Download Estimation of Benefits

Annex 4 – Estimation of benefits/costs
This note provides further detail on the estimation of the costs and benefits associated with the
Gateshead Highways Maintenance Challenge Fund bid.
Project costs
Cost estimates include:
- Removal of existing columns;
- Re-design of lighting layout;
- Installation of new lighting columns;
- Re-provision of all cabling and associated equipment;
- Risk allowance (see below).
Cost estimates have been prepared on the basis of existing cost information from the Construction
Services section within Gateshead Council.
The cost of new lanterns is not included for replacement of existing columns, as these costs will be
covered by the Invest To Save initiative.
Inflation assumptions of some 2% per year have been included in line with the GDP deflator figures
included in the TAG data book.
Risk allowance
The project overall is considered to be low risk with a relatively straightforward procurement and
implementation route, and no complex dependencies. The main cost related risk is additional
excavation/connection work associated with the installation of new lighting columns (Risk 5, Annex
7).
Discussions with practitioners in the Council’s Construction Services section identified an
appropriate (P50) risk level as an additional cost of £400 (current prices) affecting some 10% of
installations. This led to a risk allowance of £126,272 being added to the total project cost.
Project benefits
The main benefits from the project will be:
- Energy savings;
- Carbon savings;
- Reduced fear of crime;
- Reduced accidents;
- Increased walking and cycling;
- Reduced maintenance costs;
- Reduced risk of requirement for reactive column removal/replacement.
Energy savings
Provision of the new columns will allow for the fitting of new energy efficient lanterns while
providing lighting levels to meet current guidelines.Net figures were calculated taking into account:
- Reductions in energy use through the use of new LED lanterns on replacement columns;
- Increased energy use through installation of an estimated 343 new columns.
Estimates from the Council’s Construction services section, who have been implementing the
Invest To Save project, estimated savings in energy costs of some £69,770 annually (see below).
Energy saving from replacement columns (kwh)
Additional from new columns (kwh)
Net saving (kwh)
Cost (£ per kwh)
Annual saving (£)
623607
42189
581418
0.12
69,770
Carbon savings
Estimates of carbon savings were made using the approach outlined in ‘Maintenance of Street Lights
and Roads’ (MOSLAR). Again net savings were estimated given the proposed additional columns.
The CO2 intensity of energy generation was taken the TAG data book, table A3.3. The ‘rail’ value was
used as being the more representative value for this project.
Initial values of CO2 savings were some 174,000kg per year, although this reduces significantly over
time. Over the 60 year life of the columns nearly 2.9 million kg CO2 would be saved.
For the estimated NPV calculation in the outline Benefit/Cost Ratio (see below) prices for the traded
electricity sector were used (TAG data book table A1.3.7) in accordance with the advice in TAG Unit
A3. Again the ‘rail’ values were used.
Reduced fear of crime
Estimated benefits from improved security were calculated in accordance with MOSLAR. Given the
widespread nature of the project a ‘zone of influence’ of residential properties within 100 metres of
any street lighting column proposed for replacement was assumed as benefitting from improved
security. This identified a total of 29,550 properties as benefitting in this way, some 32% of the
housing stock.
Using these figures, and based on population information from the 2011 Census, monetised benefits
were calculated separately for under 50’s and 50+ age groups. This gave annual benefits of some
£437,000.
Distributional impacts
Index of Multiple Deprivation and Census OA data was investigated for any potential distributional
impacts in line with TAG Unit 4.2. No significant variance from figures for Gateshead as a whole were
identified for the groups of concern identified in the section on the distributional impacts of security.
Local crime and anti-social behaviour statistics were also examined to see if there were any patterns
affecting the areas where street lighting replacement is proposed. No significant variance from the
pattern across Gateshead was identified.
Reduced accidents
Estimates of accident reduction were based on the 12.5% reduction suggested in MOSLAR. Using the
same 100 metre zone of influence as for fear of crime this gives initial annual reduction in accidents
rates (accidents per year within 100m of columns) of:
Fatal 0.042
Serious 0.315
Slight 2.370
These give monetary savings from reduced accidents (at 2010 prices) of just under £200,000 in 2017.
Accident benefits reduce significantly over the 60 year expected life of the columns as the accident
rate reduces further in line with beta values from the TAG data book (table COBALT3).
Distributional impacts
Index of Multiple Deprivation and Census OA data was investigated for any potential distributional
impacts in line with TAG Unit 4.2. No significant variance from figures for Gateshead as a whole were
identified for the groups of concern identified in the section on the distributional impacts of
accidents.
Increased walking and cycling
Increased levels of walking and cycling would be a direct consequence of the improved security
experienced by residents. However the spread of areas affected across Gateshead, together with
their location within residential areas where cycle and pedestrian flows are likely to be limited make
any attempt to quantify the scale of this problematic. This is particularly so as other factors may
affect levels of walking and cycling locally, suggesting that the attribution of cause and effect will be
problematic.
In the light of the above no quantification of the levels of increased walking and cycling has been
made.
Maintenance costs
Replacement of lanterns is predicted to see a significant increase in the length of life, from the
current 4 years to 12 years. Maintenance savings associated with this were calculated on the basis of
a replacement and labour costs of £50/lantern.
Again net savings were estimated given the proposed additional columns, giving a saving of over
£250,000 over a 12 year period, or £21,454 per year.
Reactive column removal/replacement
The project would reduce future costs by avoiding the need for reactive removal and replacement of
the columns identified in this project. Given the age of the existing columns it can safely be assumed
this would affect all 2,750 columns in the foreseeable future. However no estimate of benefits for
this has been include because the profile of removal is hard to judge. This would have an impact on
the costs of replacement due to inflation, and also affect any NPV calculation.
Benefit/cost ratio
A full TAG compliant benefit/cost calculation of the project has not been carried out. However an
initial estimate was made based on the monetised value of the costs and benefits outlined above.
This used an appraisal period of 60 years, the expected life of the new columns.
Discounting the costs and benefits monetised above to 2010 prices in line with TAG Unit 1.1 gives a
provisional cost benefit ratio of 3.3.
Sensitivity testing was undertaken with accident/fear of crime benefits reduced to those within a
50m radius of the columns to be replaced. This suggested a reduced BCR of 2.5, albeit still in the
‘high’ value for money category.
It is expected that a full cost/benefit ratio calculation would give a higher ratio as the current
calculation does not include any benefits associated with:
- Increased walking and cycling;
- Avoiding costs of reactive column removal/replacement if project not carried out.