Solar energy companies emerge as telco heroes in Southeast Asia
As telecom operators expand into more rural and remote areas across Southeast Asia, new telecom towers are being built that cannot tap into the electricity grid for reliable power.
Access to reliable power remains a challenge for telecom operators in many emerging markets. Non-existent to poor grid infrastructure at many tower locations have driven a high dependence on diesel fuel to power such sites, increasing energy costs and carbon footprint for telecom operators.
Over 90% of the 1 million off-grid and bad-grid sites are powered by diesel generators, emitting over 45 million tonnes of CO2 per year. The mobile industry has made a commitment to achieve net-zero greenhouse gas status by 2050. However, the transition to renewable energy has been slow. The number of bad and off-grid telecommunications sites is expected to grow by 22% over the next ten years, from 611,000 to 745,000 sites.
With the cost of solar power declining rapidly and with telecom operators increasingly embracing sustainability, diesel generators are being replaced by solar panels as a primary source of electricity for such telecom towers.
Southeast Asia is among the frontrunners globally in adopting renewable solutions at telecom sites, with around 23,000 telecom sites in the region having adopted renewables, out of 64,000 globally.
Improving Mobile Connectivity in Remote Areas
Tapping into this opportunity, Telecom Energy Services Companies (TESCOs) are emerging as reliable electricity solution providers for telecom tower owners, typically converting diesel generators into renewable solutions (with diesel only as a backup). These TESCOs also contribute to increased access to mobile connectivity for communities in rural areas and reduce the carbon footprint of the telecom sector.
A report by the International Finance Corporation (IFC), carried out in partnership with a team of consultants from Roland Berger, “Investing in Sustainable Access to Communications: The Role of Telecom Energy Services Companies” shows that the Philippines, Indonesia, and Myanmar are among countries in Southeast Asia with a higher proportion of bad-grid and off-grid areas. These are locations where telecom towers are not connected to the electricity grid or experience an average of more than eight hours of electricity outage per day. The report states that Southeast Asia accounts for around 29% of bad- and off-grid telecom sites globally.
Roland Berger’s Southeast Asia managing partner, Damien Dujacquier said that as network coverage and urban penetration reach saturation in these countries, regulators require the Mobile Network Operators (MNOs) to roll out new sites in rural areas and regions with lower population densities and ensure mobile coverage equity. This is expected to drive the rise in bad- and off-grid telecom towers, where electricity supply is less reliable.
“In Myanmar, power availability is a major challenge. In the Philippines and Indonesia, the expansion of telecom towers into remote and rural areas will drive the number of bad and off-grid sites.
Energy-Efficient and Cost-Effective Solution
Today, access to reliable power solutions remains a challenge for telecom operators in developing markets. The good news is that new technologies, such as new battery solutions, are emerging. Also, innovation in business models is happening, with the entry of TESCOs.
TESCOs own and optimise the power solutions for the telecom tower owner, through a long-term contractual agreement – instead of the telecom tower owner having to invest and operate the power assets. TESCOs have more expertise and incentives to bring the best power solution and minimize the total cost of ownership of the power assets.
Roland Berger’s Southeast Asia Principal, Dieter Billen, who contributed to the IFC report, said that telecom operators have already outsourced a variety of non-core functions. Outsourcing power assets is the next step in this trend.
“Telecom operators and tower companies are capturing the opportunity of solar power, especially in countries in Southeast Asia, where connecting to the grid is difficult. They are increasingly relying on TESCOs to do that for them” said Billen.
According to the IFC report, renewable energy penetration will rise from 10% today to 27% by 2030, globally. Some barriers to greater penetration of renewable energy solutions, however, exist, such as subsidies for diesel fuel, high import duties on renewable energy equipment in some countries, and resistance to adopting new technologies.
An investment need for the forecast growth in TESCO sites amounts to US$4 billion by 2030. TESCOs control the power equipment at nearly half (47%) of all renewable energy powered sites globally, which makes them a key partner to accelerate the green transition in the telecom industry. Additionally, the number of TESCO sites is expected to quadruple by 2030, from 42,000 today to 166,000 and the penetration of renewable energy solutions at bad and off-grid sites will increase from 10% today to 30% during the same period, the report adds.
“Some industry players are still hindered by high upfront costs to install solar panels. However, the total cost of ownership of solar-powered telecom towers is lower than that of diesel-based power generation. Over a ten-year period, savings of 50% can be achieved,” said Billen.
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