Creative Financing for Revitalizing Cities

by Sep 8, 2013Smart Cities

Harry Verhaar

Harry Verhaar has over 20 years of experience in the lighting industry, and is Head of Global Public & Government Affairs for Philips Lighting. He is responsible for the strategy, outreach and stakeholder management on energy & climate change, resource efficiency and sustainable development, with a key focus on the role of the LED lighting revolution.

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With Meeting of the Minds beginning tomorrow—and, in general, as the buzz around cities, energy and economic growth becomes louder—one sometimes wonders if we are speaking about the right things that we want to accomplish in our cities, and subsequently how to make these happen.

In my view initially we should look beyond some of the ‘must do’ arguments and the mathematics, and start working on enhancing real awareness about the economic and therewith the financial potential of making our cities more energy efficient, and more sustainable. This also means a deepening of our understanding of what innovations mean for the citizens and – thus – how revitalizing our existing cities is key for our economies as well as quality of life.

It is true that – as with many innovative solutions – the latest intelligent LED lighting offers the potential for substantial reductions in carbon emissions and energy expenditures. On a global level the transition to energy efficient lighting can provide a 670 megaton reduction in CO2 emissions, and a monetary saving of €128 billion / US$ 168 billion. It is however also becoming apparent that modern LED lighting increases citizens sense of safety, makes cities more inviting for tourism, and increases productivity at our workplaces (without having to work harder). See, for example: Lighting the Clean Revolution: The Rise of LEDs and What It Means for Cities

The social benefits are in my view arguments that can be further leveraged in enhancing the momentum for change though public engagement. Of significant importance is that from a city perspective the improvements in quality of life go hand in hand with reduced public expenditure on energy, as well as with the creation of jobs, as a significant number of people can be put to work on the renovation of buildings and street-lighting.

What does this mean for creative financing of revitalization projects and initiatives? As an enabler we can look at how policies can contribute to accelerating and scaling-up of sustainable financing in cities / public projects? What financing mechanisms do we see emerging that should go into a financing toolbox, so that financing (instead of transactional approaches) become common practice in cities?

One approach that we are working on at Philips is to move from selling products (like streetlighting fixtures) to offering cities lighting as a service. In dedicated Public Private Partnerships (with financial institutions; installation and maintenance operations, as well as local utilities) a city receives a blueprint for intelligent LED street-lighting, where the initial investment is covered by the savings in energy and maintenance cost over lifetime, thus having the city pay a fixed amount per month during the period of the service contract. This takes away the initial investment barrier, and helps accelerating the revitalization of the city, while focusing on and optimizing the quality of the (lighting) service that is of most interest to the livability of the city.

How can we increase awareness of this creative financing option, and what other creative financing approaches can we develop and apply?

For more information on how intelligent LED streetlighting improves the livability of cities see also: Shining a light on the cities of the future.


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