UK tax break boosts renewable street lights

Hit by a 30 percent increase last month in carbon tax prices under the CRC (Carbon Reduction Commitment), councils should be considering renewably-powered street lights as a cost effective alternative, writes freelance contributor Cristina Brooks The government hopes to use increased tariffs under the CRC to encourage councils to cut emissions the way it already uses EU ETS for industry, meeting national carbon emissions reduction goals.

A council with 100,000 lights will now owe £300,000 per year in carbon taxes alone, estimates UK consultancy, Power Data Associates. Councils will see an additional carbon tax price increase of 6 percent in September 2015.

While many UK councils plan to dim public lighting to reduce costs, dimming technology is controversial, giving rise to speculation that dim lighting may lead to an increase in crime.

There is a new way to counteract carbon taxes, however, thanks to an amendment to the CRC rule that ‘zero rates’ carbon tax on condition that street lights are powered by renewable energy.

DECC said the amendment to the CRC Energy Efficiency Scheme Order 2014 came into force on April 1st.

While DECC assumes that waste and water treatment companies, which can burn anerobic waste gas for power, will benefit most from CRC zero-rating, councils can apply it towards power used by the authority to light streets and buildings.

All renewable generation is eligible on condition that it is both ‘onsite and self-supplied,’ which means the generation needs to be contiguous with or immediately adjacent to the area where it is being used.

Electric power qualifying for zero rating is self-supplied, onsite renewable power generation built after 2008, and will receive the tax break at a price of £16/tCO2 or 0.76p/kWh.

The government says that sources qualifying for the benefit are the same sources that qualify for Feed In Tariffs (FiTS) or Renewables Obligation Certificates (ROC) outlined in the 2008 Energy Act, but they must not be signed up to receive renewable energy benefits under these programs.

DECC expects most in the CRC scheme to opt for the better prices currently available from FiTs or ROCs to zero-out CRC payments. However, prices for those benefits may vary, and FITs only cover renewable power installations up to 5MW.

Dimming savings may be negated
Using community renewable projects to run street lighting may be a cheaper long-term option than dimming because it gives communities protection from some costs beyond their control, like the price of fossil fuel.

Average gas and electricity prices have risen by 41 and 21 percent respectively since 2007, mainly due to the rising cost of fossil fuel, said DECC.

The price of electricity is expected to increase dramatically by 2030. DECC has in the past year estimated that, for a variety of reasons, medium-sized businesses would see gas and electric costs rise between 22-26 percent by 2020, then 40-39 percent by 2030. For large industrial businesses this may reach up to 60 percent.

If the cost of electricity in real terms rises by over 20 percent by 2020 for councils as predicted, it would negate the 20 percent cost savings from typical dimming lights.

Cost savings from dimming also depend on the stability of grid charges. For example cost savings for typical lights dimmed 30 percent are around 20 percent, or about 10 percent less, because of charges by the grid operator. These charges are currently being modified under a proposed rule, Project TransmiT.

In the case of continued gas and electricity price hikes, the lights could potentially become expensive to operate, regardless of dimming.

This could lead to problems with keeping dimmed lights on, repaying outstanding financing on the dimmed lights, and financing future lighting upgrades.