The Indian telecom sector has witnessed unprecedented growth in the last decade, driven primarily by declining voice tariffs and availability of affordable mobile handsets. This growth has been supported by the rapid roll-out of telecom towers across the country, which has led to ubiquitous coverage. However, the widespread deployment of these towers has resulted in high diesel consumption, especially in the semi-urban and rural regions. With limited or no grid access, these areas suffer from acute energy shortage, thereby compelling service providers and tower operators to deploy diesel gensets to power their tower sites.
At present, the country has a tower base of 440,000, which requires over 3 billion litres of fuel. This is estimated to result in 11 million tonnes of carbon emissions. According to ICF International, the diesel consumption of telecom towers is expected to rise to 4.8 billion litres by 2015 and to 6.3 billion litres by 2020. This is a cause of concern for industry stakeholders and the government given the constant escalation in diesel prices, which have been deregulated partially on account of rising international crude oil prices. High diesel prices not only increase the opex of tower companies but also raise the government’s energy import bill, which impacts the country’s macroeconomic situation.
Government efforts to drive uptake of renewables
In order to ensure lower diesel consumption by tower companies and encourage adoption of renewable energy and energy efficient solutions, the Department of Telecommunications (DoT), issued several mandates for telecom service providers and tower operators. These include the following:
•50 per cent of all rural towers and 20 per cent of urban towers are to be powered by hybrid power (renewable energy and grid power) by 2015. Further, 75 per cent of rural towers and 33 per cent of urban towers must use hybrid power by 2020.
•All telecom products, equipment and services should be assessed on the basis of their energy consumption and performance, and certified “Green Passport” utilising the energy consumption rating (ECR). The energy passport must be determined for these products and services by 2015.
•The Telecommunication Engineering Centre will act as the nodal centre for certifying telecom products, equipment and services on the basis of the ECR.
•All service providers should declare the carbon footprint of their network operations to the Telecom Regulatory Authority of India in the format prescribed by the regulator. The declaration should be done twice a year.
•Service providers should adopt a voluntary code of practice encompassing energy efficient network planning, infrastructure sharing, deployment of energy efficient technologies, and use of renewable energy solutions to reduce their carbon footprint.
However, the telecom industry has raised serious concerns over meeting these targets. Sector experts have contended that in order to comply with the mandate, companies will need to deploy renewable energy projects aggregating 3 GW at 30 million towers by 2020. This would require an estimated investment of Rs 660 billion. Not surprisingly, the deployment of renewable energy solutions has been slow and tower companies continue to use diesel gensets as a backup for grid power and for operating towers in rural areas. At present, only 1.1 per cent of the towers use hybrid energy solutions for their operations.
One of the key reasons for the limited adoption of renewable energy by the industry is the inadequate availability of funds. Declining tariffs, high spectrum acquisition costs and hyper competition in the sector have impacted the profitability of operators and tower companies that are facing a debt burden of over Rs 2 trillion. Consequently, raising additional funds has become increasingly difficult for operators, especially in the current scenario of high interest rates. Also, financial institutions have been reluctant to provide funds due to the regulatory uncertainty in the sector and the increase in the percentage of non-performing assets.
To address this issue, the government plans to provide viability gap funding to tower companies, which would expedite the adoption of renewable power options. It has stated that financial assistance can be sourced from the Universal Service Obligation (USO) Fund or the National Clean Energy Fund, which is maintained by the Ministry of New and Renewable Energy. The government has also appointed PricewaterhouseCoopers to evaluate the techno-commercial feasibility of implementing renewable energy solutions at tower sites, study the financial support mechanism and develop a carbon credit policy for operators.
Some tower companies and operators have also expressed concerns over the high cost of renewable power generation. They assert that while grid electricity and diesel power are available at a cost of Rs 6-Rs 8 per kWh and Rs 15-Rs 18 per kWh respectively, the cost of solar power generation (through decentralised projects) is over Rs 20 per kWh. With regard to wind energy, though the cost of generation is relatively lower, trial projects have not yielded positive results given the unpredictability of wind speed and lack of historical data on wind sites. Similarly, biomass, which has lower generation costs than solar, is not seen as an ideal solution due to issues like inadequate fuel availability.
Proponents of green energy, however, differ on the cost of solar power. They contend that although the upfront investment in solar energy solutions remains high, benefits are realised over the project life of 25 years. Further, while the cost of conventional power (coal and diesel) will continue to increase in the future, solar power costs are expected to decrease substantially with improvements in module efficiency as well as a reduction in module prices. Further, the opex associated with solar projects is significantly lower than that of conventional power sources, thus encouraging the uptake of solar energy as a sustainable solution in the long term.
Industry efforts
Although initially sceptical about deploying renewable energy solutions due to their high investment requirements, operators and tower companies are now increasingly adopting these technologies. This is due to the evolving business model in the telecom tower industry. Earlier, tower companies had been leasing sites to operators under a pass-through model, wherein any increase in energy costs would be passed on to the operator. This model offered zero incentive to tower companies for using energy efficient equipment and reducing their energy costs. However, now there has been a shift towards the fixed-cost energy model, under which tower companies charge operators a fixed amount regardless of fluctuations in energy costs. This has encouraged tower companies to improve energy efficiency at tower sites in order to prevent any rise in energy costs.
Tower companies are taking several initiatives to adhere to the government’s green energy guidelines. In a first-of-its-kind attempt, several tower companies including Bharti Infratel, Viom Networks and the ATC India jointly invited bids from renewable energy service companies (rescos) to set up projects and supply off-grid power at a predetermined cost on a pay-per-use basis. However, the contract failed to elicit significant interest and only two companies – Mahindra & Mahindra and Creative Mark Engineering Solutions – were selected from among 25 rescos for 1,110 tower sites. The disagreement over sharing of profits/losses in the venture between the rescos and the tower companies was cited as the main reason for the low interest.
Meanwhile, Indus Towers is following a multi-pronged strategy to reduce diesel consumption and its carbon footprint. The tower company had implemented the Green Cities project before 2012, wherein the company had stopped using diesel for powering its tower sites in Mumbai, Kolkata, Ahmedabad, Chandigarh, Palanpur and Gandhinagar. Subsequently, it shifted its focus to individual towers sites for accelerating renewables deployment. Indus Towers now operates 20,000 of its telecom towers across 15 circles through non-diesel energy sources (of which 900 are powered by solar energy solutions) and intends to make another 10,000 towers diesel-free by end-March 2014 under its Indus Towers Green Sites Project initiative. The company has also implemented 15,000 free cooling units across various tower sites to reduce power consumption by air conditioners, which account for the majority of the energy cost at a tower site. These initiatives have helped Indus Towers reduce its overall diesel consumption by 15 per cent despite expanding its operations by 35 per cent during the past three years.
Similarly, Bharti Infratel has been deploying renewable energy and energy efficient solutions to reduce its carbon emissions under the GreenTowers P7 programme, which will be implemented at 22,000 sites, primarily rural areas, in a span of three years. Through this initiative, the company intends to reduce diesel consumption and carbon emissions by 66 million litres per annum and 15 million tonnes per annum respectively. As of December 2013, Bharti Infratel was operating about 1,409 tower sites using solar power and has made over 3,500 towers diesel-free. It has also deployed variable speed DC diesel gensets, integrated power management solutions across 900 tower sites, which reduced diesel use by 1.2 million litres, thereby saving Rs 47 million.
Several operators are also using green energy solutions to reduce their carbon footprint. Bharti Airtel, for instance, has set up a 100 kW solar rooftop project to power its major switching centre in Gangaganj, Lucknow, and intends to replicate it in six other locations. The operator is of the view that the Lucknow rooftop project would help save about 26,000 litres of diesel per annum. The operator has also set up a green data centre in Mumbai, with the aim of achieving a power usage effectiveness of 1.7-1.75.
Vodafone India is another service provider that has taken significant strides in adopting alternative energy solutions. As of March 2013, Vodafone was operating 2,700 tower sites (of 12,680 sites managed by Vodafone) on hybrid energy solutions, an increase of 15.13 per cent over the 2,345 sites as of March 2012. Further, 250 tower sites are being powered by solar energy solutions. The deployment of renewables has helped the operator reduce diesel consumption by 4 per cent from 46.23 million litres in 2011-12 to 44.37 million litres in 2012-13.
Bharat Sanchar Nigam Limited, which had earlier faced challenges while deploying solar power solutions at its tower sites, is planning to set up 1,315 solar-powered telecom towers. These towers will be installed in the areas affected by extremism. The operator has also been directed by DoT to ensure that most of its towers in rural areas are powered by solar energy, with a focus on Bihar, Jharkhand, Uttar Pradesh, Assam and the Northeast.
Meanwhile, Idea Cellular is optimistic about the deployment of fuel cells and other green energy solutions to reduce its carbon emissions. The operator had partnered with Delta Power Solutions to power a tower site in Nagada, Madhya Pradesh, by deploying fuel cells. Idea Cellular is also likely to undertake a pilot project in collaboration with Canada-based Ballard Power Systems to deploy solar hybrid methanol-based fuel cell systems of 2.5 kW to power its tower sites. The operator has received a grant of $1 million from the United States Trade and Development Agency, and appointed ICF International to conduct a feasibility study.
Reliance Jio Infocomm Limited, which is involved in setting up long term evolution networks, has awarded a contract to France-based SAFT to supply lithium-ion batteries for meeting the power requirements of its tower sites. The company has also been collaborating with its counterparts and tower companies to share infrastructure, thereby limiting the roll-out of additional infrastructure as well as carbon emissions.
The way forward
Clearly, industry stakeholders have realised the need to move towards clean and sustainable energy options to reduce carbon emissions as well as energy expenses. However, there has been no significant progress on this front. To accelerate the deployment of renewable energy and energy efficient solutions, the government needs to provide incentives in the near term, at least till these technologies achieve grid parity. Expediting subsidy disbursal from the USO Fund to operators and tower companies would also encourage the adoption of alternative energy. On the other hand, the government could incentivise tower companies to purchase renewable energy certificates (RECs) from renewable power developers rather than setting up captive renewable energy projects, especially in urban areas where land acquisition remains a key issue. This would offer twin advantages. First, there would be an increase in the demand for RECs, which would encourage more developers to set up renewable energy projects based on the REC model. Second, tower companies would not be required to make huge upfront investments for meeting the government’s green energy mandate. For rural areas, tower companies could consider solar rooftop projects, whose commercial viability will continue to improve.
In all, telecom operators and tower companies have done a commendable job of lowering operational costs over the years to sustain business in the competitive Indian market. This needs to now be replicated on the green energy front as well.