NSW LED Programs Update and #Fake #News: Smart Controls, Specifications, Prices, Timing, Gifting and Tax!

There’s a fair bit going in NSW at the moment with a bunch of interesting LED projects completed and more planned over the coming years. Many councils are starting to get in on the act and are following the “gold standard” for NSW LED public lighting projects, the award-winning Light Years Ahead program that took out the NSW State Government’s 2017 Green Globe award. Light Years Ahead began with the successful installation of 15,000 LED street lights through a bulk changeover in 2014-2016 and is now onto the next stage of the program. 

Not only did Light Years Ahead demonstrate a gold standard approach for planning and implementation, it ticked all the boxes in terms of demonstrating the financial, social and environmental benefits of bulk street lighting changeover projects.

Councils in other areas where there haven’t been any accelerated roll-outs of LEDs watched on with increasing frustration as Light Years Ahead demonstrated the great heights that can be achieved when key stakeholders work together. We keep saying it because it the evidence is clear: Every single successful project in Australia has been the result of cooperative dialogue and relationships at all levels; between councils, councils and DNSPs, and other key stakeholders.

More councils are jumping on board the Light Years Ahead program, led by WSROC (Western Sydney Region of Councils) which now is open for any council in NSW to join. Councils don't need to be in Western Sydney or in the Endeavour Energy area to join! 

However, there has been some confusing commentary around the program that needs to be addressed. Since April 2019, a few NSW councils passed on some questions and commentary they had received regarding the Light Years Ahead program. The comments were somewhat inaccurate and indicated a basic lack of understanding of how the Light Years Ahead and other successfully implemented LED programs have been rolled out.

They mentioned the role of the DNSP, Endeavour Energy and councils who have subsequently asked Ironbark to respond. So, in the interest of transparency, sharing information and ensuring the projects throughout NSW - and indeed Australia - are not delayed, here are the answers to make sure everyone's on the same page and there's no confusion in the industry.

The Four Questions and Responses

1. Smart Controls and Smart Cities

"Endeavour Energy does not appear to have considered the energy savings, asset management and other benefits of smart controls and the ability of the latest LED lights to support additional smart city devices. There is a one-off opportunity with this accelerated deployment to co-deploy LEDs and smart controls at low marginal cost as is happening around the world."

What’s Happening in the Real World 

This is incorrect. In fact, smart lighting is actually a key focus for Endeavour. The Light Years Ahead program is also leveraging a number of installations and trials around Australia to understand roll out opportunities including through the recently funded Fairfield Smart City project, as well as others that are currently being scoped. All projects involve the installation of "smart-ready" LEDs (featuring dimmable drivers and 7-pin NEMA receptacles). Councils and Endeavour have a formal process where they meet  four times per year to discuss smart lighting and other energy projects and how to leverage the common benefits from these systems. Councils also benefit from working closely with Ironbark who are in the process of deploying dozens of smart city installations on unmetered street lights nationally.

2. LED Specification

"The current LED luminaire offerings from Endeavour Energy have not been substantially updated in recent years. And, we don’t believe that the main road offerings have been approved by Roads and Maritime Services (RMS). To ensure both the most efficient technology and best pricing, the specification for the LED luminaires should be revisited by Endeavour in consultation with councils and RMS prior to a mass deployment if they are to lead this."

What’s Happening in the Real World 

Endeavour's offering of LED luminaires has consistently been updated and energy consumption ranges are now substantially lower. In addition, the pricing that WSROC and participating councils receive through the Light Years Ahead program are substantially lower than that of the projects in neighbouring regions - for example in the Ausgrid region - due to repetitive reviewing of products and prices. This is because Light Years Ahead councils can feed into national smart lighting programs that benchmark prices across multiple DNSP regions covering all of Australia

3. Timing

"The value of this proposed project is likely to be well above the procurement limit of council staff and we’d be surprised if a proposal of this size does not have to be considered by a full meeting of each council. Councils will therefore be unable to meet Endeavour Energy’s incredibly short requested return date."

What’s Happening in the Real World 

The background to this is that there is $12.5m of funding through the New South Wales Office of Environment and Heritage (OEH) to assist councils to upgrade to LEDs. This alarmist information is similar to what we have seen from the odd street lighting consultant over the past decade. This language seeks to create alarm, outrage and confusion. The impact is to delay and slow council decision making, without understanding the context and level of support councils have access to. Through the Light Years Ahead program, (open to all NSW councils!) councils can access detailed support to navigate offers from DNSPs and consider the best way to deliver bulk LED programs. Councils are aware of the timeframe and know that there is flexibility in all timing. Noting however, that funding through OEH is limited so the earlier a council can progress the more likely accessing this funding is. For councils considering proceeding with bulk changes under the OEH program, you can indicate to Endeavour (or other DNSPs) interest and timing that suits Council. This approach is supported by the OEH. You can also contact Ironbark to discuss.

4. Gifted Asset Tax Implications

"All new assets under this proposal are to be council-funded. These assets will be deemed to be gifted assets and incur tax-related liabilities of about 30% of the capital cost and will be placed on a tariff called TC5 seeking to recover this liability from councils over time. Once gifted, this cannot be unwound so our view is that councils should carefully consider this additional 30% cost impost in their assessment of the proposal and discuss possible alternatives with the NSW government. We are unclear that most councils are aware of this unique aspect of Endeavour Energy tariffs."

What’s Happening in the Real World 

Interesting comment! Simplest answer is that councils are funding the programs through TC4, not TC5. More detailed answer is that Endeavour will not recover upfront capital cost and as a result TC4 charges are significantly lower than the alternative Endeavour funded option. In light of this, councils will achieve much higher savings funding the changeover and Ironbark's business cases support this.

In regard to the Gifted Asset Tax, all assets gifted to Endeavour (whether through a bulk LED program or new residential developments) currently incur a gift tax as per ATO rules. This one of the numerous cost inputs and assumptions built in the business case that have been developed for councils. Interestingly, Ironbark is working in several DNSP areas in Australia where lights are not gifted to the DNSP so councils can capitalise and depreciate the asset – and no gifted asset tax is payable – even though the DNSP retains all standard rights to use, modify, possess, access, maintain or repair the new LEDs. We’re working with other DNSPs to use this contract model across Australia.  If a council wants a business case developed that analyses a range of models and options open to councils; is water-tight; builds on decades of experience; takes smart lighting and controls into account; and has formed the basis of 88% of all of the successfully implemented LED bulk changeover projects in Australian history then just drop us a line! 

They Got One Thing Right

It’s not unusual to have these sort of questions or comments from stakeholders that often sit on the periphery of local government, have vested interests or have had little experience in successfully delivering bulk LED changeovers. It’s also not unusual for these types of tactics to be thrown around in the street lighting space where information is consistently spread around to confuse or delay council’s decision making. Over the last decade we've found that this most frequently occurs when positive movement at scale is occurring and some fear being left behind. 

For councils in the Endeavour Energy area, it’s important to be aware of these tactics but probably not worth responding directly. Feel free to use, copy, edit or re-emphasise the responses above if you receive enquiries on the street lighting rollout or you can always contact us.

It's worth acknowledging that there was one highly accurate phrase in their comments around Gifted Asset Tax Implications and tariffs – the phrase, “we are unclear”. Spot on :-) 

For councils in the Ausgrid region, the take-up of LEDs has been a lot slower than other parts of NSW and Australia. Over the last decade there have been some positive starts with the installation of 52,000 CFLs and broader changes that include “on fail” LED changeovers. It is hoped that this will quickly move onto accelerated LED rollouts given the Minamata Convention is starting to bite and the sun is setting on those old inefficient lights faster than we thought. The more councils are delayed in Endeavour the more money there is for Ausgrid councils, because the money from the OEH is not a bottomless pit. Ironbark works with councils in every state and territory, in every DNSP area, and we can safely say that the OEH’s NSW Climate Change Fund is currently the largest street lighting funding mechanism available to the local government sector. So, councils need to get behind the program and process. 

However, even if councils in the Endeavour region were to delay there is a sting in the tail for councils in the Ausgrid region. Through the Light Years Ahead program, councils have collectively negotiated prices that are 30% lower than for Ausgrid roll outs. For some councils, this has meant they have jumped the fence and are getting assistance from Light Years Ahead.

So... Who is Next?

Other consultants and stakeholders have come and gone in this industry without getting any projects off the ground so make sure you get the right advice. Whatever your location or opportunity, for councils asking "who is next?", don’t let rumours slow you down, get the right advice and the right numbers… and change those damn lights!