It is much easier to convince a business to invest in a project with environmental benefits if it will save that business money. Lighting retrofit projects often fit into this category, especially in the case of industrial buildings.
Typically, in a well-designed project, lighting energy costs can be reduced by 40-60 percent, and sometimes more. These savings are achieved by a combination of replacing the primary working components within light fixtures (i.e. newer energy-efficient lamps and ballasts); redesigning fixtures for a different configuration of lamps, ballasts, and reflectors; and replacing existing fixtures with new, more efficient ones. Additional savings may come from installing occupancy sensors so that lights can be automatically turned off when no one is in an area.
In addition, a lighting retrofit project can save a business on maintenance costs—both materials and labor. This is achieved through a combination of products with longer lives and/or a reduced number of components.
The cost-effectiveness of a lighting project is, of course, directly influenced by the number of hours that the lights are actually used. If a factory has many lights, but they are only turned on for one shift, then the savings may not warrant the cost of upgrading. The more the lights are on, the greater the energy savings opportunity.
The Financial Decision-making Process
Before deciding to embark on a lighting upgrade, a company must determine whether the payback period is attractive enough to warrant the purchase. For example, a $100,000 lighting project with $40,000 annual energy savings has a 2.5-year payback. In industrial facilities, if the payback is greater than three years, there is usually not much interest. For some businesses the payback period required may be considerably shorter. Some companies put additional variables into the payback equation based on their unique accounting methods or tax situations, making it even more challenging to provide a payback number that is acceptable.
While most businesses base lighting retrofit project decisions almost entirely on financial criteria, some factor improved light levels or light quality into the decision. The goal in lighting retrofit design is to achieve an appropriate balance between energy savings and light quantity/quality. Environmental benefits are usually not a significant part of the decision-making process, although some companies will post the environmental benefits of a lighting project (reduced electricity generation = reduced pollution) for their employees to see and/or publish it in corporate annual reports.
When all of the costs associated with a lighting project—material, labor, project management, trash disposal, lamp recycling, lifts, etc.—are added up, the project often becomes too expensive to be approved. Fortunately, the larger New England utility companies offer financial incentives in the form of rebates to encourage facility owners to undertake lighting retrofit projects as well as other energy conservation measures. The current industrial rebate programs provide sufficient incentives to "buy down" the project cost to levels that meet many businesses’ payback requirements. Hopefully these programs will not go away. They are achieving the desired result of encouraging many businesses to replace older inefficient lighting components with new state-of-the-art technologies and save millions of kilowatt hours of electricity annually.
Overcoming Additional Obstacles
Even if a lighting project has a payback period within the parameters of the company’s requirements, it may still have to compete with other budgetary demands. In industrial facilities, lighting projects often have to compete with budget requests for new production equipment. If the lights work, even inefficiently, the budgeting decision may favor a machinery purchase that can increase production and revenues. Or, the lighting project may be put on a back burner to be considered in a future round of budgetary decisions.
Financing options may make the purchase of a lighting project more feasible if available cash is scarce. Financing can be structured so that the monthly payment is less than the monthly savings. This means that there is no initial capital outlay required, and the project will result in an immediate positive cash flow. Financing can enable some projects to move forward that might not otherwise have a chance.
Another obstacle to overcome is proving that calculated energy savings figures are accurate. On an electric bill, the lighting portion is not separated from anything else, and, in industrial facilities, the lighting load is usually a much smaller portion of the total electric bill than their process load (production equipment). Therefore, if the electricity use for production equipment varies over time, energy savings resulting from a lighting upgrade project may or may not be visible on subsequent electric bills. To prove that the savings that we calculate will really be achieved, and without sacrificing light levels, ESCO Energy Service Company always includes energy savings and light level verification testing as part of the project. The testing consists of taking digital light levels and kilowatt readings from a representative number of the main fixture types. We then upgrade or replace those fixtures in the way that we have specified in our proposal. This is followed by repeating the light level and kilowatt readings on the upgraded fixtures and comparing the "before" and "after" numbers. In almost every instance, the tests create a lot of enthusiasm for proceeding with the project. It’s one thing to see potential benefits on paper, and it is another thing to see upgraded fixtures next to the old ones producing equal or more light using 40-60% less electricity.
Finally, before factory owners/managers sign contracts for lighting projects, they need assurance that the installation will not cause significant disruption to their operations. Energy savings are great, but job number one for an industrial facility is to produce products. If anything gets in the way of that, it costs the company money. Therefore, a contract will never be signed for an industrial lighting project if there is any doubt about the caliber of the company installing the project. The quality of the proposal, the ability to address the customer’s concerns, attention to detail, a successful test installation, and a solid list of references that can be called and/or visited are the main things that will alleviate fears.
Jobs and the Environment
Industrial lighting upgrades are a great win-win for the economy and the environment. On the economic side, manufacturers can cut costs, become more competitive, and provide a healthier workplace for their employees. Companies like ESCO that offer lighting retrofit services provide jobs for electricians, project managers, and administrative and salespeople. ESCO purchases millions of dollars worth of lighting equipment and related hardware from many different suppliers annually. We also rent lifts, utilize regular disposal companies and EPA-authorized hazardous waste handlers (to recycle lamps and PCB ballasts), and provide business to finance companies.
The environment wins because substantially cutting the demand for electricity in large industrial buildings significantly reduces the need to build more oil, coal, and nuclear power plants with their associated air pollution, global warming, and radiation hazards. Reducing energy demand and generating energy in a cleaner, more efficient manner are two sides of the same sustainable energy coin.
Andrew Bloom is a lighting retrofit specialist with ESCO Energy Services Company based in Pittsfield, Massachusetts. He can be reached at abloom@lightingretrofit.com.
NESEA Network