Guest Opinion: Converting streetlights to LED technology
One year ago, the Electric Utility Task Group (EUTG) was asked to investigate the conversion of the town’s street lights to LED either through conversion by the Block Island Power Co. (BIPCo), or by the town condemning the lights and converting them to LED. Condemnation of street lights, or having the town take ownership of the street lights, is a common practice and is currently an initiative being pursued by the Washington County Regional Planning Council.
The goal is to reduce the cost of this utility to the taxpayers. (LED stands for light-emitting diode.) An added goal for Block Island was for the EUTG to take steps in laying out the steps for condemnation, which would also be necessary if BIPCo was converted to a rate-payer electric cooperative, or a municipal utility. Ratepayer cooperatives are by far the largest number of electric utilities in the United States.
A recent EUTG meeting revealed little, if any, progress. BIPCo promised to provide a purchase price to the town months ago, and as of the meeting in March BIPCo still had not provided this price, and then told the EUTG to “make an offer.” Making this all a little strange is that BIPCo and the EUTG stated that they thought street lighting was a money loser for BIPCo. After some discussion of the economics of street lighting, a member of the EUTG made an off-handed purchase offer of $1, which received no response from BIPCo. Clearly this is not the way to move this process forward.
Having formed and directed several industrial, commercial and municipal energy conservation programs, I decided to examine the economics between town budget sessions. This is what I found:
1) Using a marginal cost analysis approach, BIPCo does profit from the street lights. They effectively charge about $.50/kWh with fuel costing $.34/kWh. The fixture and bulb replacement costs are relatively inconsequential.
2) BIPCo realizes about $4,000 in annual revenue from the street lights.
3) Every street light that is not working at night costs the town money and every street light that remains on during the day costs BIPCo money.
4) Condemning the street lights and converting them to LED would save approximately $7,000 per year; $8,000 if dimming LED technology was used.
5) The payback on the condemnation and conversion would be approximately two and two-and-a-half years respectively, or a simple return on investment of 50 percent and 40 percent. However, over the life of the bulb, the dimming technology would yield greater savings to the taxpayer of about $15,000.
6) The customary way in which this process takes place is for the depreciated value (not book value or replacement value) of the street lights to be determined. I would suspect that most of these fixtures are fully depreciated having zero residual value. This has been true for other towns. (This value would be zero even if the town did not convert to LED technology.)
Important to this analysis is the assumed life of the different bulb technologies and the installation and maintenance costs. However, it appears the EUTG can move this process along and provide the Town Council and the taxpayer with cost-effective and concrete action items.
The above was submitted to The Block Island Times on March 26, 2013. Due to space issues we were not able to publish until this week’s edition.