Navigant Research Blog

Smart Street Lights Face Financial Hurdles

Eric Woods — November 14, 2012

In 1807, London’s Pall Mall became the first street in the world to be illuminated with gaslight.  Since then street lighting (first by gas and then electricity) has become so ubiquitous that few people give it a second thought (unless they see a broken lamp in their street).  But street lighting is once again becoming a focus for innovation and a priority issue for city managers as they try to reduce energy costs and meet their sustainability targets.  Smart street lighting can play a similar role in the development of 21st Century smart cities to the one played by gaslights in Victorian London.

Street lighting can account for up to 40% of a municipality’s electricity bill, not counting maintenance costs.  Some U.K. cities have tried turning off lights to save money (though this commonly leads to a public outcry and subsequent rethink).  The dimming of the lights can also stand as a potent metaphor for a city’s decline, as in the case of Detroit.  Many cities are now looking at alternative approaches to reducing the energy consumption of their street lighting.  The most attractive solution is to move to more efficient lighting technologies.  LED lighting is generally seen as the future for street lighting, as falling costs and improvements in quality are driving adoption in cities such as Seattle.  Our recent report, Smart Street Lighting, estimates that shipments of LED street lights will rise from fewer than 3 million in 2012 to more than 17 million in 2020.  Other cities, such as San Diego, have chosen to introduce induction lighting to replace their existing high-pressure sodium lamps, with the same aims – a significant reduction in energy use and maintenance costs and savings to the city purse that can reach millions of dollars (around $2.4 million a year for Seattle and $2.2 million for San Diego).

The Piggyback Approach

The biggest challenge for cities looking to change their lighting systems is one common to many smart city innovations: finance.  The long term savings may be indisputable, but cities still need to find the upfront investment.  In the United States, stimulus funding has played a significant part in getting smart lighting pilots underway.  However, in many municipalities street lighting is provided by the local utility, so building the business case for energy efficiency depends on the incentives set for the utility by regulators.

The adoption of LED lighting is only the first step: the real revolution comes when intelligence is added to lighting systems.  Networking the street lighting system can further improve energy efficiency and introduce more adaptive local lighting without reducing public safety.   The network infrastructure can also be used to support additional services, such as traffic monitoring and even local Wi-Fi.  A pilot in San Francisco, for example, is looking at smart street lighting in this broader context.

But if building the business case and finding the investment funds for LED lighting is hard, justifying an advanced control network is still a step too far for many cities.   The additional costs and complexity have slowed the adoption of networked street lighting systems, behind that of LED lighting.  Cities must be able to leverage that network investment for other services or piggyback street lighting systems onto other systems.  This, of course, presents a chicken and egg problem as to which application can provide the initial cost justification for the network.

Most cities still struggle to develop investment models for new technology that take the holistic view of city operations.  Pilots in areas like Barcelona’s 22@ district show what can be achieved by taking an integrated view on energy, communications and city operations, but scaling such projects up to city-wide deployments requires innovations in city financing as much as in technology.  The implementation of smart street lighting will depend on new forms of private-public partnership based not on cost-saving models of traditional outsourcing but new approaches to long-term energy efficiency and improved operational effectiveness.

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