Street Lighting

Energy efficiency upgrades to street lighting systems are a simple way to improve public services while generating long-term cost savings for municipalities. Projects involve retrofitting existing streetlights with energy efficient lamps and fixtures, and automatic controls to optimize performance and energy use. Energy Services Companies (ESCOs) can implement and manage these renovations for municipalities. However, municipal debt limitations have often postponed upgrades.

Bank financing of ESCOs, instead of municipalities, is a well accepted model which allows the entry of private capital into the sector and offers instant modernization of the street lighting system. This is at minimal or no increase in costs to the municipality as ESCOs receive service fees from municipalities based on energy savings achieved.

What are the key issues--questions to ask?

-Credit risk: Is the FI comfortable with the municipality’s credit risk? With the ESCO credit risk? With the type of project?
-Municipal debt ceilings and solvency: Does the municipality use commercial financing? Do they install basic equipment and strive only to maintain existing levels of service (with associated inefficiencies)? Do they try to finance equipment upgrades? Are they credit-worthy? Have they reached their debt-ceiling?
-Client capacity: Is the project capital intensive? Is local technical expertise available to assess energy savings? Is there a need to raise public/government awareness?
-Monitoring and evaluation: What is the FI’s level of understanding of energy efficient transactions? Is technical assistance needed for internal training and institutional capacity building to implement this type of lending? How will the FI monitor and process this component of lending to clients?