CFO Studio Magazine, 1st Quarter 2012
By Michael Schratz, Director of Marketing, and John Krauter, Vice President, Finance

Switching to LED lighting can result in a payback of two years or less.

INSTALLING ENERGY-EFFICIENT LIGHTING is one of the most effective and efficient upgrades a facility can implement to save time, money and energy as well as improve overall productivity, sustainability, safety and security. As the most efficient lighting solution available, light-emitting diode

(LED) lighting technology produces immediate and quantifiable results from day one.

While some may question whether such a technology investment will provide real savings and a quick ROI, the fact is that switching to LED lighting can result in a payback of two years or less. With technology that is typically warranted for five years, and most often lasts 10 or more, it is no surprise that making the switch to LED can deliver fast and significant ROI.

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

LED lighting consumes much less power than traditional incandescent, metal halide or mercury vapor lights, with superior energy efficiency that can slash energy consumption by as much as 50% in virtually any application. In states where the energy rate is quite high, such as in New Jersey, New York and other areas, this energy savings can have a dramatic impact on bottom-line performance.

For example, at Arkansas Rockline Industries, a major supplier of private label wet wipe products to Walmart, a one-to-one replacement of metal halide fixtures with LED high bay lighting cut the operational and energy costs of the lights by some $75,000 per year to just $25,000. And, because LED lights produce much less heat, the facility also noted a 20-ton reduction in its air-conditioning demand, further reducing energy costs.

A correctional facility in the state of Oregon reported a significant drop in its energy consumption — to the tune of $140,000 in annual savings — by converting to high-efficiency LED lighting.

Meanwhile, a building products provider in Connecticut shaved more than $5,500 a year from its energy bill, thanks to LED lighting.

Longer Life Reduces Maintenance Costs

While often considered an unavoidable expenditure, the actual dollars spent maintaining traditional lighting can be substantial, whether using a maintenance department or an outside electrical firm. Simple bulb changes often demand the use of a scissor lift, a halt in production and other costly inefficiencies. Equipment costs alone can easily double a maintenance bill. In some applications, reaching the fixtures to replace a lamp may be a significant hazard and require massive effort.

LED fixtures eliminate these headaches and can bring the cost of lighting maintenance down to virtually zero. With their exceptionally long-life performance, the best LED systems today can provide at least a decade of worry-free, high-quality lighting that delivers significant savings.

Since switching to LED fixtures, a natural gas transmission and treatment operator in Colorado has saved $4,800 a year in bulb expenses alone, plus another $57,500 in labor, for a grand total of more than $60,000 in annual direct maintenance savings. At Rockline’s facility, the elimination of bulb changes has saved the company at least $5,000 a year, not including the cost of lift rental to reach the fixture mounting height.

The savings are also significant at power generation and other facilities with towers or stacks, like the Mount Bethel PPL generation facility in Bangor, PA. Here, the company saved about $12,000 in maintenance costs by converting its six Xenon stack beacon lights to LED beacons. And, because the LED products will last much longer, the company also reduced its risk of costly FAA fines levied as a result of burned-out bulbs.

Rebates and Incentives

In addition to the inherent energy and maintenance costs realized by switching to LED, the U.S. Department of Energy (DOE) has implemented various rebate and incentive programs to significantly reduce the upfront cost of upgrades and shorten 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. LED lighting often falls under a custom rebate program dependent on kWh saved annually, and ranges from 30%-100% of investment cost provided back to the customer.

The building products manufacturer in Connecticut took advantage of a $30,000 rebate from Connecticut Light & Power that, combined with energy and maintenance savings, generated a 1.5 year payback on its LED conversion. And, Rockline garnered a $48,000 rebate from its power supplier, American Electric Power’s Southwestern Electric Power Company.

The Bottom Line

For its energy efficiency, maintenance savings and overall lower total cost of ownership — not to mention attractive rebates and incentives — LED technology has already been recognized by the industrial lighting world as the undisputed successor to antiquated conventional lighting systems. With numerous products for a wide range of applications 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.

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