$431 Million: Our Favourite Figure for 2014
2015 has started on a high with councils around Australia following best-practice energy efficiency project examples and installing more LEDs and other energy efficient street lights than ever before. Over the last 6 months alone Ironbark has been project managing dozens of street lighting installations throughout Victoria and also been engaged by councils and local government bodies in New South Wales, South Australia, Tasmania, Western Australia and Queensland to provide advice and analysis on how to reap the massive financial and environmental benefits that councils are now achieving en masse.
In Victoria we started 2014 with 183,000 lights ready to come down (or already down!) but that has grown to 232,000 as the year has progressed and is still rising as 2015 begins.
A whopping 85% of all Victorian councils have implemented or are planning on implementing an energy efficient street lighting project. This project is now the norm and indeed there are only a few councils that have not started an energy efficiency street lighting project.
There are no longer any barriers for a council that wants to follow suit. The proof is in the 232,000 lights and 1.56 million tonnes of greenhouse emissions reduction.
The cumulative financial savings of these projects is $431 million through reduced electricity use and maintenance costs.
Electricity costs are wasted dollars so to see nearly half a billion dollars back into the pockets of councils and ratepayers is an incredible outcome and councils should be very proud of their long and successful journey to start realising these savings.
... And Rising?
This $431 million figure is essentially aggregated data from each of the individual business cases that Ironbark developed for the Victorian councils that are implementing these projects. Having worked with all of them we have some great data.
The development of these business cases is very detailed and sits on the back of very powerful financial and technical modelling as well as conservative assumptions as we look into the future. It’s fair to say that over the last decade we’ve put more time and resources into our business case financial and technical modelling than any other area.
Every council business case that we've developed tells a council what the overall costs, financial savings, and returns on investment are going to be (as well as technical information, social and environmental benefits). To get to the $431 million figure we went through and analysed each of the business cases we developed and added up the financial savings of each.
It’s worth noting that it’s probably more than $431 million for a number of reasons.
Firstly, the $431 million figure includes data from business cases that were developed 4-5 years ago and since then we’ve seen capital costs reduce pretty dramatically. Additionally, projects that had 7-8 year paybacks (including all the costs and conservative assumptions) now have as small as 4-5 year paybacks. Many business cases were also based on T5 or CFL lights so if you factor in LEDs and recalculate the savings, they would be even higher.
Secondly, our assumptions are generally very conservative. Our business cases are often put to senior management, finance staff, CEOs etc. (as they should be) so they need to be watertight. Assumptions need to conservative, so we factor in everything. If you’re developing a business case then every cost (including written down value and project management costs) should be included.
Thirdly, we've got more councils coming on board as we write. In just the last few weeks multiple councils have either engaged Ironbark or expressed interest in joining the MAV Street Lighting Program, representing tens of thousands more lights.
We think there's a fair chance that we'll hit the half-a-billion dollar mark early in 2015. And it's fair to say we're a little excited about the coming year and the opportunities still out there.
Bring on 2015, bring on projects, bring on real action and bring on figures in other states that will dwarf the $431 million benchmark.