The Use Of Ppp Arrangements In Street Lighting: A Win‐Win Option?

Street lighting is a classic example of a public good, and governments are extensively involved in its provision. Adequate lighting facilitates both car traffic and personal safety while improving an urban area's character. However, many systems are mismanaged and obsolete, incurring high energy costs and emissions with relatively low lighting quality. Public authorities facing budget constraints often find retrofitting old street‐lighting systems challenging. They have two options: either direct in‐house, public‐authority renovation or contracting with a private company through a public–private partnership (PPP). Although private‐sector‐participation approaches vary, most public authorities can now enter into a street‐light modernization PPP agreement. That can be a win‐win option for both the public and private sectors. The upfront investment is small and operational expenses outweigh capital expenses, generating lower payback periods and energy‐cost reduction with light‐emitting diode (LED) technology. Little public expenditure is necessary when private partners are compensated via shared energy savings. We analyze the Detroit street‐light PPP – the United States’ first – and find that PPPs are practical for retrofitting US street lights and in other countries where they are antiquated.