Financing Change
Richard McCarthy explores what financing options are available to local authorities looking to roll-out LED technology across their street lighting stock.
Local authorities face financial pressures with a need to drive efficiencies and deliver growth. At the same time the issues of climate change remain very real. Nevertheless, the focus on action needs to be both practical and affordable - it is a time for solutions, not statements of intent.
The transition to energy saving LED technology across the UK’s 7.5 million street lights represents one such approach. Approximately 10% of the UK’s street lights use low energy LED technology. For the remaining 90%, replacing them with LED technology could provide local authorities with up to 80% savings on energy costs and up to an 80% reduction in CO2 emissions.
LED lighting can also make streets safer and provide more directional light to avoid unnecessary nuisance. It is all compelling stuff, and yet the conversion rate is slow; so why aren’t we being more proactive in making this change?
Of course, to achieve 100% LED street lighting in the UK by 2020 over 1m street light replacements (and some replacement columns) will be required each year until 2020. This represents installing new LED lights each year, equivalent to 12 times the number in Birmingham, at an annual investment of £500m. This is clearly a tall order, particularly when it comes to the money.
With the budget constraints facing local authorities the key to unlocking the transition will be to identify suitable financing options and putting in place the necessary specialist project and programme management skills.
There are a number of financing options available to councils, stretching from the Public Works Loan Board (PWLB) to the Salix Energy Efficiency Loans Scheme (SEELS), the Green Investment Bank (GIB) and commercial lenders. GIB and PWLB financial solutions for an invest-to-save project provide immediate revenue savings, albeit the GIB solution can enhance affordability due to shaping the servicing of the debt so that it is lower than the forecast savings and can show a better NPV cost over the project life.
In short, a LED retrofit represents an elegant example of local authorities transforming infrastructure to deliver a better service in exchange for financial savings.
LED technology is also consistent with many of the principals of the Government’s ‘Smart Cities’ agenda - energy efficient, connected, integrated and intelligent. This is why the move to LED street lighting has been so strongly endorsed by the All Party Parliamentary Lighting Group that has been set up to promote the application of LED lighting technologies to address local concerns, improve the quality of street lighting (thus making our streets safer), and reinforcing the wider sustainability agenda.
LED street lighting offers a wide range of tangible and attractive benefits and few, if any, downsides. The case for investment is compelling and the evidence and experience all point to a high confidence factor that the solutions work and can be successfully implemented.
The UK’s streets are ready for a change. LED’s may just hold the key.
Richard McCarthy is executive director – central government at Capita
