Telecoms towers in the energy transition

Telecom Tower industry expert Neil Smith joins us again for a closer look at two key power issues facing the industry.

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Transcript

Lou:  Good Day and welcome everyone to Power Bytes!  I am your host Lou Signorelli and Power Bytes is your destination Podcast for power generation conversations.  As always please know how much we appreciate you, our listeners.  We hope you find our topics helpful and interesting.  There are several ways for you to get in touch with the show. You can send us an email at powerbytes@cat.com, visit us at Cat Electric Power on Facebook or LinkedIn.  Please remember to subscribe, leave comments and like our show wherever you listen to your favorite podcast.  

Lou: On a previous Power Bytes Episode we heard from our guest Neil Smith about the power challenges facing telecoms tower companies, and this time we want to dig a little bit deeper into how those challenges are being addressed, and what other sectors could learn from the experiences of the tower industries.  

Lou: So, Neil is back with us today to offer some further insights into these issues.    You might recall that Neil is the Global Accounts Manager for Caterpillar's Electric Power business focused on Telecom.  Neil has worked with Caterpillar for the last seventeen years and previously worked at Caterpillar dealerships in the UK and Africa where he first became involved in the mobile telecommunications industry.

Lou: Thanks for joining us today, Neil! 

Neil: It's a pleasure to be here, Lou. 

Lou: So, Neil, last time we spoke you highlighted two key power issues for the telecom tower industry – the increase in power demands as 5G is rolled out and the move away from diesel power. Let’s take those one at a time. Firstly, what changes as we move to 5G?

Neil: The move to 5G is an interesting challenge to telecom operators because although the core 5G technology is actually more energy efficient than 4G the reality is that the business case for 5G is all about a major growth in data traffic, so the power demand on each telecom tower site will increase. The expectation is that power demand per tower could increase from 3-6kW today to 10-20kW with 5G.  This is obviously a substantial increase and will be a problem in areas where there is no grid supply. As 5G is initially rolled out there is expected to be a rapid increase in power demand, as towers will potentially be carrying 5G loads along with the legacy 3G or 4G systems for a while.  Although the 5G equipment is expected to become more energy efficient over time, the use cases for 5G are expected to grow faster so total energy use will continue to increase.

Lou: What are these use cases, and how is it different for 5G, it’s not just phone calls and web browsing any more is it?

Neil: No, indeed.  Although a lot of the consumer advertising for 5G focuses on faster and more data to mobile handsets allowing 4k video streaming for example but the real data demand growth will come from other places.  People have talked for a while about “the internet of things” or “IoT” with web enabled equipment communicating directly rather than through human users, but it’s only with 5G data speeds that these applications become useful.  The kind of thing we are talking about is self-driving cars and trucks that are connected in real time to traffic information to create more efficient routing. That obviously needs a mobile connection. There are also very interesting applications in the energy transition space – for example sending signals to direct excess power available in electric car batteries to inject energy into local electricity grids during peak times. Wearable medical devices sending real time health data directly to healthcare providers or insurance companies. New applications are appearing all the time, and all will drive additional data traffic, and increase energy demands on the telecoms networks. 

Lou: So that brings us to the second big issue we identified for the telecom tower industry. At the same time as energy usage is increasing, the industry wants to move away from using diesel power generation, how does the industry manage those conflicting goals?

Neil: There certainly is a conflict, Lou.  In remote areas without grid power, or where the grid is unreliable, telecoms towers have usually been powered using small diesel generator sets.  The technology is well known, the fuel is available globally, and service networks are well established that can guarantee maintenance and good uptime.  The problem with this traditional model is that telecom network operators, like most organizations, are becoming focused on their environmental impact and are looking to reduce the carbon emissions of their operations.  Many telecom operators and tower companies are committed to net zero by 2040, and some are far more aggressive.  In markets with poor or no grid that is obviously going to be more difficult.  There is also a pressing economic issue for telecom tower operators as diesel costs are increasing to become one of the main operating costs for some operators.  In some African markets the telecom tower operators are amongst the largest buyers of diesel, and this can mean problems not just in terms of cost but also in sourcing enough good quality fuel.

Lou: So how are telecom tower operators managing these issues?

Neil: Well for some years now telecom tower operators have been looking at the switch to hybrid power, combining diesel generators with renewable energy to reduce fuel usage but keep the high availability guaranteed by the diesel generator.  We worked on sites in Africa and the Middle East that combined diesel, solar and wind energy over a decade ago, but the use of hybrid energy has really accelerated in the last few years. This uptake in hybrid power was driven partly by the drive to net zero but mostly by the economic benefits driven by the cost reductions and efficiency improvements in solar panels and batteries as those technologies became more mainstream.  We would expect those cost reductions to continue as the technologies mature, as new battery chemistry comes into the market, and as battery and solar module production capacity continues to increase globally.  Today there is a concerted effort to convert the majority of diesel-powered telecom tower sites to hybrid diesel-battery-solar power systems wherever it is possible.  It isn’t always possible to find space for large solar arrays, but the industry is looking into other approaches such as small-scale wind power, or conversion to alternative fuels such as HVO or green hydrogen.  The increasing energy requirements of 5G, and the difficulty in scaling up solar arrays within the fence of a tower base station is also challenging the industry to look at other models of power generation outside the fence.

Lou: How would that operate?

Neil:  It seems obvious that if the limitation to renewable energy use is the size of the tower site, then the solution would be outside the site, and that opens up a number of different opportunities. In developing markets with poor or no grid there is a great potential for connecting telecom towers with larger solar-battery or solar-battery-diesel hybrid microgrids that would also power local businesses and communities.  There is a very interesting synergy between rural electrification and telecom coverage. Access to electricity and telecommunications are both critical to economic development and the provision of these services in village hubs can actually attract people and businesses to move closer to those hubs to access these services.  This growing local population concentration can support the economic case for further investment in upscaling the microgrid in a virtuous circle.  In developed markets there is the potential to connect telecom towers to solar microgrids that will serve increasing local power demands due to electric vehicle charging.  Many countries have a backlog in the grid connections and upgrades that are required from the transition to more electrification, and local energy generation will be a requirement. Just as in developing markets these communities have a growing need for both power and telecommunications, and it can make sense for both to be developed simultaneously.  The installation of power and telecom infrastructure together is also of interest to developers of smart cities around the world, and we do know of some telecom tower companies who are being asked to become infrastructure companies – providing not just 5G towers but fibre optic networks, power distribution and edge data centres in a total package to support smart city growth.  Of course, all this requires the telecom operators and tower companies to make further investment in capital to support these developments.

Lou: It sounds like the investment required could be huge, how will the industry deal with this?

Neil: Just as mobile network operators outsourced tower operations to towercos to free up capital for their core business, we are seeing network operators and tower companies outsource their energy requirements to specialist energy services companies or ESCOs.  The ESCO invests the capital to install new power generation equipment, and charges by the month or by the kilowatt hour. It has the effect of moving the cost from a one-off capital hit to a recurring operating cost and frees up capital for the customer to invest in network growth and improved customer services. The need to employ specialist energy services companies is especially relevant if telecoms infrastructure is powered alongside larger community microgrids – the management of a distribution network with multiple customers and supply points is not something most MNOs or towercos would want to get involved in.

Lou: It certainly sounds like specialist energy services companies will have a larger role to play in the telecoms industry.

Neil: The growth rate of ESCOs over the next decade is expected to mirror the rapid growth rate of Towercos in the last decade, and there are major opportunities coming for these services companies outside of telecoms. Given the cost of the energy transition from carbon intensity to renewable energy we expect this business model to grow into other industries, not just mobile telecoms.  Every business and community in the world want to make the change to green energy, but not all have the expertise or the capital to be able to do it.  Energy services companies will fill the gap. 

Lou: There you have it folks!  I’d like to thank Neil Smith for sharing his expertise with us today. And thank you, our listeners for listening to Power Bytes.  I hope that you’ll take this opportunity to like, follow, and comment on today’s show.  Until next time, have a great rest of your day.