Green Investment Bank offers 30-year LED streetlighting loans

LONDON - The bank that the UK government established to back energy efficiency and renewable power projects is pushing hard into LED streetlighting with a financial product that lets municipalities repay a loan over decades, by using money saved from energy savings.

The Green Investment Bank will offer loans of as long as 30 years - a length that's hard to find in the commercial banking world - Gregor Paterson-Jones, co-director of energy efficiency, told an audience at LuxLive here today. The GIB recently completed a loan agreement with Glasgow City Council to fund 10,000 new LED streetlight luminaires. With that as a model, it is now reaching out to other localities.

Paterson-Jones encouraged municipalities to use LED streetlights not only for illumination, but also as the backbone for 'smart city' information networks.

The GIB was founded by the UK's Department for Business, Innovation & Skills two years ago to help the country meet its legal mandate to reduce carbon emissions 80 per cent by 2050 compared to 1990 levels. It has focused much of its £1.6 billion investments so far on offshore wind and biowaste, but now hopes to push more into lighting streets and highways with energy-efficient LEDs.

'Streetlighting is a huge opportunity in that the amount of energy used is quite significant,' said Paterson-Jones. 'You have many local authorities that own about seven-and-a-half million streetlights in the UK. We estimate somewhere between 200 and 300-million pounds per annum... could be saved by moving to low-energy lighting.'

He noted that a full replacement would also yield the equivalent of removing about 'a third of a million cars' from the country's roads,

Paterson-Jones also hailed LED streetlighting for its potential to underpin smart city networks – in a manner that many cities and groups around the world are exploring.

'Streetlighting and the move to LEDs can be the entry technology to making your city smarter,' Paterson-Jones said. 'So you can implement much smarter systems for traffic flow, much smarter systems for the pedestrian flow.'

GIB in September finalised financing with Glasgow City Council to replace 10,000 luminaires in the first phase of a 70,000-luminaire project, and will now use that agreement as a template to fund other municipal LED streetlighting initiatives. Paterson-Jones noted that cities in Scotland benefit from a common governement procurement framework called Excel; England and other parts of the UK are developing something similar.

One feature of GIB's financing: It will stretch repayments over many years, and base those payments on energy savings, which are likely to increase on a yearly basis as the price of energy rises.

'When you're borrowing money to fund streetlighting, you don't want have to immediatley repay it,' said Paterson-Jones, nothing that otherwise a municipality could be 'out of pocket' by paying back debt before savings kick in. 'We can stretch out the length of the repayment on that loan.'

He noted that loans could last as long as 30 years, especially in cases where municipalities have to replace aging columns as well as luminaires.

'You only pay back what you need to, which is modeled on the savings as you make them,' he said. 'We can lend very, very long, which is unusual for a financial institution post-financial crisis, in that most banks don't like to lend more than 10 to 12 years.'

GIB lends money at competitive commercial interest rates, unlike another government entity, Salix, which provides interest free loans but requires a relatively quick payback.

GIB has lent £1.6 billion of its £3.8 billion in original government funding, most of it outside of lighting. Its pot of money is limited because the government prohibits it from borrowing and raising money in the capital markets, the way commercial banks do.

CEO Shaun Kingsbury believes he could raise £60 billion once the government lifts that restriction.

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Photo is from the Green Investment Bank