Do the Numbers: Calculating Total Cost of Ownership for Replacing Existing Lighting Systems with Energy‐Efficient LED Lighting By: Michael Schratz ‐ Director of Marketing, Dialight Corporation John Krauter – Vice President of Finance, Dialight Corporation For facility managers, the time involved identifying and implementing energy‐saving solutions is often a major factor that deters them from moving forward with cost‐saving alternatives. Not only do they have to meet the latest sustainability goals, but they are also under pressure to simultaneously improve the bottom line and maintain or increase productivity in the workforce. Of the many upgrades a facility can consider for energy, productivity, sustainability, safety, security and building renovation improvements, installing energy efficient lighting ticks all these boxes while also saving money. As the most efficient lighting solution available, retro‐fitting light‐emitting diode (LED) lighting technology produces immediate and quantifiable results from day one. Qualities of LED lighting technology Long life energy efficient lighting technology Significantly reduces maintenance Operates efficiently in extreme temperatures Clean technology that reduces carbon emissions No mercury or hazardous material With rising energy costs and the need to deliver significant carbon reduction on everyone’s agenda, LED lighting can help facility managers meet their goals. While some may question whether such a technology investment will provide real savings and a quick ROI, the fact is that the switch to LED lighting can result in a payback of two years or less when taking into account all of the cost variables. As a technology which is typically warranted to last five years and is expected to last ten or more, it is no surprise that many facility managers have already made the switch to LED. What to take into account in calculating ROI The actual cost for maintaining lighting in facilities includes many non‐capital, re‐occurring expenses. For example, what do you pay per kWh, how much does it fluctuate over a day or a year and where is it projected to be in 5 or 10 years? How often are the lights on and what does it actually cost to change a light bulb? These all affect the total cost of ownership and calculation of the payback period. For every organization different factors need to be weighed in making the ultimate decision. The upkeep of inefficient lighting systems in industrial and commercial areas can involve unique challenges. For the safety of employees, organizations have the added responsibility of meeting the lighting requirements. Lamps may require annual replacement and the predictability of the installed systems may be impossible to determine. The rapid performance degradation and sudden bulb failures associated with incumbent lighting technologies can turn replacement scheduling into a guessing game for facility managers.
In hazardous areas, facility managers in oil and gas, chemical, pharmaceutical and power generation plants may even demand that not only is the bulb changed each time there is a lamp failure, but the ballast as well. The inherent risk of opening a fixture within an environment with gas or dust present demands such extra safety precautions and ultimately results in costly maintenance. Regular servicing of the fixtures also leads to moisture intrusion and deterioration of gaskets and other hardware. How LED technology has overtaken traditional lighting solutions The number of LED lighting products commercially available continues to grow, including fixtures for building products, roadways, parking lots, pathways, and other area lighting. Compared to other technologies, LED fixtures generally consume less power, perform better in extreme conditions, last longer, contain no mercury or hazardous material, and generate a better quality of light. There is no bulb, filament or glass found in traditional light fixtures and as a result the solid‐state design of an LED‐based product makes it highly resistant to shock and vibration. Over recent years, the efficiency of high brightness white LED technology has improved significantly, allowing for its benefits to be introduced into new applications. The technology has grown from “lighting to look at”, to “lighting to see with” for general indoor and outdoor illumination. As with any new technology, there is a fundamental difference between the future technology and the incumbent. LED‐based fixtures are now the most efficient lighting source available primarily due to their high bulb efficacy of 140 lumens per watt which continues to improve, compared to stagnant comparable technologies. Figure 1: Performance gains projected for LED technology from 2009 to 2012. Energy reduction, the simple solution
With soaring energy costs and risks of supply disruption, facility managers are being tasked with new challenges that require new solutions. Energy efficiency not only provides a cost reduction for facilities, it also aligns with sustainability goals. According to a 2010 IFMA survey 1 on energy efficiency, lighting retrofits were the most popular energy efficiency measure over the last 12 months with a whopping 73% surveyed switching to more efficient lighting. Compared to other high output lighting systems such as metal halide, high pressure sodium, mercury vapor and fluorescent, LED lighting can provide at least 50% energy savings. 400W lighting systems are typically installed in high ceilinged facilities and can be replaced with LED systems around 150W or less. Having an instant on/off property, LEDs are not affected by re‐strike, so lighting downtime or warm‐up period is eliminated and in the event of a power outage, the lights will be up‐and‐running immediately when power returns. Turning them off or dimming them when not needed vastly reduces energy use, extends the life of the fixture and contributes to a quick payback. The real cost of lighting maintenance The extended lifetime of LED fixtures means reducing frequent maintenance associated with traditional lighting systems which require frequent and repeated bulb replacements. For this reason maintenance should be considered when calculating the total cost of ownership for facility lighting, as the actual dollars spent on it annually can be substantial, whether using a maintenance department or an outside electrical firm. With high ceilings sometimes a ladder will suffice to access lights, but most likely a scissor lift is required which means more costs. Facility managers may prefer to replace the bulbs in all of their fixtures at once, even if they’re not all ready to be replaced, to minimize disruption time and avoid the risk of failure. By contrast, some wait for many bulbs to fail before calling an electrician, thereby sacrificing light quality and safety on the working level. 1 2010 “Energy Efficiency Indicator” survey conducted by Johnson Controls with the International Facility Management Association (IFMA
Figure 2: Scaffolding that had to be erected each time the lights failed at the Pullen Aquatic Center in Raleigh, NC. Equipment costs can easily double a maintenance bill. In some applications, reaching the fixtures to replace a lamp may be a significant hazard, and require a massive effort. For example, building scaffolding to change lights in an indoor swimming facility may take days and cost a fortune. Rebates and incentives Globally, billions of dollars are available for electrical improvements, helping organizations reduce the upfront cost of upgrades and significantly reducing payback periods. The amount of funding available has increased in the last year, leaving facility managers with great opportunities to move forward on projects even when little capital is available. Rebate incentives have become readily attainable through many utilities across the US, and can be easily located directly on the utilities website. LED lighting often falls under a custom rebate program, dependant on kWh saved annually and from 30‐100% of an investment cost can be provided back to the customer.
Programs like ENERGY STAR® and DesignLights™ Consortium (DLC) are working to qualify LED products, and help differentiate quality products while raising awareness. Case studies Figure3: Rockline’s recent LED High Bay installation at their Arkansas manufacturing facility. To improve energy efficiency and reduce total operating costs Rockline Industries, the largest supplier of wet wipes in North America, recently replaced 140 x 400W metal halide fixtures with 150W LED High Bays. The new fixtures have not only slashed future energy consumption by almost two thirds, but they have also improved light performance and output, reduced maintenance cost and qualified Rockline for a substantial $48,000 energy‐savings rebate through American Electric Power’s Southwestern Electric Power Company.
Figure 4: March Foods before LED lighting (HPS) and after LED Lighting UK‐based March Foods recently upgraded its two 35,000 sq ft warehouses from 450W high pressure sodium lamps to 150W LED fixtures, increasing the floor light level from 9.3 to 20.5 footcandles (fc). The upgrade simultaneously reduced their installed load to 0.4W from 1.2W/sq ft, cutting their energy bill by 67% and reducing carbon emissions by 100 tonnes annually. The company was able to have its LED installation funded by a 4‐year interest‐free loan of £38,000 from the UK’s Carbon Trust. How to evaluate LED products Important differences in LED technology compared to other light sources have created a gap in the industry standards and test procedures that underpin all product comparisons and ratings. New standards, test procedures, and ENERGY STAR criteria for many fixtures have been released, with more in development. In the meantime, product comparison is a fairly laborious, one‐at‐a‐time task. The obvious specifications to consider when comparing LED fixtures are light output, luminaire efficiency, correlated color temperature (CCT), color rendering index (CRI), wattage, warranty, compatibility and ease of installation. Unfortunately, the review process cannot stop there, as not all aspects of LED products are black and white. Reliability of LED‐based products is key to computing a payback period, but depends on many factors. There is no question that the individual LEDs themselves will last a long time, but the most crucial aspect of a fixture design is the driver that powers them. For maximum optical performance, efficiency, reliability and functional features, the driver must be optimized around the LED load and integrated into the mechanical aspects of the light. In addition its design should take account of the lights application and operating environment. The future of LED technology for ‘smart’ buildings
With full dimming ability LED technology allows for further wattage reduction. In many circumstances, full 100% light output is not required for the full time that the lights are on. LED technology allows for the lights to be dimmed with simple circuitry, and paired with occupancy sensors to create a ‘smart’ lighting system. Current options include STEP dimming for specified light level percentages (typically 25%, 50% & 100%), or variable dimming for custom light output levels. Advanced dimming can also be considered for an ‘intelligent’ lighting system as an automated response to a specified task, user requirement or environmental change. For example, the LED light fixture paired with a photo cell can determine the amount of natural light provided, and adjust its output according to what is required. Using different sensors, the system can react and improve or decrease light levels with the presence of certain gases, dust or fire. LED light manufacturers are also starting to introduce light systems that can be monitored & controlled remotely. These advanced systems will come with lighting fixtures coupled to communication devices which form a network through which they talk to a central energy management system. Conclusion With numerous products now commercially available from a number of reputable manufacturers, many companies worldwide have already started to realize the benefits of LED technology and have become more proactive in its adoption. Future improvements in the technology and the integration of advanced dimming, remote monitoring and intelligent lighting solutions, will enable facility managers to exercise more control and predictability in the efficiency of their lighting systems. Bio: Michael Schratz is the Director of Marketing for Dialight, he has responsibility for the Company’s worldwide corporate branding, messaging, market positioning and communications including web marketing, PR and social media initiatives. Michael plays an integral role in managing new product introductions, successfully rolling out new LED lighting products into the market. John Krauter is the Vice President of Finance for Dialight Corporation, a leader in LED lighting applications. He is deeply involved with the firm’s strategic planning and financial operations. Prior to joining Dialight, Mr. Krauter worked as a financial consultant with Resources Global, a large consulting firm with offices in more than 80 international locations. From 1979 to 2006, Mr. Krauter worked for various divisions of Siemens, one of the largest electronics and industrial engineering firms in the world. Joining the firm as a Senior Internal Auditor, Mr. Krauter was consistently promoted to higher level positions and left the firm as Chief Financial Officer of the North America Siemens Hearing group. Trained as a Certified Public Accountant, Mr. Krauter began his career in 1976 as an auditor at the powerhouse consulting firm Deloitte & Touche.