The banding is probably happening because you are going from a bright light to near pitch black.
Your shadows do look very strange though in the orange scene, like they are already being dithered or changed by anti aliasing.
On another area where the problem may be, have you tried checking your graphics driver settings? Perhaps you overrode a specific hardware setting that is causing the graphics card to be limited in some way. You could try maybe resetting them to default and seeing if it changes.
Does this happen on other pc’s? Have you had the chance to send someone a demo level to see if it’s just your pc settings?
Trying to recreate it, some dithering occurs but it’s inevitable with the jump from bright lights to darkness.
