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Cities account for 70% of global CO2 emissions. Switching to energy-efficient light emitting diode (LED) technology for their public street lighting could help them to reduce emissions substantially and transition to a low carbon path.

In Brazil, public lighting accounts for about 4% of the country’s total electricity consumption. Within cities, this consumption ranges from 10% to 40% of the municipal energy budget depending on the number of lights and their efficiency. At the last COP21 climate talks, Brazil committed to increase energy efficiency by 10% by 2030 – something that high quality, highly efficient LED (light-emitting diode) lighting technology could accelerate.

In Belo Horizonte – the sixth largest city in Brazil – the electricity price has been increasing rapidly, jumping by 45% in 2015. The quality of public lighting was low, compromising the safety of residents especially in remote and poor areas. To add to that, a recent law requiring cities to assume ownership of public lighting infrastructure from local utilities posed a challenge for Belo Horizonte’s existing institutions.

Switching to LEDs presented an opportunity for Belo Horizonte, not only for cutting GHG emissions and achieving cost savings, but also for realizing additional socio-economic benefits, such as increasing local nighttime economic activity, and improving provision of public services to citizens by improving security and traffic safety. To this end, ESMAP worked together with the Public-Private Infrastructure Advisory Facility (PPIAF), the World Bank Energy team for Latin America, the International Finance Corporation (IFC), and the Brazilian Development Bank (BNDES) to deliver a solution for the city to identify energy-efficient investments for public street-lighting.

The work kicked off with conducting city energy diagnostics using ESMAP’s TRACE tool, which identified public lighting as a priority in terms of reducing electricity consumption and costs. This was followed by an early-stage feasibility analysis and technical assistance, which looked at the existing institutional and regulatory arrangements for public street lighting and identified enormous opportunities for investment.

One of the main recommendations of the study was private sector participation in investments through public-private arrangements. This acted as a trigger for Belo Horizonte to put in place a public-private-partnership (PPP) to upgrade 178,000 public street lights with more efficient LED lights over a five-year period for an investment of US$100 million.

The overall 20-year, US$300 million PPP contract is a third less than the US$430 million the city had planned to pay based on historical costs, and the largest for public street lighting in Latin America to date. ESMAP supported city officials in designing the PPP and the city moved to the installation of the lights quickly after the contract was signed in July 2016.

Some areas already have better lighting and the city is expected to save 40% on electricity cost, and operation and maintenance expenditures. The project is also changing people’s lives by reducing the price they have to pay for electricity by bringing down public energy usage rates, improving their safety, enabling them to keep their businesses open for more hours, and beautifying their city.

“This is a great example of how smaller grants, in this case by ESMAP and PPIAF, are able to leverage larger investments for a transformational impact,” said Délio Malheiros, Vice Mayor of Belo Horizonte.”

In parallel to Belo Horizonte, Rio de Janeiro - a city that consumes 60% more energy for public lighting than does New York – also benefited by ESMAP assistance. Initial TRACE assessments for Rio found that if the public lighting in the city were replaced by LED lights, annual savings could reach US$72 million and 110,000 tons of CO2 emissions. Building on these findings, ESMAP helped the city to incorporate a PPP for LED street lighting in its 2017-2020 development plan.

Learning from the experience of both cities, the project is being scaled up. The World Bank has studied an additional 300 municipalities in Brazil and assessed their street lighting infrastructure to help identify the most applicable business models. To share findings, ESMAP and its partners organized a forum on “Business Models for Energy Efficient Public Lighting” held in São Paulo in June 2016 targeting stakeholders interested in participating in the street lighting market. Over 250 participants from over 30 major cities in Brazil, private sector financiers, development banks and manufacturers flocked to the event to learn how to expand LED street lighting in municipalities across the country. Eight business models were presented, aiming to provide options for the diverse needs of all 5,570 Brazilian municipalities, including public-private partnerships that have the potential to boost investment in large-scale LED infrastructure projects. The full report, as well as a tool that will help cities to conduct financial and economic analyses of public street lighting projects will be launched later this year.

In September 2016 the World Bank/ESMAP and IFC teams were also invited to present the latest findings and recommendations of the work during a LED finance roundtable at Climate Week NYC, hosted by The Climate Group. The Climate Group has called for all city street lighting to switch to LED by 2025.

Many cities around the world are taking action to benefit from LEDs potential, including Buenos Aires, New York City, Bogota, and Los Angeles, among others. During the U.N. Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP21) in Paris in December 2015, 19 countries included improvements to public street lighting in their Intended Nationally Determined Contributions (INDCs).

ESMAP has compiled online resources to help cities in their journey to convert. These include an introductory e-learning course, six detailed case studies (and a synthesis report) on different delivery models, and an implementation manual.

Learn more about the ESMAP Energy Efficient Cities Program