As much as I don’t like it, lighting retrofit projects have to compete for corporate funds just like all other projects.  If it was up to me, lighting retrofits would just be given the green light and prioritized above all other capital requests, and corporations large and small would come flocking to RelightDepot for their energy efficient lighting needs.  In the real world, project sponsors have to justify why they want to spend money on new lights if the existing ones work just fine.  The most common way to do that is by building a business case that includes a return on investment (ROI) and a simple payback calculation.  In this article, I’ll walk you through the simple math that will help you prove that the money spent on a lighting retrofit is money well spent.

Before we begin, there are a couple of pieces of information that you’ll want to gather in order to plug into the ROI formulas below.  These are the following:

• Total number of existing fixtures. Take advantage of our lighting audit form to capture the details you’ll need for your lighting retrofit.
• Total system Watts for the existing and new fixtures. Refer to the Total System Watts for Old Fixtures article to look up typical system wattage values for common industrial fixtures.   Most of the fixtures in our catalog include the system wattage you can use for the new fixture section of the formula.
• Operating hours per year. This is simply the total number of hours the lights are on during one year.  This can be calculated by taking the Work hours per day and multiplying by work days per year.  If the lights are never turned off and operate 24 hours per day for 365 days per year, the burn hours would be 8,760 hours per year.
• Cost of Electricity per kilowatt-hour (kWh). Electric bills aren’t the easiest things to decode.  Some have multiple per-kWh charges in addition to peak and demand charges.  We find the easiest thing to do is to total all of the per-kWh charges and divide by the total kWh consumed.  You can also back out any fixed lease charges (outdoor lighting, for example) and divide that number by the kWh consumed.  For quick calculations we use $0.10 per kWh but you could also just use the average retail electric rates that are listed by state on the Department of Energy website.

With these values in hand, it’s time to calculate the annual savings from a lighting project and get to the return on investment and simple payback formulas.

Calculating Annual Savings for Lighting

The first part of calculating the ROI is to figure out how much the new lights would save us in a singe year.  This can be done by plugging the values above into the formula below:

Annual Savings =  # of Fixtures  X  Burn Hours per year  X  kWh Rate  X  (  (Existing fixture system wattage – New Fixture System Wattage)  /  1000 )

Lighting Return on Investment

The Return on Investment calculation for a lighting project provides a way of measuring the amount of benefit the organization will receive from the new lighting project relevant to the amount of investment that is needed in order to purchase and install the new lights.  The ROI is typically displayed as a percentage and you can easily think of it as the percentage of the investment that the project will return in profit over one year.  Any utility rebates, or other State and Federal incentives that may be available, could significantly improve the outcome of the return on investment calculation.  Feel free to contact us or refer to the Database of State Incentives for Renewables and Efficiency if you would like to find out what additional incentives you may qualify for.

ROI (%) = (  Annual Savings  +  Total Rebates  )  /  ( # of Fixtures  X  Installed Cost per Fixture  ) * 100

Return on investment may also be expressed in dollars.  This is typically done when looking at the ROI over a certain period of time.  If your organization prefers this method, it would typically define how long the ROI period should be.  I’ve seen this be five or 10 years with our customers.

ROI ($) = (  # of Years in Period  X  Annual Savings  )  +  Total Rebates  -  ( # of Fixtures  X  Installed Cost per Fixture  )

Lighting Payback Period Calculation

The payback period is the amount of time it would take for the new lighting project to generate enough savings to make up for the investment required to complete the project.  After this point, all of the savings that the project generate go straight to the bottom line for the company and can be used to fund other initiatives.

Payback Period (Years)  =  (  # of Fixtures  X  Installed Cost per Fixture  )  / Annual Savings

Count On Us

Of course, we would be more than happy to walk you through any of these calculations.  We could also investigate what rebates may be available for your project and can even arrange for one of our partners to go through your facility and count up lights.  All you have to do is contact us and we’ll take it from there.

Prior to the late 1970′s, ballast manufacturers used a group of compounds called polychlorinated biphenyls, or PCBs, to insulate and cool the inner components in certain electrical products. One common application was to cool the internal capacitor of fluorescent lamp ballasts. These components contained a small amount of PCB oil and most of it is typically absorbed by several layers of paper within the device. Since these compounds were found to be health hazards and were linked to the development of certain cancers, they were prohibited by the US Congress in 1979. The risk of PCB leakage is quite low, however anyone considering a lighting retrofit project, or involved in these types of projects routinely, must understand how to determine if a ballast contains PCBs and what to do if it does.

Identification

There are several methods that can be used to determine if ballasts contain PCBs:

• Ballasts that were manufactured without PCBs will have a very obvious “No PCBs” mark on the manufacturer’s label.
• Many manufacturers will imprint a manufacturing date on the ballast case. Any ballast with a manufacturing date prior to 1979 should be assumed to contain PCBs. This may lead to false positives, but it would eliminate the risk of downstream contamination. Date codes after July 1, 1980, can be considered to not contain PCBs.
• If the building was erected after July 1, 1980, there is a good chance that the light fixtures were manufactured after the legislative cutoff for PCBs and therefore be PCB-free.

Unfortunately, after many years of exposure to heat, dust and other elements, the labels on old ballasts become illegible or are missing altogether. If PCBs cannot be ruled out based on the age of the building or lighting system as a whole, the prudent response would be to treat suspect ballasts as if they did contain PCBs. This is especially true if PCB ballasts have already been found in the facility.

Screening and Disposal

When working in a facility where PCB ballasts may be present, the safest course of action is to screen all fixtures being removed. In cases where the risk of misidentifying a PCB ballast as non-PCB is high, it may be beneficial to remove all ballasts from old fixtures. Requiring the same amount of effort for both types of ballasts ensures a consistent process will be followed.

Ballasts that are positively identified as not containing PCBs can safely be disposed of in the standard waste stream or sent to a recycling facility that can reclaim the metals. All other ballasts should be treated as having PCBs. These must be sealed in a poly bag and placed inside an 18 gauge steel drum. The drum must be properly labeled and, when full, locked with a ring and bolt. Personnel working with PCB ballasts should wear nitrile gloves and disposable coveralls. All gloves, coveralls and any cleaning materials that are used should be disposed of with the PCB ballasts in the steel drums.

The Non-Standard-Lighting for Business Program provides cash incentives for energy efficient lighting projects, both new construction and retrofit. Equipment must be installed after October 28, 2009 to receive incentives. That means even completed projects with eligible equipment can apply to receive cash back. Incentives available through the Non-Standard-Lighting for Business Program include per-unit incentives as well as performance-based incentives:

• Compact fluorescent lamps, – $1/screw-in lamp or $15/hardwired lamp
• LED exit signs (retrofit only, double or single sided) – $15/sign
• Occupancy sensors – $25/sensor
• Daylighting photosensors – $25/sensor
• All other energy-saving lighting products or technologies are performance-based, and are incentivized at $0.05 per kWh saved. All equipment installed must be code compliant.

RelightDepot can help you with all of the required paperwork and ensure that your application conforms to the program requirements.  For more information, don’t hesitate to contact us or visit the EnergySavePA website.



• Achieve a 20 percent improvement in energy efficiency by 2020: Under the President’s plan, by 2020, we will make commercial building space in the United States 20 percent more energy efficient through cost-effective upgrades.
• Reduce companies’ and business owners’ energy bills by about $40 billion per year: By making buildings more energy efficient we will save business owners money by reducing their energy bills by about $40 billion at today’s prices. That money that can be put to better use hiring more workers, inventing new products, and creating shareholder value.
• Save energy by reforming outdated incentives and challenging the private sector to act: The President is calling for an aggressive reform of existing tax and other incentives for commercial building retrofits and proposing a new competitive grant program. In turn, he is asking corporate leaders to commit to making progress toward his energy goals.

The President’s Plan for Better Buildings
The President’s Budget will propose to make American businesses more energy efficient through a series of new initiatives:

• New tax incentives for building efficiency: The President is calling on Congress to redesign the current tax deduction for commercial building upgrades, transforming the current deduction to a credit that is more generous and that will encourage building owners and real estate investment trusts (REITs) to retrofit their properties. These changes could result in a ten-fold increase in commercial retrofit take up, leveraging job- creating investments.
• More financing opportunities for commercial retrofits: Access to financing is an important barrier to increased retrofit investment in some market segments. To address these gaps, the Small Business Administration is working to encourage existing lenders to take advantage of recently increased loan size limits to promote new energy efficiency retrofit loans for small businesses. The President’s Budget will also propose a new pilot program through the Department of Energy to guarantee loans for energy efficiency upgrades at hospitals, schools and other commercial buildings.
• “Race to Green” for state and municipal governments that streamline regulations and attract private investment for retrofit projects: Much of the authority to alter codes, regulations, and performance standards relating to commercial energy efficiency lies in the jurisdiction of states and localities. The President’s Budget will propose new competitive grants to states and/or local governments that streamline standards, encouraging upgrades and attracting private sector investment.
• The Better Buildings Challenge: The President is challenging CEOs and University Presidents to make their organizations leaders in saving energy, which will save them money and improve productivity. Partners will commit to a series of actions to make their facilities more efficient. They will in turn become eligible for benefits including public recognition, technical assistance, and best-practices sharing through a network of peers.
• Training the next generation of commercial building technology workers: Using existing authorities, the Administration is currently working to implement a number of reforms, including improving transparency around energy efficiency performance, launching a Building Construction Technology Extension Partnership modeled on the successful Manufacturing Extension Partnership at Commerce, and providing more workforce training in areas such as energy auditing and building operations.

Building on Progress

The Better Buildings Initiative will complement the initiatives the President has already launched for government and residential buildings, including the $20 billion in funding for building energy efficiency in ARRA:

• Through ARRA investments in programs like the Weatherization Assistance Program, Better Buildings, and the Energy Efficiency and Conservation Block Grant, we will retrofit 600,000 residential homes.
• In last year’s State of the Union, the President called on Congress to pass a package of incentives to encourage Americans to make their homes more energy efficient. We remain committed to the passage of the “HOMESTAR” program.
• The Penn State-led Greater Philadelphia Innovation Cluster is the winner of the federal Energy-Regional Innovation Cluster (E-RIC) competition. The E-RIC competition is a ground-breaking $129.7 million multi-agency grant program that delivers coordinated, targeted grants to spark the growth of innovative, energy-efficient building systems and technologies. This effort involves extensive collaboration across agencies, including Commerce and the Small Business Administration.
• ARRA provided GSA $5.5 billion to improve the energy performance of existing buildings and to start building a new generation of energy efficient buildings.
• The President signed an Executive Order directing federal agencies to achieve zero net energy by 2030 and employ high-performance and sustainable design principles for all new construction and alterations. At least 15 percent of existing buildings need to meet these guiding principles by FY 2015.

It’s February and Ameren Illinois’ Act On Energy ® program is offering a sweet deal!  For all new applications submitted from February 14th through March 31st of 2011 that include electric measures, an additional 15% cash bonus will be added on top of the incentive.  This could improve your project’s ROI and increase your incentives for high bay lighting replacements and other non-T12 retrofits.  Since the T12 lighting phase-out program already pays a 10% bonus, T12 measures are not eligible for this 15% bonus.  The current 10% bonus for T12 lighting upgrades offers the best incentives for T12 replacements that will be offered for the duration of this program.

In order to receive the 15% incentive bonus, projects must be completed no later than May 31, 2011 and final paperwork must be received within 30 days of project completion.  This special offer cannot be combined with any other promotions or bonuses.

RelightDepot.com can help you apply for these or any other benefits made available through local utility companies.  For more information on the bonus program, don’t hesitate to contact us.