Airs enclosing alternative lights (7)
I believe the answer is:
auroras
'lights' is the definition.
(I have seen 'Polar lights ' mean 'auroras' so perhaps 'lights' could also mean 'auroras')
'airs enclosing alternative' is the wordplay.
'airs' becomes 'auras' (I've seen this in another clue).
'enclosing' indicates putting letters inside.
'alternative' becomes 'or'.
'auras' going around 'or' is 'AURORAS'.
(Other definitions for auroras that I've seen before include "Polar lights" , "orange colours" .)