For cities, the upside of replacing energy-guzzling street lights with efficient LEDs is evident. But there is a downside -- for utility cashflows.
We've written a good deal about the movement of cities to upgrade their street lighting. In all the cases we have discussed so far, the city owned the street lights and bought power from a utility -- municipal or regional, publicly owned or private. But there is another model for lighting the streets, according to a recent post on the Rocky Mountain Institute's website. In fact, the majority of US cities and towns follow this alternative model, in which "the local electric distribution company provides overhead street lighting as a basic service at a flat monthly rate per light, which includes the light itself, maintenance, and electricity."
The problem, in a nutshell, is that utilities are understandably reluctant to give up this revenue stream. It is steady, dependable, and often lucrative for them, and the demand occurs during off hours. There is an essential misalignment between these utilities' incentives and the good of the municipality and citizenry.
The rates cities pay utilities for lighting service are often regulated at the state level by utility commissions. If a city wants its utility to move to more efficient lighting, it may have to go to the commission and negotiate a new tarriff -- not exactly a quick process.
Cities that have this service relationship for street lighting are finding that one way around the mismatch is to purchase the lighting plant from the utility. According to the RMI, the town of Union, NY, did this a few years ago and expects to save $13.1 million (or 40%) over the 20-year term of the bond the city used to buy out the lighting system.
Silicon Valley timescales
Part of the whiplash utilities are feeling around solid-state lighting is that the changes are occurring on timescales to which they are not accustomed. Instead of the slow-moving lighting industry of yesteryear, they are dealing with a technological evolution that is unfolding at an accelerating rate.
It's not only about the lighting. Cities want to use the opportunity provided by the SSL changeover to leverage other smart-grid and smart-cities technologies: sensor networks, WiFi access points, traffic control, etc. (We touched on this development in June.) Utilities have not a clue about these radical new technologies. The RMI blog piece paints two alternate futures for the utilities. They can "pivot," Silicon Valley style, and quickly develop the expertise to manage all the services and intelligence co-located on light poles, or they can watch as others step in to take over that management.
One company of this new breed is Silver Spring Networks, which is working with the French lighting company Citelum to build a 20,000-node smart network while upgrading the street lamps in Copenhagen. The RMI speculates that a company like Google -- already laying fiber in US cities -- might be well positioned to add lighting as a service.
It's time for the sleepy utilities to get nimble. If they can.
— Keith Dawson , Editor-in-Chief, All LED Lighting