Once you complete the bandit camp questline, a new area of the map will open north of it. Hidden in a cave you will find glowing plants, and you can get someone you already met (I won't spoil the details) to turn those into a light.
Once you realize that your character is an alchemist (duh!) the game becomes much easier. Use potions. Lots of them. You can win without them, but I am fairly sure that the game is meant to be played with potions.
