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Glow Industry
Financial Incentives
Financial incentives available for a retrofit include annual energy savings, annual maintenance savings, utility rebates, tax deductions, American Recovery and Reinvestment Act stimulus funds, increased property value, and productivity, Precision-Paragon’s Lou Preston points out.
“Advances in technology over the past couple of years allow us to implement lighting systems that have a long life and are inexpensive to replace,” notes Preston. “Most light sources being replaced have a 20,000-hour mean life. Our fixtures today utilize light sources that range from 36,000 hours up to 100,000 hours. Improvements in technology have greatly reduced the material and labor costs associated with maintenance.”
Financial incentives available for lighting retrofitting usually depend on one’s location, Dialight’s Michael Schratz says.
“A lot of times, it depends on how many total kilowatts you’re saving,” says Schratz. “Some states are better than others. New Jersey requires 100,000-kilowatt-hour savings to be able to qualify for any rebates. That could mean 150 to 200 fixtures, so a bigger facility would qualify, but nothing for smaller companies. In Connecticut, you can get a rebate for one bulb.”
In Pennsylvania, any government or school district can implement energy-efficient projects under Act 77, known as Performance Contracting, says Atlantic Energy Concept’s Tracy Niedrowski.
“What this allows these entities to do is use the energy savings dollars to offset the cost of the loan or financing vehicle used to fund the project,” says Niedrowski.
Atlantic Energy Concepts designs energy-efficient lighting retrofit solutions for existing or new buildings. In addition to offering energy-efficient lighting retrofits, Atlantic Energy Concepts also provides energy assessments and energy and carbon footprint benchmarks that incorporate the benchmark rating systems of the US Department of Energy, EPA Energy Star, and US Green Building Council’s LEED.
“For example, if you had a project that cost $5 million, but had a monthly energy savings of $150,000, you can use that $150,000 to offset your loan payment. Then at the end of the financing period, you will then realize the full amount of savings. You can also use this in the private sector using leasing options for financing the projects.”
“We can offer any energy-efficient lighting technologies as long as it makes sense for the client’s application,” says Niedrowski. “Most of our retrofits incorporate T8 fluorescent lamps and high-efficiency electronic ballasts. However we have installed T5HO lamps, LED, induction, and lighting controls—either wireless or wired systems—as well as photocells for daylight harvesting opportunities.”
Niedrowski points out that rebates are “ever-evolving and changing from the availability to the rebate amount to the form that is required to obtain the rebate.”
To address that challenge, the DesignLights Consortium, operated by the Northeast Energy Efficiency Partnerships, is working with about 30 different utilities to qualify some lighting fixtures.
“They take a look at all of the third-party test reports, qualify the data against the actual fixture, and they basically have one qualified products list that these 30 utilities are now going to in order to see which products are already pre-qualified,” says Schratz.
“They’re working in parallel with Energy Star where Energy Star is not currently rating lighting fixtures. They are acting as a third-party certification group for these utilities working for these rebates.”
Preston says it is not uncommon for a rebate to cover 30% to 70% of the total project costs.
“To operate more efficiently, they need to reduce demand-side energy use,” he points out. “Most utility rebate programs are funded by all of their energy users via a line on their monthly utility bills.”
Under the federal governments’ Energy Policy Act of 2005 (EPAct 2005), there is a $0.60-per-square-foot tax deduction incentive for qualifying lighting projects, Preston points out.
“EPAct is basically an accelerated tax deduction—instead of taking the equipment depreciation over a five-year period, you can take it in one lump sum in the first year of project completion,” says Niedrowski.
Lutron helps facility managers figure out available state and utility financial incentives through an online tool.
Preston points out yet another financial incentive: energy-efficient lighting systems increase the value of a property whether it is being leased or sold, he points out.
As for a return on investment (ROI), many manufacturers are citing a period from one year to around five and beyond, depending on such factors as the scope of the project, the building, its operating hours, and a state’s kilowatt-hour rates.
Referencing statistics from the Energy Costs Savings Council, a typical ROI is a half-year on energy-efficient projects, meters, and monitors; 2.2 years on lighting; 2.3 years on controls; 2.4 years on motors and drives; 3.6 years on HVAC; and 5.9 years on building automation, according to Graybar.
Dialight’s ROI tool on its website is based on figures derived from the United States Environmental Protection Agency and the United States Department of Energy.
“Our tool asks the questions that would help determine the maintenance savings, the energy savings, and the installation costs against the traditional fixtures being replaced, and it will do the math for you to figure out what your ROI is,” says Schratz.
Blue Sky Lighting Products’ Bear Shelton says the ROI depends on the type of light. Induction lighting’s ROI is two to three years with a 100,000-hour lifespan, he says. For LED, it can be two to four years on average, with a 50,000-hour lifespan. For fluorescent, it’s one to two years with a 30,000-hour lifespan.
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