Seeing the Light - How New Taipei City Took a Novel Approach to a Key Infrastructure Project
New Taipei City wanted to upgrade its street lights and it got a bright idea. With a little inspiration from Britain, it switched to electricity-saving LED lights and found a novel way to pay for the change.
Using a private finance investment model, it replaced some 180,000 mercury street lights with LED lighting at a cost of NT$3 billion, or around $100 million. It will pay for the newer “smart” lighting over six years, passing on the money saved from lower electricity costs to its equipment suppliers which are responsible for the upfront costs.
“This was the first time this was done in Taiwan,” says Wu Shi-wei, deputy commissioner of the New Taipei City Public Works Department. “We got the idea during a visit to the UK.”
New Taipei City made the switch over the course of 2015. The following year it made its first of six installment payments.
The city government signed six-year contracts with the two Taiwan suppliers – Delta Group and Lite-On Technology Corp. By making the payments over a six-year period it keeps the interest on the funds that would have been spent on the initial costs of the project.
The suppliers are responsible for all maintenance – meaning they have an incentive to provide high quality equipment. Moreover, repairs and replacements are supposed to be made within 24 hours of notification in order to fully comply with contract terms – a fact that might keep motorists and pedestrians happy.
The structure of the deal seems to be a winner as far as the government is concerned. “We had NT$220 million in actual savings in one year,” says Mr. Wu. “This is value for money.”
The project had other benefits. The brightness of the “smart” LED lights can be adjusted according to natural lighting conditions. Another benefit – the city says it saves on some 96,000 metric tons of coal a year as a result of the reduced demand for electricity. That contributes to a cleaner environment for the city's residents.
The two equipment suppliers also seem pleased with the results.
“Lite-On was proud to be able to team up with New Taipei City in this effort to save energy and reduce carbon emissions,” the company says, adding that it looks forward to making use of its capabilities in undertaking dedicated projects.
Delta also appears to be happy with the arrangement, saying: “In the future, if other city or county governments wish to use the PFI model, we would be interested in bidding once we have a chance to make a detailed assessment of the costs and a review the project feasibility.”
That suggests that residents of New Taipei City might see more of this type of investment. Officials say the city government is already considering using a similar model for an upgrade of residential lighting.