Out in front
LED technology has won the street lighting race, but ownership uncertainties hinder uptake and delay benefits.
Unthinkable anywhere else, local councils pay for most street lighting in Australia (that they are legally responsible for providing), but they are powerless to control its costs or the level of service provided. This is because, in most places, electricity distribution utilities own and maintain the street lights. Moreover, in most jurisdictions there is no service level agreement or regulation covering street lighting to provide a basis for negotiations. So when the electricity distribution utilities’ street lighting charges rise sharply, as they have in recent years, local councils just have to accept it. The problem was highlighted recently when Essential Energy – the distribution utility for regional and rural NSW – sought approval to raise its street lighting charges
on councils by 60 per cent.
The elephant in the room
In theory, national competition policies should allow contestability – the ability for councils to choose a street lighting provider other than their local electricity distribution utility. However, in practice there is no contestability because the utilities own the street lights, and most of the poles on which the lights are mounted. Even if the utilities agreed to sell the street lights back to the councils, in many states high valuations on the lighting assets make that financially impossible for councils.
Furthermore, if it allowed a council to take over the maintenance of street lights in its area (or contract out that function), so long as the utility owns the street lights it can charge the council various ongoing inspection and management fees, making that course of action financially challenging for the council.
Only the state governments have the power to remove those impediments and make contestability a realistic option for local councils. But cash-strapped state governments, reliant on the substantial dividend revenue from publicly owned utilities, or having already sold their utilities, may be reluctant to risk a dispute with the utilities when contestability would mainly benefit local councils and their ratepayers.
Two local councils – one in Victoria and another in Queensland – are currently trying to take back control of street lighting in their area. If the councils are successful that would have very far-reaching implications. Another important test case will be in Canberra, where the ACT Government, which is also the local government, has announced plans to sell Canberra’s street lights to the private sector. There is likely to be high demand for the sale from private providers, including European specialist street lighting companies seeking to enter the Australian market.
De-centralised power
When asked at the recent Sustainability in Public Works conference to predict what street lighting would be like in 10 years’ time, two street lighting practitioners suggested that the rapidly increasing capacity and decreasing cost of batteries could, in 10–15 years, make it technically feasible and financially worthwhile for householders to disconnect from the electricity grid. The fixed generation and network costs would then have to be borne by the decreasing number of customers still connected who would pay higher and higher electricity prices, accelerating the rate of disconnections. Under that scenario the existing centralised power network – the power generators, power transmitters, electricity distributors and electricity retailers – would have to radically transform their business or disappear.
At the same time, technological developments already underway could, in 10–15 years’ time lead to stand-alone street lights disconnected from the electricity grid, with their own solar panel and battery.
Either scenario would allow local councils to take control of their street lighting. Interestingly, that would return street lighting to the situation in the late 1880s when local councils first introduced street lighting.
Australian local councils, which currently collectively spend $400m per year on street lighting, in some cases spending $2m or more each per year, will need to develop expertise in this field in order to seize the opportunities and manage the risks that those changes will bring.
This article was first published in the Sep-Oct 2014 edition of PWPro.