Energy is perhaps the biggest headache for operators in emerging markets. The magnitude of the problem has been constant, but in a market which is essentially experiencing growth of 100% year-on-year, there are many equally pressing areas which can consume time and attention.
However, when the market starts saturating and growth starts stagnating, then a market will descend into fierce competition. The size of the market remains the same, so operators must fight for customers through marketing campaigns – with customers switching back and forth from month to month.
Many high-growth markets are reaching this stage, with revenue slowing to stagnation. This forces operators to examine their costs, and energy is always the major expense - diesel prices are constantly increasing, and even grid prices have risen. While the issue of expense is a major one in emerging markets, the issue of grid reliability – even availability – can make expenditure a moot point.
Fortunately, many firms have seized on the energy issues that operators face, and providing solutions to these problems is a rapidly growing business. Renewable energy solutions in particular provide an excellent workaround for the issues of grid availability and expense.
Nick Blitterswyk, CEO of green energy provider Urban Green Energy (UGE), observes that the market for renewable energy is growing incredibly quickly, highlighting Bharti Airtel’s recent US$300 million RFP for the India region. Meanwhile, the GSMA’s Green Power for Mobile initiative - which began in 2008 - is aimed at cutting annual carbon emissions by 6.8 million tonnes by the end of 2012. “I believe that there will be around US$1 billion’s worth of installations this year focussed on renewable energy for telecoms – this would more than double the current amount”, says Blitterswyk.
UGE provides renewable energy solutions to operators in poor-grid and off-grid areas that would previously rely on diesel generators to power their infrastructure. There are over a million diesel-powered telecom towers across the world, split in a ratio of roughly 30:70 – around 30% being completely off-grid, and around 70% being technically on the grid, but in areas where the grid power is unreliable.
To offset this, UGE provides a wind-solar backup battery solution that serves as the primary source of energy, with diesel as a failsafe. The combination of wind and solar power could – in the long term at least – represent a feasible replacement to both diesel and grid power. “In the case of unreliable grid power, we’re pretty confident in providing a replacement right now”, says Blitterswyck. “The batteries can be topped off when the grid is on, and that’s enough of a failsafe. In the completely off-grid case, the solution needs to be oversized but it’s still feasible – it would just be best to have an on-demand source of energy just in case.”
Increasingly, the backup source of power no longer has to be a diesel generator, with firms taking bold strides into alternative means of powering infrastructure. One such company is the ‘micropower’ firm OMC Power, which has the goal of replicating within the energy industry the consolidation seen within the infrastructure industry via local ‘micropower plants’.
The firm’s plants provide renewable energy based on a hybrid diesel-solar solution. While it would theoretically be possible to accomplish this by partnering with a tower company to install solar panels inside a tower facility, this has a heavy cost implication. Tower firms pay rent by the square metre and hence want their facilities to have as small an area as possible – for an energy firm, it would be advantageous to have a bigger area so that as many solar panels as possible could be installed.
The firm’s CEO Anil Raj notes that these factors led the company to conclude that it would require its own infrastructure and premises, separate to any tower firms. “Across East Africa, India, Bangladesh, Pakistan, there are a lot of villages that need coverage – they’ll typically have a tower for each operator present, and these tend to be situated close together. This makes it easy for us to install a plant and run a cable from it to each of these companies”, says Raj.
“The ceiling for one of our ‘micropower’ plants is 100Kw”, he continues. “This is comprised of various components: a bi-fuel generator which runs on compressed natural gas (CNG) or diesel contributes around 45Kw, while a solar array generates anywhere from 24 to 48Kw, depending on the site’s maturity. The plant can store 100Kw hours of energy in a large on-site battery bank. This provides the foundation; power is then provided via cable to the tower companies.”
Currently, running a tower site requires two gen-sets running for ten hours each every day – the remaining four hours are handled by a small backup battery bank. Running a diesel generator for twenty hours a day is extremely expensive. The fuel cost is just one aspect – an engine that runs this much will require maintenance in the form of a full disassembly and service every 250 hours, the oil needs to be changed every 500 hours, and the engine will need a full overhaul every 1000 hours. All of this needs to be performed by a qualified mechanic.
Therefore, if it were possible to use the diesel engine for one hour a day rather than twenty, this would reduce the need for maintenance by 95%. Rather than servicing the engine several times a month, it would need maintenance only two or three times a year – and this represents a massive saving. Every operator in the world has issues with powering its sites, so a reliable low-cost power solution has vast potential – particularly as attitudes towards renewable energy are undergoing a major shift.
“When we started the company, the common refrain was that the US shouldn’t do as much as it could with renewable energy because China never would. It’s funny how much that’s changed within the last four years, because China is progressing so much faster in this field – they’re adopting hybrid wind-solar solutions for the telecoms space”, observes Blitterswyk.
The market in China is fairly centralised, which facilitates the adoption – the major operators make implementing green solutions a pillar of their strategy and deliver on this. It becomes more complicated in a market such as India with a high number of telecom firms, but in such a competitive market the benefits provided by renewable energy can be a major differentiating factor.
For example, India has the world’s least efficient transmission network; 35% of all power is lost after it is generated but before it is distributed to homes. The inefficient transmission process – through which energy is carried to major residential centres via cables – can be eliminated altogether by adopting the ‘decentralised grid’ approach of micropower plants, whereby power is generated locally and connected to the towers by a short cable.
By being less reliant on diesel, operators can save money and differentiate themselves from their competition. Powering areas with limited grid access will require creative approaches to energy, and the potential environmental benefits and savings for customers will see that alternative energy solutions are widely adopted in emerging markets.