07 / 08 / 23 - 4 minute read
Excessive lighting can seriously impact biodiversity. Artificial light draws and disorientates night-flying creatures and affects the flight patterns of migrat
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Electricity is typically one of the most significant bills on a city’s budget, accounting for up to 40% of total costs. Jose says cities can save 55-80% of these costs by switching to smart street-lighting. Switching to LEDs can also significantly reduce carbon dioxide emissions.
“The savings can be even more if the municipal grid is particularly old and inefficient but, on average, the savings you are looking at are quite substantial.”
Night in pre-industrial cities was often dangerous as well as dark. For night was the realm of the criminal: the vandal, the pickpocket and the murderer. But then came street-lighting; first as gas lamps and then as the electric light bulb, which was ‘invented’ by at least 22 people before an improved version was successfully commercialised by Thomas Edison in 1879.
Since then, humanity’s desire to illuminate everything has given rise to ‘light pollution.’ The light that emanates from cities all over the world creates glare, light trespass and skyglow and prevents people from the pleasure of seeing the Milky Way on a moonless night. It also diminishes the freshness of the air they breathe at dawn, according to the American National Oceanic and Atmospheric Administration (NOAA).
Is it any wonder that cities are turning to smart street-lighting to strike a balance? Smart street-lighting using energy-efficient LEDs can replace inefficient street-lighting.
“LEDs cost more than traditional sodium and incandescent lighting,” says Jose. “But they have many advantages, including lower power consumption, longer lifetime use, improved visibility, less harmful to the environment and its humans and animals, and smaller.”
Smart street-lighting offer cities an easy way to regulate light levels. Cities can remotely program network-connected intelligent public lighting based on needs from a centralised location.
When paired with motion sensors and software, LED lights can brighten when a person or car comes near, but otherwise stay dim. Turning down the light levels during off-peak hours also significantly reduces light pollution. This helps generate additional savings and brings relief to wildlife. In addition, LEDs do not contain mercury like fluorescents.
Jose Artiles, Director of Private Equity at PATRIZIA
PATRIZIA has investigated the opportunities available in smart street-lighting for several years as part of its desire to create smarter, better-connected cities across the globe. In 2022, PATRIZIA committed €180 million to acquire two Italian smart streetlighting companies, Selettra Illuminazione Pubblica and Ottima S.r.l, and support their growth.
Founded in 2013, Ottima is one of Italy’s top 10 smart streetlighting companies by the number of light points it manages. The company partners with small- to medium-sized municipalities to update traditional infrastructure with the latest LED street-light technology.
Selettra was founded in 1990 for the design, redevelopment, installation, finance and management of connected lighting points. Historically, it focused on southern Italy but recently expanded to include the country’s north. It is rolling out two additional smart city business lines connected to the development of renewable energy communities and the roll-out of 5G small cells.
Together, the two firms represent a €180 million portfolio of smart street-lighting companies, making them the second largest independent player in the Italian sector. Across the two street-lighting investments, there are currently 170,000 light points throughout Italy and contracts with 112 municipalities.
Jose says that Italy always loomed large in PATRIZIA’s research into the smart street-lighting market. “There are several reasons,” he explains. “First, LED penetration in Italy is sparse – only around 30% of municipalities have switched. So that means that 70% of the 8,000-plus municipalities still require a lighting retrofit.”
Another attraction is the regulatory framework. Italy is one of the only countries where a company can approach a municipality with a project or initiative, and the municipality can sign a preliminary contract before doing a public tender. Under this system, the company promoting the initiative receives a ‘soggetto promotore’status. This means that if the city places the proposal out to tender, the promoting company has the right to match any better offers or be reimbursed a percentage of the project costs.
“It streamlines the entire project and justifies the go-to-market effort from the developers,” says Jose. “It can cost a lot to go inland in Italy to speak to a small municipality that doesn't know much about street-lighting, present a concept and send a team to explain the benefits. If they like it, you’ll be up for the costs of the technical design. But it's worth it because of the ‘promotore’ status.”
Typically, the approach of the PATRIZIA companies is to establish a long-term relationship with the local council. They do this with a unique approach that helps municipalities overcome capital constraints.
Ottima and Selettra seek to win a long-term, inflation-protected concession fee of 20 years. The companies retrofit the traditional lighting system with smart LEDs and provide upfront capital expenditure, which the municipalities do not have, via a trusted partner backed by the central government. The long-term relationship also enables Ottima and Selettra to offer the modular roll-out of additional smart city solutions and enhancements.
For example, the light posts can also be used to deploy electric vehicle charging stations, solar panels for generating electricity or cameras that can assist with smart traffic control or smart parking.
“It is all part of our investment thesis,” Jose explains. “We don't just want to do street-lighting, which, in itself, is crucial infrastructure for municipalities. We want to deploy other smart city solutions which are going to make cities more efficient and sustainable.”
Ottima is already offering add-on services like smart efficient buildings by changing the lights of government buildings and retrofitting boilers. Selettra is developing small-scale solar electricity panel projects where they deploy panels and sell electricity to the municipalities.
Jose Artiles, Director of Private Equity at PATRIZIA