Tag: renewable energy

Should telcos dive deeper into energy?

Introduction

Some telcos have been dabbling in the energy market for a decade or more, partly reflecting the interdependent nature of the two industries. In the past two years, energy has climbed up the agenda of telcos’ management teams, as the electricity and gas sectors experience another major wave of disruption.

In much of the world, energy prices have surged as a result of the war in the Ukraine and the subsequent sanctions against Russia. At the same time, the ongoing transition to renewable energy in response to climate change is opening up new sources of supply and bringing in new players. The cost of wind and solar power, and battery storage is falling steadily, while many policymakers are introducing further incentives to hasten the transition away from oil, natural gas and coal.

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In 2022, energy prices have surged around the world

Source: The IEA

In August 2022, for example, US President Joe Biden signed the Inflation Reduction Act, bringing with it, tax incentives and other measures that should significantly boost the deployment of renewable energy and storage (large-scale batteries). The Act earmarks US$369 billion to help bring about a 40% reduction in greenhouse gas levels by 2030, by supporting electric vehicles (EVs), energy efficiency and building electrification, wind, solar photovoltaic (PV), green hydrogen, battery storage and other technologies. For example, the Act introduces an investment tax credit for standalone energy storage, which can lower the capital cost of equipment by about 30%.

As policymakers and consumers seek out new energy propositions to try and contain rising costs and greenhouse gas emissions, some telcos, such as Telstra and Polsat Plus, are seeing strategic opportunities to build deeper relationships with households. To that end, they are pushing deeper into the energy market, investing in generation capacity, as well as developing retail propositions.

Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of energy, telcos could develop solutions and services that can help consumers and businesses manage their own consumption and sell excess power back to the grid.

This report explores why telcos may want to get involved in the energy market, what their options are and presents case studies, outlining the steps some telcos have already taken. It considers the key advantages/assets that telcos can exploit in the energy market, illustrated by short case studies:

  • Extensive distribution networks
  • Established brand names
  • Billing relationships and payment mechanisms (mobile money/carrier billing)
  • Existing connectivity and IoT expertise
  • Big buyers of energy and in-house energy management expertise

The subsequent chapters in the report include an in-depth review of Telstra’s end-to-end energy strategy, the economics of energy retailing and whether telcos should move into energy generation and storage. The penultimate chapter, which considers how to engage consumers, is followed by conclusions summarising how telcos can help address some of the challenges facing energy suppliers and buyers.

Table of Contents

  • Executive Summary
  • Introduction
  • Extensive distribution networks
    • Case study 1: Polsat Plus – bundling telecoms & electricity
    • Case study 2: Orange Energy Africa – distributing solar kits
  • Established Brands
    • Case Study 1: Singtel Power – taking on the incumbent
    • Case study 2: Building a Reliance Jio for energy
  • Billing relationships and payment mechanisms
    • Case Study: MTN Nigeria – Pay as you go solar
  • Existing connectivity and IoT expertise
    • Case study 1: Telefónica España – monitoring solar panels
    • Case study 2: Proximus – electric vehicle charging
  • Energy buying and management expertise
    • Case study 1: Vodafone – enabling energy data management
    • Case study 2: Elisa – balancing the electricity grid
  • In depth case study: Telstra Energy
    • The strategic justification
    • How the IoT and AI can help
  • The Economics of Energy Retailing
    • An even tighter regulatory regime
  • Telcos and energy storage and generation
    • Competition from other investors
    • Planning permission
    • Grid connections
  • Engaging consumers
    • Ripple Energy – consumer ownership
  • Conclusions

Related research

 

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Telefónica’s 10 steps to sustainable telecoms

Telefónica’s sustainability: A 20-year journey

Sustainability in the Coordination Age

As part of STL Partners’ research on the opportunities for telecoms operators and the wider industry in the Coordination Age, where the ultimate goal for operators, their customers, and society at large is to make better use of the world’s resources, we have explored how telcos can integrate sustainability into their activities. Previous research on this topic includes:

During the course of this research, we have identified Telefónica as one of the most proactive operators in sustainability. Through our interactions with Telefónica’s sustainability team, we have also found the team to be seriously committed, organised and successful in achieving buy-in to their vision from both the executive leadership team and several business units and opcos. This is a highly impressive achievement for such a large operator.

With the support of Telefónica’s sustainability team, through candid interviews with the team and their colleagues across the business, we have created this case study on their experiences in embedding sustainability across the business. We believe this will help other telcos intent on following a similar trajectory to understand how they can embed sustainability into their corporate strategies and day-to-day activities.

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How Telefónica got to where it is today

Since the creation of Telefónica’s first sustainability team in 2001, the operator has gradually built up its sustainability activities into a company-wide approach with cross team participation over the last twenty years. The first move in this direction came with the creation of the Climate Change Office in 2007, which included senior representatives from Operations, Procurement and Social Responsibility.

Over the last ten years Telefónica has implemented more than 1,400 energy efficiency projects and has carried an annual Energy and Climate Change Workshop with more than 30 vendors for 12 consecutive years, to exchange challenges and solutions to reduce their energy consumption and carbon emissions.

It has three main climate targets: energy efficiency and reducing energy consumption; utilising renewable energy; and reducing its carbon footprint to achieve net-zero emissions in 2040, including its value chain. Figure 2 outlines Telefónica’s sustainability journey and key inflection points through the years.

Key activities and inflection points in Telefónica’s

Telefónica's sustainability

Achieving buy-in across the organisation

Embedding sustainability into Telefónica has been a grassroots effort on the part of the small but hardworking Global Sustainability Department (hereafter known as the environmental team in this report) to find the proof points necessary to convince Telefónica’s senior management to build sustainability into the corporate strategy. The team has used a mixture of bottom-up and top-down approaches, with management support at crucial moments, which will be explored later in the report.

Through our many conversations with Telefónica’s environmental team, perseverance stood out as the most important characteristic within the team. When they recruit new employees, their priority is to find people with the ability to come up with innovative ideas for meeting sustainability targets, resilience, and perseverance.

This determined and visionary approach means that the environmental team works intuitively and pre-empts other departments’ needs. By the time colleagues from other departments approach the environmental team with their requirements for sustainability-related projects (for example the finance team’s interest in launching a Green Bond), the team is already armed with a range of data, materials and resources needed to put together a business case for the activity. As a result of this preparation, the environmental team has been able to quickly support and capitalise on new opportunities as they have arisen, ensuring they can keep the momentum going whenever it builds.

However, the process of embedding sustainability into company strategy has not come without challenges and difficulties. In conversations with STL Partners, the environmental team said that one of the challenges of working with different teams has been picking the right moment to approach them with ideas. Telefónica also stressed the importance of finding strategic alliances and internal champions on other teams. Through strategic, considered and strong relationship building, the environmental team has found internal champions in their Spanish core network operations, finance, procurement, enterprise, and sales teams, who are fully on board with the Telefónica sustainability vision and strategy.

Although the environmental team is currently working with the marketing team to ensure its sustainability message and efforts is more present in its brands, the environmental team cited this as one of its top priorities in 2022. Aside from needing to build stronger relationships and buy-in, part of the challenge is working with the marketing team on how to accurately and effectively market sustainability, without appearing to be ‘greenwashing’.

Another challenge is adapting to the different ways in which the other teams operate when implementing sustainability initiatives across the company. For example, the sales team generally work towards quick deadlines with short-term results, hence it may be harder to create an aligned dialogue with this team. Having a strong insight into the way Telefónica works as an organisation, by working directly within other teams e.g., helping the sales team to complete RFPs, helps this challenge.

By embedding sustainability into the company in these ways, all departments see the benefit and engage with the process. Telefónica told STL Partners that its employees believe in sustainability on a personal level as well as seeing the business benefit and commercial opportunity. Employees are genuinely engaging with sustainability issues themselves and want Telefónica to work towards sustainability goals as a company. As one employee said to us, “you don’t have to work in the environmental team to want to protect the environment”.

Ultimately, this rigorous, patient, committed and collaborative approach to sustainability has enabled the team to achieve broad buy-in across Telefónica’s business units and international opcos. Throughout the report we will explore how it has done this in:

  • Core network operations
  • Finance
  • Enterprise services
  • International opcos.

Table of contents

  • Executive Summary
    • What makes Telefónica different to other telcos?
    • Next steps
  • Table of Figures
  • Telefónica’s 20-year sustainability journey
    • Sustainability in the Coordination Age
    • How Telefónica got to where it is today
    • Achieving buy-in across the organisation
  • Why Telefónica stands out among telcos
    • High level overview of achievements so far
    • How Telefónica compares with other telcos
    • How Telefónica collaborates with its peers
  • Network operations: The first step to embedding sustainability in Telefónica
  • Sustainable financing: A pioneer in telecoms
    • How the first Green Bond came to life
    • Subsequent green and sustainable bonds
    • Challenges and benefits
  • Eco Smart label and consulting services: Expanding from networks to services
    • How the idea came to life
    • Consulting services through Telefónica Tech
    • Eco Smart label in 5G services
    • Sustainability as a core component of digital transformation
  • Implementing sustainability across a global footprint
    • Aligning goals with individual market dynamics
  • Conclusion
    • Ten takeaways from Telefónica’s holistic approach
  • Index

 

 

 

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How 5G can cut 1.7 billion tonnes of CO2 emissions by 2030

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The chartpack for this report is available to download as an additional file

Explore this research further by joining our free webinar 5G’s role in reducing carbon emissions on Tuesday November 10th. View the webinar here.

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Transitioning towards a carbon-neutral world

Carbon reduction targets have been set at global, regional, and many national levels to tackle climate change. The Paris Agreement was the first universal, legally binding global climate change agreement. Adopted in December 2015, close to 190 countries agreed the long-term target to limit the increase in global average temperatures to 2 degrees Celsius above pre-industrial levels. The EU also has a binding target to cut emissions to at least 40% below 1990 levels by 2030, as well as achieving at least a 32% share for renewable energy and at least a 32.5% improvement in energy efficiency.

This report will focus on the way in which technology, in particular 5G, can enable individuals, businesses, the energy industry and governments to accelerate the transition to zero carbon emissions.

This analysis is based on desk research, an interview programme and survey with industry leaders, as well as detailed economic modelling to quantify the benefits that 5G can bring, and the contribution it can make to achieving carbon emissions targets.

A framework for thinking through the carbon emissions challenge

The main mechanisms through which technology (including 5G) can reduce carbon emissions arising from our consumption of energy, fall under one of three categories:

  1. Green electricity generation: increasing the proportion of electricity generated from renewable energy sources
  2. Transition to electricity: as electricity becomes greener, moving away from energy that is directly delivered through combustion of fossil fuels towards delivery through electricity
  3. Energy efficient consumption: reducing the amount of energy required to achieve the same outcomes – either by not consuming energy when it is not needed or doing so more efficiently
A framework for outlining the key mechanisms for reducing carbon emissions

Source: STL Partners

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Greener electricity generation

Generating ‘greener’ electricity is a fundamental part of any carbon emissions reduction strategy. Energy analysts forecast that it will still take decades for a substantial amount of the grid to be powered by renewable energy sources. The chart below demonstrates the current prevalence of coal and gas in our electricity networks, with some contribution from nuclear and hydropower. By 2030, we will need rapid growth of wind and solar, but it only becomes a significant proportion of world supply by 2040.

Forecasts predict that future electricity generation will come from growth in solar and wind

Source: DNV

Renewable energy generation must grow enough to meet three challenges:

  • Replace current electricity generation from fossil fuels
  • Provide electricity to power directly supplied by fossil fuels as these transition to electric power (see transition discussion below)
  • Meet future demand arising from economic growth.

Moving from fossil fuels to wind and solar energy presents new challenges for balancing the electricity supply system. Due to the variable nature of these renewables (it’s not always sunny or windy) and our limited ability to store energy (with current battery technologies), the growing dependence on renewables means that supply cannot be controlled to meet demand. New business models enabled by millions of connected devices (washing machines, electric vehicle chargers) will allow us to reverse the market model such that demand meets supply.

Further in this report we describe in more detail how 5G networks will enable the acceleration of greener energy supply by:

  • Improving the cost competitiveness of renewables (in particular, by reducing operating costs).
  • Ensuring that renewables can contribute to the bulk of our energy needs, by supporting new business models ensuring energy demand across millions of appliances is managed in response to the fluctuating nature of renewables supply.

Transition to electricity

The second major mechanism to reduce carbon emissions is transitioning to using electricity as the primary source of energy for applications that currently rely on fossil fuel combustion. The two big transitions are the move from:

  • fossil-fuelled cars and trucks to electric vehicles
  • gas boilers to electric heat pumps.

Using electricity to power these appliances and processes is more energy efficient than burning fossil fuels and can therefore deliver an overall reduction in energy use and carbon emissions even if the grid is only partly ‘decarbonised’.

However, this will create a seismic change in energy consumption. Taking the UK as an example, the energy used for heating space and water is almost double that used for total electricity consumption in the country. Space and water heating is largely fuelled by gas today. Meanwhile, transport used over two exajoules of energy in 2018. Shifting these to electricity will put unprecedented burden on our electricity networks.

Comparing UK energy consumption for space heating, water heating and transport to total electricity consumption (2018)

Source: UK National Statistics

As well as the need to meet demand with supply discussed above, the other consequence of moving away from fossil fuels is that it may be more difficult to keep the electricity grid stable. Historically, turbines from traditional power generation stations have provided inertia, which has helped to maintain a buffer when demand for power changes over a short time. Power station turbines’ rotational inertia effectively absorbs and releases energy in response to fluctuating demand, resulting in grid frequency variations. To keep the grid stable and mitigate blackouts, frequency needs to avoid deviating by more than 1-2% from the target of 50 or 60 Hertz. Removing traditional thermal turbine generation means that solutions must be developed to provide highly-reliable sub-second responses – precisely the type of requirements for which 5G was developed.

5G networks can enable the acceleration of this transition from direct fossil fuels to increasingly renewable electricity by:

  • Improving the performance and cost-effectiveness of electric-powered alternatives (for example, by making electric vehicles much cheaper to buy and as convenient to refuel as fossil fuel vehicles through optimised battery lease-and-swap networks)
  • Providing high-reliability, low latency connectivity to the energy suppliers and users committed to maintaining stable frequency across the electricity grid
  • Ensuring that renewables can contribute to the bulk of our energy needs, by supporting new business models ensuring energy demand across millions of appliances is managed in response to the fluctuating nature of renewables supply (for example, by charging electric vehicles or heating domestic hot water when renewable supply is at its peak).

This report is part of a series of research on the role of 5G in accelerating digital transformation. Other reports within the portfolio include:

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