According to research, lighting consumes almost 20% of the electricity in commercial properties. Businesses and companies are always looking to improve the energy efficiency of their lighting systems in order to lower their electric bills. The introduction of LED technology and changes to lighting efficiency standards have both contributed to the drastic reductions in energy consumption by commercial buildings.
According to a report released by the Department of Energy, by 2016, LED installations had risen to 874 million units. And while this figure is massive, the LED market penetration hasn’t even reached 15%. The Department of Energy estimates that by 2035, the market penetration will have reached 90%.
LED manufacturers, in an effort to reduce the gap, came up with retrofit kits that can be used in traditional lighting fixtures. These kits come in different designs and can fit different conventional fixtures.
However, while many property owners and building managers know about LED technology, they are hesitant to make the switch because they fear the associated costs. The thing is, retrofitting is not as expensive as buying new LED fixtures. Converting to LED lighting might have been expensive in the beginning (when LEDs were first introduced), but it no longer is.
If you’ve been postponing switching to LED technology, here are five great reasons why you should do it now.
The main reason businesses and facility managers put off converting to LED technology is because of the upfront costs involved in the upgrade. One way to minimize costs and avoid cash flow issues is by implementing the project in phases.
For instance, if you own a manufacturing plant, you can decide to install LEDs in the manufacturing area first before moving to the other areas. Installing the lighting in one part of the building gives your employees a chance to get used to the light and they can also give you valuable feedback. If they complain that the light is too bright or too dull, you can have it changed before LEDs are installed in the other areas of the plant.
If you’re an electrical professional or contractor who has been given the task of installing LED lighting in one part of a building, the small project can be a way to show a property owner the benefits of LEDs and get them to say yes to a full upgrade. The success of the small retrofitting project may give them the motivation they need to continue with the upgrade and they may even ask you to speed up its implementation.
Rebates and incentives can make converting to energy-efficient lighting a less-expensive venture because they significantly reduce the upfront costs related to an upgrade. Utility companies across America have different rebate programs for LED lighting and provide cash rebates and incentives for commercial LED lighting projects.
While the programs are different in each area, utilities generally offer rebates for new energy-efficient lighting units installed or on the total quantity of energy savings delivered. For instance, the utility company PSEG located in Long Island gives a $5 rebate for a 4-inch linear LED lamp and a $50 rebate for a 2″x4″ LED panel. Companies usually have specific rebate values for lighting fixtures, bulbs, controls, and other energy-efficient lighting technologies. But in order to make the most of them, you need to be precise with your planning.
Utility companies normally give rebates and incentives to lower the demand for electricity on the grid. Many of them offer free energy assessments to help building owners identify potential lighting projects and also give information on the available rebates.
If you own or manage a property, be sure to reach out to your electric utility early on. The rebates and incentives given by the company may be enough to influence your upgrade decision. Some of the easiest ways to find the right rebate programs is by contacting your utility directly, looking for incentives using ENERGY STAR’s Rebate Finder (www.energystar.gov/rebate-f...), or searching on the Department Of Energy’s Rebates and Savings Page (www.energy.gov/savings/search).
However, it is worth noting that as the cost of LEDs continues to go down, the rebates offered by utility companies also go down. Utilities usually adjust the rebates at the end of each calendar year but at times change them without prior warning. If you wait for a year to carry out your LED conversion project, you may miss out on a good rebate check. This single reason should be enough to convince you to conduct the project earlier rather than later.
There are two reasons people mostly give for not upgrading to LED lighting.
“The current lights are good enough.”
“The upfront costs are too high. I can’t afford a full-scale upgrade”
The truth of the matter is, no lighting system is as efficient as LED. Sure, the lights in your warehouse may be providing sufficient light, but they probably consume a lot of electricity and don’t have long lifespans.
Some of the major benefits of LED technology are energy savings, better light output, lower maintenance, and increased property values. But most people usually make the switch because of energy savings – and who wouldn’t? LEDs consume about half of the electricity other lighting systems consume and cut the lighting portion of an electric bill in half.
Let us give you an example.
If your commercial space has a hundred 128W fluorescent fixtures and you replace them with a hundred 52W LEDs and the electricity cost in your area is 10.82 cents per kWh (which is the national average in the US) and the lamps operate for 2,870 hours every year, your lighting project will pay for itself in approximately 4.2 years and save you $41,116 during the lifespan of the LEDs. You will have a return of investment (ROI) of 411%.
If you live in New York where the average electricity cost is 15.03 cents per kWh, your investment will pay for itself in 3 years and save you $57,000 during the lifespan of the lights. Your ROI will be 571%.
A report published in 2017 by the Department of Energy stated that energy-efficient properties have higher market values, higher occupancy rates, low operating expenses, and low rental concessions per square foot. The net operating income of energy-efficient buildings is also higher than that of inefficient buildings.
As we mentioned earlier, one of the reasons property owners and facility managers give for not upgrading to LED is that they can’t pay for a complete lighting upgrade at once. While this is a very legitimate reason, it shouldn’t be a hindrance to converting to LED technology as there are alternative pricing structures.
Alternative funding structures like Special Purchase Vehicles (SPVs) have created new opportunities for companies and municipalities to upgrade their lighting systems without coming up with the initial capital or taking on extra debt. Through SPV, you lease the lighting products for a set monthly fee. When the lease period comes to an end, you have the option of buying the assets or returning them.
Another example of an alternative funding structure is Energy Performance Contracting (EPC). Here, an energy service company installs energy-efficient lighting and is repaid over a period of time as the customer benefits from energy savings.
EPC is available in different forms, but they all comprise a service where the energy service company formulates and implements a project (which is financed by a third party) and the savings are guaranteed to be enough to pay for the implementation costs and financing of the project. Some lending institutions usually offer low interest rates for projects that enhance energy efficiency.
The third alternative funding structure we’ll talk about today is known as lighting as a service (LaaS). LaaS is comparable to services such as Spotify, Netflix, Audible, or leasing a cell phone. Property owners and building managers avoid paying the high upfront costs of LED upgrades and instead pay a monthly fee to use the lights provided by the service company.
These different pricing models break down common barriers to entry, offer instant and continuous energy savings, may allow small upgrades to the products, shift the maintenance responsibility to another party, and lower the risk of operating a full-scale lighting system.
Most property owners usually think “The lights in my property are working just fine, why should I change them?”
As a property owner, we are sure your main concerns are profitability and tenant comfort. Sure, your existing lights may be in good working order, but they may have a negative impact on your bottom line and cause discomfort to your tenants.
If you care about your tenants – and we are pretty sure you do – you care about their comfort. If your building houses businesses and companies, the people in those establishments expect it to have good lighting that increases their productivity and doesn’t cause discomfort. If your tenants are comfortable, they won’t be looking to move anytime soon.
LED lighting increases productivity, enhances safety, decreases maintenance costs, and generates less heat than traditional lighting systems. It has better color accuracy, does not contain dangerous materials (which are harmful to the environment), can be used in low voltage applications, attains full brightness instantly, has a better lumen decay profile, and can be used in both hot and cold environments.
As buildings become better and tenants’ expectations rise, improving tenant comfort with energy-efficient lighting can be one of the best things you ever do for your building.
If you haven’t switched to LED technology yet, you’re not alone. However, you cannot afford to postpone the project any longer as there are so many benefits to be enjoyed. Sure, your current lights may be fully functional, but conventional lighting systems are getting phased out and a time will come when you won’t be able to use those lights anymore. In addition, the lights use up a lot of money and time. Make the switch today and start enjoying all the benefits of LEDs.