As reported in Distribted Energy
Many business owners delay lighting retrofits due to a misperception of capital constraints, yet efficient lighting can be one of the most cost-effective investments facility managers make. Business owners can reap the benefits of a retrofit and allocate existing funds to more pressing projects, by working with their suppliers to identify the best financial solution customized for their individual needs.
Facility managers frequently forget that financing is often available from the suppliers they know and trust. Graybar, for example, offers a program through its financial subsidiary Graybar Financial Services (GFS) that helps contractors acquire lighting equipment without capital or credit line constraints. Leveraging financial services like this can be critical to getting retrofit projects off the ground.
Immediate Cost Benefits
Simple retrofits generate impressive savings. According to a recent study by GE, facility managers can save $44 over the rated life of a new lamp just by replacing a 75-W incandescent light bulb with a 20-W compact fluorescent. GE calculates savings based on a $0.10 per kilowatt-hour utility rate over the life of the lamp.
Efficient lighting offers tangible workplace benefits as well. In fact, businesses in a recent study by the Rocky Mountain Institute saw improved morale, increased production and fewer mistakes after upgrading their lighting and climate systems. The same study found that a 1% productivity increase could generate enough savings to exceed a company’s entire electric bill.
It is recommended that facility managers make these upgrades sooner, rather than later, to comply with new legislation. While less-efficient products are still available to managers, many new regulations prohibit the sale of replacement products. For example:
* The Energy Independence and Security Act of 2007 requires efficiency enhancements on all 105 W–500 W metal halide ballasts manufactured after January 2009.
* The Energy Policy and Conservation Act mandates that all ballasts and light-bulb cartons carry a “Circle E” label rated for efficiency.
* The Energy Policy Act of 2005 blocks production of mercury vapor ballasts.
The cost of maintenance will also likely increase as manufacturers begin pricing more limited products at a premium. Facility managers should consider comparing their current kilowatt-hours and maintenance costs against proposed kilowatt-hour load and maintenance costs to determine their cost savings. This is especially true when combined with savings from incentives, such as the 2005 EPAct, which recently was extended through 2013 to provide businesses with up to a $0.60-per-square-foot tax deduction on energy-efficient lighting investments.
Facility managers can rely on Graybar to help calculate potential costs, provide leasing support and/or project financing services that help improve monthly cash flow. For example, a typical lease transaction processed through Graybar’s financing subsidiary will flow as follows:
* Once the end user’s credit has been approved, the contractor can acquire the equipment they need for the project from Graybar without having to pay for it or use their Graybar credit line.
* Upon receipt of the signed lease agreement and installation verification, GFS will pay Graybar for the cost of the equipment and pay the contractor for their charges related to labor, installation, maintenance, etc.
* This frees up working capital for the contractor to focus on other important needs.
Another advantage is that lease payments can be structured as a monthly operating expense and won’t impact the customer’s balance sheet. In some cases, businesses can expense lease payments for up to a 100% tax deduction, while in other situations, they can structure monthly installments around the monthly energy savings.
GFS can also finance extended maintenance contracts. This enables customers to bundle charges related to equipment, installation, and maintenance into one easy monthly payment, improving administrative efficiency and providing businesses the security of knowing their contractor will support the equipment investment throughout the lease. The portion of the monthly lease payment tied to maintenance is interest free, and this capability also helps contractors generate monthly revenue over the term of the lease.
Financing in Action
Many businesses, public and private, are taking advantage of these types of offerings. In fact, GFS saw an 86% uptick in lighting financing last year.
One such example is Community Education Partners (CEP), which relied on a monthly leasing arrangement through GFS to finance lighting improvements in three buildings being converted into alternative high schools for at-risk students.
Organizations can also use these arrangements to reap the benefits of state rebates. A school district in Maine, for example, wanted to retrofit lighting, but the state’s rebate fund was depleted before the district could commit to the project. The school turned instead to a financing option. By tying the district’s monthly payments to the energy savings from new, efficient lighting, the project became “self-funding”, and the monthly lease payments were tax exempt.
Retrofits also have a real impact in traditional office buildings, where lighting typically accounts for 30% to 40% of the building’s energy bill.
Ready, Set, Evaluate!
Facility managers should not settle for a one-size-fits-all solution. To get started, facility managers should work with their contractors to determine the scope of the project, design criteria, and any maintenance and safety concerns.
Simple upgrades, such as switching to compact fluorescent lamps, can reduce energy consumption and maintenance costs. Facility managers can also see results by taking advantage of natural light. For example, daylight harvesting technologies and bi-level switching solutions help maximize ambient lighting in facilities with large windows or skylights.
Controls take efficiency a step further by helping facilities manage their lighting only when it is necessary. The New Buildings Institute estimates controls can reduce lighting energy consumption in existing buildings by as much as 50%. Typical controls include occupancy sensors and motion detectors. Time switches, panels, daylight-harvesting sensors, and dimming ballasts are also relevant options.
Depending on the applications and the facility’s needs, managers can integrate controls into an existing automation structure, such as HVAC, or they can use simple time clocks that alter lighting levels based on a pre-set schedule.
When considering controls, facility managers and contractors should examine their state and local codes as well as how the cost affects their return on investment. It is recommended that facility managers bring suppliers into the process as early as possible so that managers can explore all their options.
Making Retrofits a Reality
With a basic understanding of a facility’s operational needs, building managers, and contractors can develop efficient lighting solutions that save their business’ energy, productivity and maintenance costs. As today’s energy prices continue to climb, the cost of waiting could add up to an unexpected expense.
Whether it’s making the actual upgrade—or financing through GFS—lighting efficiency upgrades need not be complicated. Today, facility managers have financing options and opportunities to benefit from tax incentives.* By knowing where to look, businesses can obtain lighting solutions that meet their budgetary and business needs.
* Please consult a tax advisor for details regarding full tax savings and advantages.
Author's Bio: Allen Pilgrim is Manager, Lighting Business Development, with Graybar Electric Company Inc.
Giving Your Retrofit the Green Light With Smart Financing
Many business owners delay lighting retrofits due to a misperception of capital constraints, yet efficient lighting can be one of the most cost-effective investments facility managers make.
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