Sector: Energy Partners: World Bank, IFC GIF Activity: PPSA - Municipal Public Street Lighting Program Funding: $4,037,346
Challenge Most of Brazil’s 5,570 municipalities still rely on outdated, inefficient, high-pressure sodium and, to a lesser extent, mercury vapor lamps. Municipalities are often faced with expensive and often unreliable street lighting due to these inefficient bulbs associated with high energy consumption and maintenance costs. This also contributes to the lack of safety as outages are harder to tackle, leaving parts of the cities without proper lighting. Projects and trials of LED technology for public street lighting have proven to deliver energy savings of 40–70 percent, and up to 80 percent when combined with “smart” management and control systems. In addition to energy savings and reduced maintenance costs, improved lighting quality can result in a wide range of other socioeconomic benefits, such as enhanced security and increased local economic activity due to better visibility and better safety perception in high crime areas. While LED technology is available, many municipalities struggle to access financing due to low credit ratings and restrictions on public indebtedness. The private sector has an important role to play to help municipalities overcome this challenge and bring efficient LED light bulbs to where they’re needed most.
Solution In partnership with the IFC and World Bank, the GIF supported CAIXA, one of Brazil’s public banks, with the structuring and procurement of a set of public street lighting modernization PPPs in 10 Brazilian municipalities. The GIF provided funding and technical support by assisting CAIXA and other stakeholders to develop a standard approach to structuring the PPP transactions and develop project preparation capacity, which over time will help reduce transaction costs. The GIF’s engagement supports the wider World Bank engagement on energy efficiency and provides value by helping CAIXA develop the capacity necessary to apply this standardized approach to future projects in other municipalities, including the possibility to transfer this knowledge to other subnational subsectors. In addition to this innovative standardized PPP model and procurement and contract documentation for municipal public street lighting, the project uses a blended finance structure combining climate funds, public and private sector investment, and World Bank support to develop a bankable and affordable business model.
Impact The 10 planned pilot transactions will reduce emissions by 21,563 tons of CO2 per year and provide a model for a future program of investments, which is expected to increase these reductions to an annual total of 565,556 tons. This scaled level of reduction would contribute to one-fifth of Brazil’s Paris Agreement target to improve energy efficiency in electricity by 10 percent by 2030. Currently, five municipalities have started implementing LED technology with five more in the approval process to start procurement. Approximately $251 million is expected to be mobilized from the private sector. The success of the pilot transactions will allow for CAIXA to replicate the model with other Brazilian municipalities and to create the financing facility for other sectors. Better street lighting will also improve security in the project areas, including reduction of gender-based violence and improved access to public services and the labor market. With the GIF supporting capacity building of Brazilian institutions, more cities will be able to reap the benefits from the standardized transaction, keeping transaction costs low and reducing the time to get projects to market. Other countries will be able to replicate the financing facility with their own national or regional banks, allowing for its cities to develop their own public street lighting efforts.