Paul Coggins, Senior Vice President at Zumtobel Group, explains how lighting professionals can support their clients by using innovative service and finance models.
Most businesses devote a great deal of time and resource to ensuring their processes and workflows are as efficient as possible. Yet many of those same businesses fail to tackle the embedded costs that accompanies inefficient installations.
Usually the reason behind this is allocation of capital budgets. Every proposal to improve energy efficiency, and therefore save money, is typically competing with other demands for capex within the business, and may need to meet stringent return on investment (ROI) criteria. Even if the energy or facilities manager is able to create a strong business case with an acceptable ROI, the company’s directors will often be more focused on core activities such as sales, production etc.
I would suggest that lighting designers, specifiers and installers are in a strong position to help their clients overcome these barriers to more efficient lighting. This can be done by introducing the client to a different approach; one that enables the lighting and controls to be upgraded without dipping into the capital budget.
The solution is ‘Light as a Service’, which links the repayments to the energy and other cost savings that the project will deliver – taking advantage of the major savings that LED lighting and new control systems can provide.
Light as a Service schemes spread the cost of the products and installation over a pre-defined period, with regular repayments that are calculated in relation to the predicted energy savings. Typically, the annual savings will exceed the repayments, so the organisation is saving money from day one.
Moreover, the Light as a Service model enables the company to invest in the best possible solution now by spreading the cost of the investment. This model also ensures that as the lighting technologies continue to develop, e.g. human centric lighting, the Internet of Things, LiFi etc. companies can upgrade in a similar way to other assets they finance, such as car fleets, office equipment etc.
Savings from day one
To put the potential savings into context we can consider some examples.
One such example is a retail space that was using conventional lighting and opted for the Light as a Service model to fund an upgrade. The cost of the lighting is being repaid over six years at £36,000 per annum, yielding first year savings of £41,000. By using the Light as a Service model the customer could invest in the best possible solution but still be cash positive in year 1.
A similar solution for an industrial space replaced sodium lighting with LED lighting and controls. Annual repayments are £17,000, with a first year saving of £30,000.
Clearly every project will be different but these two examples give an indication of the level of savings that can be achieved without the need for any capital expenditure.
The right choice
Clearly it is important to select a scheme that offers the greatest benefit.
For example, the new lighting installation needs to be of high quality and will usually improve the quality of lighting as well as reducing its running costs. This means the project needs to be supported by a company with the lighting knowledge and experience to provide a high quality lighting system.
The selected partner ought to carry out a thorough lighting audit and be able to offer several solutions, explaining the benefits of each. They should also be offering an all-inclusive turnkey service that covers design, installation, commissioning, regular maintenance and repairs. This means that you no longer have to pay for time-consuming re-lamping or repairs to luminaires since all of these maintenance costs will be covered under the agreement.
Every day a conventional lighting system is operating it wastes energy and causes unnecessary carbon emissions through a combination of excessive electricity consumption, high failure rates and high maintenance costs. And this is the case for most lighting installations over five years old, especially if they are using pre-LED lamp technologies and older style ballasts.
Yet, while many companies ‘talk the talk’ when it comes to energy and environmental issues, they are often reluctant to ‘walk the walk’ when it comes to investment. An approach that delivers ongoing savings for many years with no capital outlay is clearly the way to get the finance director’s undivided attention. Modern LED luminaires and controls now make this option very viable indeed.
