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LED Lighting Has a Short Payback Period

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LED Lighting Has a Short Payback Period

Even when dealing exclusively with energy efficiency, it is important to plan the order in which different measures will be deployed. In many cases, the best starting point is to upgrade the existing lighting to LED technology because LED lighting has a short payback period.

Before carrying out an energy efficiency or renewable energy project in a building, it is important to determine which measures are viable and the optimal order in which to implement them. For example, if a manufacturing company is considering premium efficiency motors for all of its processes and power generation from biomass, it makes sense to go for the motor upgrade first so that the biomass plant can be sized smaller.

Why LED Lighting is a Great Starting Point for Energy Efficiency?

The advantage of starting with energy efficiency measures that have shorter payback periods is that they reach positive cash flow relatively quickly, and their savings can then be used to help cover the cost of other measures. The payback period of an LED retrofit depends on several factors, but it rarely exceeds four years, and can even be less than one year if project conditions are favorable. The following are some factors that reduce the payback period of LED lighting upgrades:

  • Having rebates from local utility companies to reduce the upfront cost.
  • Receiving federal grant funding via the REAP Grant for energy efficiency
  • Upgrading to LED from an inefficient lighting technology, such as metal halide or T12, yields higher savings than upgrading from more efficient lighting types such as T5.
  • Having long operating schedules – for example, a company that works 24 hours a day with multiple shifts will save three times as much energy per month with LED lighting, compared to a company with a normal 8-hour schedule.
  • High electricity prices translate into more cash savings per each kilowatt-hour of energy.

LED Lighting Can Provide Air Conditioning and Refrigeration Savings

When estimating the savings of LED lighting, calculations are often based on the direct reduction in lighting power. However, in air-conditioned or refrigerated spaces, there can also be significant indirect savings thanks to the reduced heat footprint of LED fixtures. This effect is minimal in homes and small businesses, but can be significant in large commercial buildings with thousands of fixtures.

  • In order to illustrate the concept with an example, assume a large commercial facility has 4000 fluorescent fixtures that consume 90 watts each, for a total of 360 kilowatts.
  • If all these fixtures are replaced with an equivalent LED product that only consumes 50 watts, total power consumption is reduced to 200 kilowatts.
  • In other words, 160 kilowatts of heat are no longer being released indoors, and the air conditioning system no longer has to handle that cooling load – this is equivalent to slightly more than 45 tons of refrigeration.

Companies with warehouses that have cold-storage areas can also achieve significant cooling savings with LED lighting: unlike the AC systems in most commercial buildings, these cold-storage rooms never stop operating.

If there are plans to upgrade air conditioning systems, carrying out an LED retrofit and improving the building envelope first is highly recommendable: then it will be possible to install a new AC system or energy management and building control system that creates temperature and usage savings.

Concluding Remarks

When an LED lighting retrofit is carried out as part of a broader energy efficiency project, there are two strong reasons to make it the starting point: the payback period is short, and it can provide significant indirect savings in air-conditioned or refrigerated facilities.

There are also emerging technologies that will only be possible with LED lighting, such as visible light communication (VLC), which is much faster than traditional Wi-Fi. This means LED lighting will soon be capable of improving the networking and automation capabilities of buildings, in addition to making them more energy efficient.

Scott Van Kerkhove is the CEO of EnergyWise and writes on issues surrounding energy management, energy efficiency and sustainability.

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