A significant set of numbers: real 5G savings and real 5G economic benefits identified in two traditional industries
5G as an enabler for low-latency applications is well-known. Less well-known is how PoCs and trials translate into real economic benefits. Could recent research indicate that the tide is turning and that we’re about to see some payback?
Many discussions about when 5G will ‘take off’ or ‘make a difference’ tend to fixate a little bit too much on consumer rollout, e.g., the big numbers that come out of the Ericsson Mobility Report.
But 5G is just more complicated than that. Fifth generation connectivity isn’t just about faster networks. If it really is to be a game changer, we want it to enable whole new categories of low latency applications, and other possibilities.
5G will for sure deliver on these promises; it’s just inherently that well-designed (and makes so much technical and performance sense). But the sector also needs to prove commercial models for the deployment of the specialised vertical solutions envisaged for new 5G-enabled network capabilities and services.
There is a growing body of evidence that they do indeed provide new value, with sustainable business models that make such 5G-enabled network capabilities and services. Just as importantly, we’d also want to see how the introduction of 5G capability could improve (= save money, make safer/more productive) existing industries and processes.
If we could start to show, at levels of numeric euro and dollar detail, based on scientific evidence, how two of the most important sectors to a modern industrial economy--rail transport and the supply of power to homes and businesses—5G doing that, then some real proof of concept could be seen to have been delivered.
Well, now we do. And with some rigorous academic backbone, too. We’re delighted to share details of new research that contributes to the momentum around 5G as a valuable addition to existing industries and not just a creator of exotic use cases in the shape of a new paper, An Economic Assessment of the Contributions of 5G into the Railways and Energy Sectors.
A report written by Portuguese academics and the company involved, this is a write-up of two recent EU-funded projects at EFACEC, with funding coming from a scheme called H2020 5Growth, a €14m fund exploring the use of 5G growth in vertical industries.
This had 19 partners and saw pilots in Spain, Italy, and Portugal. The pilots we are particularly interested in are what happened at a power, engineering, and mobility firm called EFACEC Power Solutions. This is a 500m euro-revenue Portuguese company with interests in a lot of areas, but the two in question are its rail and energy divisions (EFACEC Engenharia e Sistemas and EFACEC Energia).
EFACEC was the primary industrial partner and testbed for two 5Growth projects that ran from June 2019 until the end of February 2022. It’s important to say that the numbers we’ll be shortly reading about are from the local experience in the small (80,000 inhabitants) city of Aveiro in Portugal. Both 5G vertical industry pilots were deployed over infrastructure at the local Aveiro University Campus, taking advantage of facilities from a local Portuguese comms industry-Higher network, and using a special EU testing framework, H2020 5G-VINNI.
Well, so what? Well, as we are told in the abstract of the write-up, “The results of the techno-economic analysis reported in this paper show, on a European scale, millions of euros saved by the different stakeholders involved in the deployment of 5G solutions [in the railroad transportation and energy sectors, respectively].”
Specifically, the benefits for both industrial applications from results derived in the trial have been collated for just Portugal initially but were then scaled up for the whole of Europe and the EU. What the researchers have calculated are as follows: “From a functional point of view, the introduction of 5G in these verticals would allow faster, safer wireless connectivity, with a high bit-rate and access to a large number of devices, in a highly reliable way.”
Such new or upgraded features, added to the flexibility of wireless itself, would also significantly reduce deployment and maintenance costs of the infrastructure of both transport and energy—which the paper states would be “the main pillars” of the entire 5G revolution. As the study notes:
“The results of the techno-economic analysis reported in this paper are expressive by showing, on a European scale, millions of euros saved by the different stakeholders involved in the deployment of 5G solutions. Approximately half of the achievable savings are directly attributable to the implementation of the pilots of 5Growth project.”
Now this is where some sceptics may see a question mark over all this. The writers say that they need a special methodology for assessing the benefits of 5G. They say they need this as because traditional cost-benefit analyses only look at the cost difference between using a new solution and not using it, if something genuinely new needs to be factored in, like 5G, you need to both use that method when analysing your results but also consider the new product/services developed and associated novel sources of income.
That means the numbers we’re about to look at involve a lot of factors, from investment to operational to even new sources of 5G-enabled revenue for train and energy operators. That being said, in euro terms, to take just a few of the analysed and projected-out savings:
- A 5% increase in overall rail safety by using next-generation 5G-enhanced level crossings—which could add up to EU50 billion benefits to society from less damage and insurance costs
- Every level crossing run on 5G instead of cable would be at least 20% more efficient in terms of running costs
- 5G in rail in the contexts covered potentially add up to a ‘total Europe’ figure of economic benefits of an astonishing EU2.5 billion (EU2,477,229,000) and EU2.3 billion (EU2,278,946,000 for the EU alone)
- European households would save EU232 million a year from more efficient power grids and 15% less brownouts, while operators would see an average of EU8 million a year drop in their site maintenance visit costs by a 50% cut in the amount of time technicians would need per job—and overall, the EU energy sector could expect overall economic benefits of EU2.4 billion (EU2,446,000) a year from just the use of the 5G technologies experimented with.
The study concludes that the numbers found just add to the growing case for 5G to be “very economically advantageous” and closely aligning with previous predictions like Qualcomm’s 2019 forecast that by 2035, when 5G’s full economic benefit gets fully realised across the globe, a broad range of industries – from retail to education, transportation to entertainment, and “everything in between”--could produce up to EU12.3 trillion worth of goods and services.
There’s a lot to unpack in these projects, and we would recommend you check out the full version here.
But we do feel that these findings deserve their proper attention—so in two subsequent posts we’d like to further share what EFACEC found when it first opened the 5G box two years ago, as we think this is a truly significant milestone in understanding the real long-term transformative impact 5G represents for all industries, not just consumer mobile.