- Posted January 19, 2014 by
This iReport is part of an assignment:
Businesses Get Paid to Install LED Lighting
An in depth look at how energy efficient LED lighting can be implemented into commercial buildings causing an immediate positive cash flow and tremendous energy savings.
Ohio- The long awaited financial breakthrough for commercial LED systems has finally arrived. Light emitting diodes are almost certainly the future of commercial lighting for the next 20 years. They have been proclaimed as the sure fire substitute for current lighting systems for their energy savings, low maintenance, and light quality. Almost every inadequacy of incandescent and compact fluorescents combined had been improved or solved by the LED except for one; the price. LED lighting had been too expensive to implement. With the help of incentive programs, lower manufacturing costs, and increased energy efficiency, LED lighting is now less expensive to own than any other commercial lighting system.
Energy efficiency is the strongest driving force for the financial payoff. For example, a 7 Watt LED light bulb has the same light output as a 65 Watt incandescent light bulb. That means the LED bulb is 89% more energy efficient. That type of savings would be incredible, but most buildings are not incandescent, they are a mixture of compact fluorescent and metal halide lighting. Even with this type of improved efficiency LED lighting is still 50-75 % more efficient than even the best CFL technology, like a T5 54W lamp replaced by a 22W LED.
LED’s lower maintenance, demand and HVAC load cost also lowers the cost to own. Maintenance is almost nonexistent with quality commercially rated LED light bulbs, and will last the average owner over 10 years or more before replacing them. Compare that low cost to re-lamping your T8 fixtures every 3 years with bulbs, ballasts, lifts, and labor expense to understand how LED can easily save thousands. The demand portion of your electric bill for lighting will also be decreased by 50-75%. Lastly, your HVAC loads can be reduced by up to 33% as LED light bulbs do not emit nearly the amount of heat that current lighting systems radiate.
Rebate and tax incentives have made purchasing an LED system much more attractive. For example, in all Ohio investor owned utilities (AEP, Duke Energy, DP&L, and First Energy) 10-15% of the project is paid for in the form of a cash rebate upon completion. Other local incentive programs can also chip in to help lower the cost. Make sure to contact local energy specialists to confirm all incentives. Tax incentives can be as much as 30% of the project cost depending on the type of installation. With all the incentives included, in Ohio, LED lighting actually can have a stronger incentive package than solar or wind projects. Along with these offset incentives, financing programs for LED lighting are giving special loans because of the strong track record of consistent savings and dependable results.
Combining all of the above advantages is how commercial buildings are now finding it less expensive immediately to employ LED lighting systems. To illustrate this, let’s take for example a 100,000 square foot warehouse that converts to an LED lighting system for $115,000. The LED lighting system would make a drastic difference to building costs:
Energy Savings: $20,000/yr
Maintenance Savings: $7,000/yr
HVAC Savings: $3,000 /yr
Total LED savings: $30,000/yr
Local incentives combined average a $15,000 total rebate. This reduces the total cost of the project from $115,000 to $100,000.
So now you have a project that if paid for in cash would yield a 3.33 year return on investment. ($100,000/$30,000=3.33) That is a strong ROI, but it is not a positive cash flow yet.
To go cash flow positive, take advantage of LED lighting financing, and you can make money on your first day of completed installation. Use the $30,000 of savings a year to offset financing $100,000 of project over a 5 year time frame. The payment cost is $1,933/month and savings is $2,500/month. Even with interest at 6% on the loan, you still come out $34,000 ahead within the 5 year time frame, but most importantly over $566/month of positive cash flow is created. Even better is that after 5 years, you get to start taking $30,000 a year straight to the bottom line for the next 10 years as your LED project is already paid off.
Implementing this type of strategy can help commercial buildings upgrade to LED lighting and make money on thebottom line. For assistance, seek out the most informed energy efficiency specialists in your area.