I’ve reported extensively on the opportunities to leverage off-grid mobile phone penetration to support energy access for the poor (see here, here and here).
It’s a tactical maneuver that can help win the clean energy war and spread the use of solar power. Saviva Research is an organization that recently documented how close we are to achieving "tower power."
"Tower power" refers to the electricity supply (typically diesel generators) that cell phone towers need to relay mobile signals for wireless communication, mostly cell phones. These towers are everywhere and they are one of the few pieces of infrastructure in rural parts of the developing world.
There is an exciting opportunity to turn tower power into community power by building excess renewable capacity into that system to power surrounding communities. This excess capacity can be sold to local communities via mini-grids, transportable batteries, or by directly charging applications on site. That means that converting tower power to clean energy is the necessary first step toward the community power vision.
Here’s an image from industry group GSMA demonstrating the concept:
The stars are now aligning to make clean tower power a reality. It’s largely occurring because converting cell phone towers to clean energy (in the developing world at least) is all about saving money by making the most out of existing infrastructure.
As the Saviva report makes clear, until that motivation was combined with favorable policy and structural changes in the telecom industry -- including the emergence of power purchase agreements (PPAs), "TowerCos," and renewable energy service companies (RESCOs) -- it simply wasn’t happening.
So how did these changes happen? The first megatrend driving conversions was the move in the global telecom industry to shed expenses. In an effort to free up cash, they’ve spun off tower infrastructure assets to create specialized infrastructure companies known as "TowerCos." These are third parties that provide a service for mobile operators, ensuring their network of towers functions properly without saddling them with debt.
It turns out the TowerCos are also aware of the outsourcing wave and decided to outsource their energy requirements. This provided a single decision-making entity with which a RESCO could contract to provide clean energy. TowerCos are interested in the opportunity because diesel is their largest expense, accounting for between 30 percent and 40 percent of total network costs. Combined with rampant diesel theft that has pushed fuel costs up further, there is a strong incentive to reduce costs and increase certainty with clean energy.
Conditions are particularly ripe for tower power in India, where telecom towers are already 90 percent third-party-owned. These TowerCos have moved from power pass-through agreements to fixed PPAs, and a diverse number of RESCOs are competing to secure those PPAs and save them money.
Of course, policy never hurts. The Telecom Regulatory Authority of India (TRAI) mandated last year that 50 percent of the towers in rural areas and 20 percent in urban areas must be supplied by renewable hybrid generation sources and grid power by 2015. Following that announcement, the Reserve Bank of India made an announcement supporting the deregulation of diesel prices to contain trade deficits, which are now around $160 billion annually.
So just how big is this market? Today there are an estimated 400,000 towers managed by TowerCos in India. But only 20,000 to 25,000 towers are covered by PPAs. The rest simply pass through fuel costs and in the process burn cash. That means the race for this market is on. Already the number of RESCOs in India has grown from a handful to over 200. The GSMA reported that over twenty RESCOs won contracts with Indian TowerCos in 2011, accounting for 15,000 base stations.
Saviva’s conclusion is that RESCOs are waging a two-front battle: one for cheap capital and one for TowerCo clients as long-term, large-volume customers. That battle will determine the future of tower power.
But the battle is for the real market opportunity: the 300 million to 400 million Indians in rural India who lack electricity. Tower power is a necessary first step -- the question is which RESCOs will have the vision to make community power a reality and capture the far larger market prize.
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Justin Guay leads the Sierra Club's international program.