African telcos can claim carbon credits under Nedbank Capital scheme

9 May 2011

Although a large number of African telcos use diesel generators to power their base stations and other telecoms equipment, the "green revolution" that should see them make more use of renewable energy solutions is yet to come. Mindsets like "this is how we are doing things here" are slow to change but sooner rather than later, telecom operators will need to incorporate "the green component" in how they operate their networks in Africa.

This is exactly where Nedbank Capital's new carbon credits scheme for telecoms operators comes in. Isabelle Gross spoke to Fritz Milosevic, investment banker at Nedbank Capital about this new scheme and how it can help telecoms operators to generate additional revenue via carbon credits.

Leading telecoms operators across the world and with operations in Africa have already pledged that they are committed to reduce their CO² emissions. The Vodafone group said that it would cut its own emissions by 50% by 2020 (from the 2006/07 baseline). Orange/France Telecom also announced something similar. The operator will reduce CO² emissions for the group by 20% below its 2006 levels by 2020. South Africa's MTN Group is on the other hand a signatory to the Copenhagen Communiqué on climate change and has released its first group carbon disclosure project report in 2010.

Behind these big announcements of intentions, renewable energy powered solutions for BTS and other telecoms equipments offer real potentials to considerably reduce operating costs and also decrease African mobile operators' heavy reliance on diesel. In a report published in February 2011, Balancing Act details how operators can realise savings by optimising the power consumption or their base stations and further bring down their diesel bill to zero by switching to renewable energy sources like wind or solar power (see link to the report at the bottom of the article). It also points out that "mobile operators shouldn't take the lack of technical expertise as an excuse to do nothing. African mobile operators have to shift focus onto the cost side of the business that they are running. Energy expenditures are among the top items on their list".

Other "green" focus area for operators are data centres and mobile handset charging services as they also potentially can help generating carbon credits or lower operators' carbon footprint according to Fritz Milosevic from Nedbank Capital. While the potential for carbon credit generation lies here at the heart of their network, mobile operator's awareness about carbon credits remains very low. Therefore they are also very reluctant to spend any money (internally or externally) for carbon credit schemes.

Faced with this contradiction and the inherent complexity of the current carbon credits market, Nedbank Capital has designed a service that allows telecoms operators to claim carbon credits for their "green" implementations. According to Fritz Milosevic, the program removes the need for telecoms operators to deal with the complicated carbon credits regulations and also optimises the revenue potential of selling carbon credits for telecoms operators.

There are two main ways to claim carbon credits either via the clean development mechanism (CDM) or through a voluntary process. The CDM scheme is a 7 step compliant process that is costly and can take up more than half a year to complete. The voluntary standards for claiming carbon credits are less stringent as they look more at the sustainability of the project rather than the climate change aspects. The downside of the former scheme is that the carbon credits are worth less that the ones generated through a CDM project.

But the most important thing according to Fritz Milosevic is that it triggers a thinking process and discussion on sustainability and what to do about it from a telecoms operator's perspective. To join the Nedbank Capital's carbon credit program, mobile operators are not required to have a minimum number of green BTS deployed or in the process of being deployed.

According to a case study prepared by Nedbank Capital, mobile operators can generate an additional 6% revenue per year from every base station that uses renewable energy sources as its main power supply (assuming a 75% saving on power). It doesn't sound much but with falling voice ARPUs and uncertain data revenue, mobile operators might find that it will improve their revenue headlines or pay partly for the overall cost of rolling out renewable energy power systems for their base stations.

The scheme proposed by Nedbank Capital is there to motivate telecoms operators to think green when they roll out new network equipment or upgrade existing one. According to Fritz Milosevic, the program is targeted at all operators from the smallest ones to the large international operators. He explains further that "mobile operators should start to come under the scheme now. Wherever you are with your plans, come and talk to us. We can set up a program to support your rollout and provide with a monitoring mechanism that will help you to generate carbon credits or reduce your carbon footprint".

The change for "greener" power solutions in the African telecoms industry is slow but there are some encouraging signs. Gradually some operators are scaling up the number of their green base stations - from less than a dozen to over a hundred. Namibia's mobile operator MTC announced on April 25th, the trial of a new method of generating power through wind. The special wind charger is mounted on the existing radio tower whereas the most common systems require a separate structure. It is not difficult to work out the immediate cost reduction, the building of an extra tower, on the overall cost of the green project.

More and more African mobile operators (even the small operation that I recently visited in Liberia is thinking about it!) are inclined to experiment with renewable energy powered solutions. Awareness among telecoms operators has changed from an embryonic point to a toddler stage and African banks that are willing to offer innovative services and support with renewable energy projects should certainly be encouraged.

For further information on Balancing Act's report "Energy for Cellular Base Stations in Africa: the quick fix approach and the long term perspective to saving energy", please click here.

Article published courtesy of Balancing Act Africa.