructure Providers Association (TAIPA), the RESCO model involves individual renewable energy service companies offering customised power solutions for different sites across the country. TAIPA has been working with the Ministry of New and Renewable Energy (MNRE) as well as the Department of Telecommunications to promote such companies. About 17 companies have already been shortlisted by the MNRE as energy providers. However, this is an initial stage and several technicalities need to be worked upon with regard to the kind of support to be provided to these companies, etc.

Several other initiatives have been taken by operators in this space. Bharti Infratel has, for instance, launched the P7 programme, which is aimed at improving energy efficiency through several catalysts – fuel cells, solar-DG hybrid, DC free cooling units, integrated project management solutions, fuel catalyst and variable speed DGs. The initiative aims at saving 57 million litres of diesel and reducing 154,000 metric tonnes of carbon dioxide annually as well as achieving energy cost savings of 25 per cent. So far, over 1,000 sites have been provided with solar power solutions.

Uninor has taken several initiatives like providing free cooling facilities for outdoor BTSs. The operator’s pilot project covering 7,500 sites has achieved 30 per cent energy savings. In another such initiative, DG sets and fuel catalysts have been provided in collaboration with Viom Networks. The pilot project has been implemented at 4,500 sites and has reduced energy consumption by 10 per cent.

However, concerns remain with regard to the use of renewable energy. While panel prices have dropped over the past few years, this has not translated into cost reductions for solar installations. Therefore, the industry will need a solution like the RESCO model to improve efficiency.

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