What if you can’t afford LED lights?

Elisa WoodBy Elisa Wood
December 4, 2012

Advanced lighting has brought us not only energy savings, but also a slew of new screw-in-a-light bulb jokes. For LEDs, it usually goes something like this: How many people does it take to screw in a LED light? One. And a roomful of deep wallets to pay for it.

To be fair, the cost of LEDs (light-emitting diodes) has been falling dramatically and is now even competitive with conventional lighting in certain circumstances, according to the US Department of Energy.

Further, LED systems offer big energy bill reductions. Installations quickly pay for themselves, often in under two years for businesses.

“So if you have capital to spend, it becomes a very straight-forward approach to energy efficiency,” said Tom Pincince, president and CEO of Boston-based Digital Lumens, in a recent interview.

But many businesses have no capital to spare these days. What then?

That’s where the next chapter begins in the LED lighting story, according to Pincince. And it follows the dictate that has brought success to other green energy products, such as solar and energy efficiency building retrofits: Find a way to remove the customer’s upfront costs.

Digital Lumens  plans to move  in that direction early next year with what it calls ‘lighting as a service.’ Business customers basically outsource their lighting to Digital Lumens, with the focus of the deal on the cost of energy, rather than the cost of the equipment.

The customer enters into a shared-savings agreement with the company, where Digital Lumens installs, operates, maintains and updates equipment and continually optimizes software so that the system achieves greater energy savings. Digital Lumens and the customer then share the money saved.

The approach requires that the lighting contractor give close attention to the customer’s system. Lighting maintenance is likely to occur on a daily or weekly basis, software optimization quarterly and equipment replacement every three to five years, he said.

Fine tuning software is particularly important because of the ‘intelligence’ employed by today’s advanced lighting. We no longer have to remember to turn the lights out when we leave a room because the light remembers for us. Computer sensors in the lights track human behavior and respond, or they notice when sunlight brightens a room and they dim accordingly. In industry, this might translate into lights turning on as a worker drives a piece of heavy equipment into a facility and then shutting off as the worker leaves.

The solar energy industry burgeoned once it figured out consumer and business friendly financing packages. Pincince sees lighting moving in the same direction. Under the  popular solar power purchase agreement, customers pay no upfront costs for solar panels, but only for the energy they use from the panels, while third parties install, own, maintain and finance the system.  Lighting offers the opportunity for a similar approach but “with negawatts rather than megawatts,” he said.

It’s important for the LED industry to take this turn – to look at new ownership/service models – because some forecasters say that while LED costs will continue to drop, the decline may not be as dramatic as in the past. Falling microchip prices accounted for much of the price drop, and now chips contribute less to the total cost of the LED. So falling chip prices will have less impact on LED prices in the future, according to Digital Lumens.

LED is beyond  a doubt a hot market. Groom Energy pegs 2012 annual market revenue at $630 million in North America and forecasts 40 percent annual growth through 2016. That puts the LED market at $1 billion next year.

So expect to see more and more players like Digital Lumens capturing market share by offering new ways to make LEDs affordable. With luck, the screw-in-a-LED light bulb jokes will get better too.

Elisa Wood is a long-time energy writer whose free newsletter is available at RealEnergyWriters.com.

Elisa Wood About Elisa Wood

Elisa Wood is an editor at EnergyEfficiencyMarkets.com. She has been writing about energy for more than two decades for top industry publications. Her work has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

Comments

  1. Dennis McCarthy says:

    Elisa

    I sell LED lighting and have for a few years – these schemes have been around for
    years – They haven’t been that popular – with merit.

    Who wants to buy a VCR on time payments – even if the cost’s for said VCR are
    covered by not going to a movie theatre occasionally- the products (up to now)
    have been a mediocre bargain – sure reduced kW consumption IS laudable but look
    to the suckers who bought underperforming luminiares 2 years ago – would
    you go around crowing about your 35 lumen per a watt – set CCT lamps
    that were typical back then at this time AND these “buyers” are in year 3 with these performance
    laggards – I’m a LED zealot but based on the value proposition has favoured procrastinators.

    SSL makes sense on merit – we in the industry are looking forward to “kicking away the crutches”
    good bye to the” Let the savings pay for it schemes”, adios rebates, see ya incentives.
    It foist a lot of crappy items out there- on under informed LED luminiare buyers.
    We will soon be seeing OLETs the size of a pushpins putting out 900 lumens and OLEDs
    that will make the screw based – so so- luminiares as desireable as those VCR’s.

    Advocacy for the “scheme” is what lesser quality SSL makers like to hear-
    it’s like the old adage there is a sucker born every minute

  2. Rob Kirkpatrick says:

    Elisa, I suggest you consider who’s considering the stragegy in this case. None of your grumps above apply.

  3. If I can afford LED Lights, I will decorate my house full of them. If not, I will still buy some, ’cause I like them so much.

  4. It would be interesting to see some of the details of the ‘lighting service contracts’. I like the creativity of overcoming obstacles to progress.

    I’m wondering: 1) Are the lights in question put on separately metered circuits? It seems we’d need to know how much electricity was being consumed by the lights themselves.
    2) If the lights are used less because they dim when the sunlight brightens the room beyond the setpoint, do those savings apply to the LED or to the dimming circuits and technology? Afterall, dimming would be a benefit regardless of the artificial lighting source.
    3) If I forget and leave the lights on over night, have I saved anything? (Answer: no). The savings might be calculated by multiplying the hours of usage times the efficiency difference of the two lighting sources but this approach assumes I need operate the lighting for all the hours they are ON.
    4) I like the idea of selling efficiency projects based on the savings they provide but I’ve always stumbled over the details because the licensee’s behavior can skew the apparent savings.

  5. Nearly everyone is talking about LED now, but seldom people know there is another leading luminaire — Induction luminaire (also named electrodeless lamp or electromagnetic lamp)– which has life span up to 100,000 hours and 90% energy saving compared with incandescent lamp, and half price of LED. In display and low wattage, LED is outstanding, but in industrial area, Induction lamp definitely is more competitive. http://www.lvd.cc; email: lvdibd26@lvd.cc

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