The next winning 💲treak 📈— Sustainability Aristocrats♔

♨ Heat reuse ♻: An #ESG business KPI for the #5G era

A “Dividend Aristocrat” is a company in the S&P 500 index that has paid — and increased — its base dividend every year for at least 25 consecutive years. For the last 30+ years, AT&T(NYSE:T) was a member of this elite group — until recently.

A turning point for AT&T dividend payouts after 30+ years of increments (source)

As articulated in Next-gen success demands forward-looking KPIs, yesterday’s KPIs will most likely lead to yesterday’s results (and this is particularly true for KPIs that have been pursued for 30+ years). This means that a company looking to change its results for the future will have to change those KPIs. The focus on direct financial shareholder value, represented as dividend payouts, is one such KPI that has quite literally run its course.

Mobile networks are estimated to spend 5–6% on energy costs (2020), and this figure is expected to rise with increased demands and network density of 5G. Most of this energy (70–80%) is converted into waste heat (4143 kWh/year per base station in the referenced study), which is currently lost to the environment. Given that mobile network sites are highly distributed and integrated with cities and neighborhoods, as they attempt to maximize coverage for the most populated areas, this lost heat could be captured and transformed into usage that benefits customers and local communities.

“For CSPs, everything will be connected”. In particular and perhaps less obviously, this includes local city heat networks. With Nokia introducing liquid cooling for its AirScale base station product line, mobile network operators are in a unique position to become the new “Heat Reuse Aristocrats” — local champions of sustainability.

The business case for heat reuse

Energy used to heat homes, per dwelling (dw) per year (source)

4143 kWh reusable heat energy per base station is roughly the amount of heat required to warm a single residential home in Spain. When viewed from this perspective, a sceptic might argue that this is hardly worth the effort.

Another perspective: Considering that natural gas has a calorific value of 42–46 MJ/m³ and 1 kWh = 3.6 MJ, 4143 kWh could save 324-355 m³ natural gas each year, avoiding the generation of 350 * 0.04 Mcf/m³ * 54.8 kg CO₂/Mcf = 767.2 kg CO₂.

The absolute benefits measured in energy reuse and Greenhouse gas emission reduction may be relatively low, but they are S.M.A.R.T (Specific, Measurable, Achievable, Realistic, and Timely). Moreover, they come on top of OPEX savings related to energy efficiency (Nokia estimates 90% reduction in cooling system energy usage, and 80% reduction of CO₂ emissions) and other benefits like lifecycle extension of electronic components and noise reduction.

Any S&P 500 company can payout dividends, but few have the opportunity to capture and deliver heat to customers in their coverage area. Environmental, Social and Government (ESG) funds are on the rise and now manage 10% of worldwide fund assets; a company that can demonstrate tangible contributions to Greenhouse gas reductions and energy efficiency/reuse would make for an attractive partner and investment. Some mobile operators like KPN have already started along this path, linking their credit facilities to sustainability performance metrics.

Top ranked S&P 500 Telecommunications companies (source)

Value creation = positive change

Value creation is about driving tangible, visible, positive change in the lives of customers. Mobile services certainly do that, but there are other, adjacent possibilities that create different types of value in ways that are uniquely available to operators of nationwide distributed infrastructure.

The Dividend King is dead. Long live the Sustainability Aristocrat!

AT&T on its way to become the first “Sustainability Aristocrat”♔