Empowering the TelCo Industry to Cut Costs while Going Green

A recent McKinsey study demonstrates that energy challenges are top of mind of TelCo leaders. Consequently, energy optimization should be top of their agenda too.

The objective of this article is to inspire and engage TelCo players to renew their energy management approaches, as we believe this will be critical to make their energy transition a success.

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Key energy challenges for TelCos

From our interactions with many TelCos internationally, we consider the challenges below the common denominator across different players:

1. High electricity costs: TelCos often face substantial electricity expenses (around 5% of their revenue on average), for some running into hundreds of millions. Combined with strict budgeting practices, this means there is limited appetite to be exposed to energy price fluctuations. With the rise of renewables and utilities shifting risk towards consumers, managing this becomes increasingly complex.
2. Network upgrades: The rollout of 5G and fiber networks will significantly change energy consumption patterns due to the higher network density of 5G and higher efficiency of fiber.
3. Multi-site management: TelCos typically have (tens of) thousands of meter points and multiple energy suppliers, making it difficult to achieve and maintain energy data coherence.
4. Critical infrastructure: Identifying and unlocking innovative energy management, e.g. flexibility use cases, in a context with critical infrastructure is challenging.
5. Commercial energy propositions: TelCos are exploring commercial energy propositions and partnerships, making energy management increasingly multi-faceted while bringing a growing number of stakeholders to the table.
6. Sustainability push: With high public exposure and sustainability as key image (and regulation) driver, TelCos are driven to adopt sustainable practices like hourly renewable energy matching (24/7 matching), which can be difficult to balance with cost efficiency.

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Two examples to demonstrate the points above:

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Opportunity is calling

We believe that in this market context, TelCos should take more proactive control of their energy context. This involves work on:

1. Energy mix: Further increase on-site or off-site renewable energy capacity to meet sustainability objectives.
2. Energy contracts: Adopt energy contracts that enable and incentivize future cost reduction, stabilization, and steering initiatives.
3. Hedging strategy: Implement targets and related purchasing strategies (across multiple years, quarters and months!) that align with cost stability objectives.
4. Energy efficiency: Maintain a continuous focus on improving energy efficiency.
5. Flexibility: Unlock behind-the-meter energy flexibility. Other TelCos are experimenting with:
   • When shifting to lithium-ion backup batteries (UPS), oversizing them to serve as flexible Battery Energy Storage Systems (BESS).
   • When revising cooling systems in e.g. data centers, making sure to install cooling buffers that can serve as thermal storage.
   • When upgrading network, considering to modulate power based on granular demand forecasting (usually aligns well with the granular nature of future-proof networks).

A well-executed optimization across these levers can lead to 10-20% cost reductions, with benefits easily in the EUR millions for most TelCo companies.

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Three Success Factors

“well-executed optimization”… easier said than done, of course. From our perspective, the following makes sense:

1. Data Management: Frequent, granular data on energy financials, operations, and sustainability is crucial for developing fact-based strategies.
2. Structured Energy Management: Clear roles and responsibilities for energy procurement, management, risk management, sustainability, innovation, and commercial functions.
3. Step-by-Step Approaches: Avoid big bang implementations. Instead:
   • Compare multiple price formulas from various energy suppliers. Lean and simple contracts can help off-takers benefit from their flexibility.
   • Source Power Purchase Agreements (PPAs) from multiple stages and terms.
   • Use a dollar-cost averaging strategy for hedging, making piecemeal buys to mitigate the risk of market timing.

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About Companion.energy

At Companion.energy, our mission is to accelerate the industrial energy transition. We assist electricity-intensive industries in taking the next step in energy management.

We build software to manage industrial energy flexibility in the age of renewables. Through our work and interactions with leading telecommunications companies, we have identified common challenges, objectives, and success factors to help them achieve their energy goals.

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