Financial Considerations For Warehouse Lighting Retrofit

December 16, 2018 3:40 am by sandiego
After retrofit led t8 lamps
Warehouse lighting retrofit considerations
Financial Considerations For Warehouse Lighting Retrofit

The first is utility rebate programs. To establish programs, many utilities use specifications from the Consortium for Energy Efficiency (CEE) for high-performance T8 and reduced wattage T8 lamp-and-ballast systems featuring high-efficiency NEMA Premium ballasts. Utilities offer rebates for LED and retrofit luminaires that are qualified by the Design Light Consortium, which evaluates fixtures much like the Energy Star program.

Due to the intelligence built into LED power supplies, LED lights can be dimmed as needed and in conjunction with motion detectors even more energy can be saved by dimming down lights when the area is unoccupied or when daylight harvesting is available. This results in even greater ROI improvement.

Once goals have been set, managers next need to understand the potential total cost of ownership (TCO) of the new lighting: the initial expenditure against long-term savings in operating costs. LED lighting, for example, has a higher upfront cost than traditional fluorescent lighting solutions. In this instance, the greatest TCO can be seen when accounting for the combined savings of lower energy consumption, minimal need for maintenance, reduced operational interruptions, lower cooling costs, and related additional benefits.

With goals defined and the new lighting systems specified, facility managers need to ensure the retrofit plan is comprehensive, thorough and fiscally responsible. The next article in the series will explore the key financial considerations of taking on a retrofit project as well as some of the major missed opportunities or pitfalls that warehouse managers should be aware of.

Parking lot and outdoor area lighting projects typically deliver an ROI of 2-3 years depending on the cost of energy, available rebates, and wattages being used.

An LED light typically uses one half to one third of the energy of traditional High Intensity Discharge (HID) lighting. A 1000 Watt HID light fixture can typically be replaced with a 300 Watt LED light fixture. A 250 Watt HID light can usually be replaced with a 90 Watt LED light.

Is the existing light level adequate? Is it too high or too low?Can task performance be improved either by adjusting illumination or reducing glare?Can employee productivity/safety be improved?Can energy consumption or maintenance costs be reduced?Can the change make maintenance easier?Are changes to the work processes or equipment anticipated in the near future?

Lighting controls should also be part of the discussion when scoping out a retrofit project. Controls today are underutilized in warehouse and industrial spaces but can dramatically increase savings. Turning off or dimming the lights when a space is unoccupied, providing flexible light levels for multi-use spaces and overall comfort, and reducing electric lighting when adequate daylighting is available are only a few of the control capabilities managers can have in their building. Depending on operational goals, lighting controls can reduce the overall demand for energy by up to 70%.

Today’s industrial warehouses have become models of efficiency and productivity, but they frequently become a “forgotten facility” when it comes to lighting. They can be underequipped or completely overlooked during retrofit projects. Properly illuminated workspaces can help increase worker productivity, improve workplace safety, and reduce maintenance costs. When a warehouse’s lighting is not up to the task, it’s time for the facility manager to evaluate the system and identify opportunities for improvement that can not only help create savings on the bottom line, but can also help provide a better work environment for employees.

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TAGSincentiveslighting-retrofitperformance contractsTitle 24warehouse facilities

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When done right, new lighting can make a big impact on a facility, but there is also potential for big mistakes and missed opportunities during the upgrade. Here are a few that deserve special attention.

LED lights are solid state with no filaments or trapped gasses which gives them extremely long life. LED’s typically do not burn out but gradually over time just get dimmer. LED’s can be expected to be operating at above 70% of their initial output for 100,000 to 200,000 hours of maintenance free operation, Operating at 24/7 this is 11.4 to 22.8 years of operation. A typical LED light fixture will come with a 5 year warrantee. Typical HID light fixtures will last anywhere from 15,000 to 30,000 hours of life and the light depreciation happens much more quickly than that of LED lighting. The end result is that the HID light fixture will be replaced several times over during the life of the LED light fixture. Maintenance labor and replacement fixture costs are greatly reduced with LED lighting.

Contact an LED Lighting expert today for more information on LED Lighting and the best solution for your application.

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At this stage, managers can begin determining the types of lighting solutions that will be needed. Light level and required visibility will depend on several factors, most importantly on the purpose of the space. The more active the area — such as a loading dock or staging area — the greater the light required. Light levels will also be affected by the size of the items that are being handled. Be cognizant of whether the tasks are horizontal or vertical, which will determine the best light distribution pattern for the space.

Keeping other decision-makers out of the loop: During planning, posing the right questions is crucial, but so too is posing questions to other stakeholders. While a warehouse manager may be focused on the immediate needs of his or her facility and how new fixtures and luminaires will affect its operations, the company’s CFO is evaluating overall operating costs. This lends itself to the opportunity for facility management leaders to highlight the value of upgrading the lighting in more than one warehouse or installing lighting controls to yield greater savings across multiple locations.

Valuing speed and short-term gain over accuracy and long-term ROI: Facility managers can frequently progress through the various steps of a retrofit too fast for the sake of expediency. In turn, they end up sacrificing the time to conduct a complete audit of the facility and develop a comprehensive plan which would allow them to fix many problems at once. The lesson here is to not just think leaner, but also smarter about how to get the most from an upgrade project. Typically, managers think only of retrofitting the existing system or simply replacing the fixtures. This makes it easy to fall victim to “cream skimming,” where the proposed solutions target the easiest savings with the lowest first cost. While in the short term, this seems a good investment, to be successful, a retrofit must find the balance between increasing energy efficiency and providing the high-quality lighting the warehouse needs to operate and retain savings in the long term.

Cutting overhead costs while continuing to improve worker efficiency and safety is a daily challenge but for a well-informed facility manager, installing new lighting doesn’t have to be costly or complicated. If a manager hasn’t evaluated a warehouse’s lighting system in the last decade, he or she could be missing a prime opportunity to not only reduce energy consumption but also provide a better experience for employees. Insight into the financial aspects is crucial to making a strong case for an optimal warehouse lighting retrofit.

Any business that is not actively pursuing an LED lighting upgrade should be questioning the fiscal and social responsibility of their operatives. Consider the following arguments for this financial approach to improve bottom line profitability performance improvement with an LED lighting upgrade implementation strategy.

In conclusion the financial returns are tremendous for LED lighting upgrades with no identifiable downside. The cost of waiting to do these projects is high and should be understood for each individual application. LED lighting is no longer new technology and is being aggressively adopted by small business owners and corporations that are educated as to the benefits and attractive ROI’s that can be realized with LED retrofit projects.

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The productivity gains with LED lighting are just now becoming apparent and may be much more significant in ROI improvements than the readily apparent energy and maintenance savings. A 2010 Study from the University of Michigan titled “Effects of Four Workplace Lighting Technologies on Perception, Cognition, and Affective State” identified an 8.34% improvement in work performance at visual and cognitive tasks with the introduction of LED lighting. A second study by “Building Investment Decision Support for Six Energy Efficient Lighting Retrofits” found a 33% improvement in mood ratings with LED translating to a 5.76 work efficiency increase. Additional studies are underway as the move to LED lighting is being rapidly implemented which will result in much more data over time.

Skipping the homework on building codes: A common pitfall in any retrofit is to overlook the codes for energy use or for controls that a building must comply with. One example: California’s 2013 Building Energy Efficiency Code, Title 24 has been a particularly challenging code for commercial facility managers to understand and adapt to as it has become increasingly complex over the years. With new requirements still being introduced to Title 24, managers should be sure to arm themselves with the most up-to-date information (or a consultant who knows the code) to ensure they are not caught unawares.

Many times infrastructure improvements unrelated to LED lighting can be accomplished in conjunction with an LED lighting project. For example your plant may need a new compressor or HVAC system that is on its last legs. ROI justifications may not allow for this to happen on its own as it may be a 7 – 10 year ROI. Lumping this upgrade in with an LED lighting upgrade that has a 1-2 year ROI may result in an overall project ROI of 3-4 years which may meet corporate funding standards. These improvements can often qualify for tax reducing financing with most equipment leasing companies.

For distribution centers, which are more often highly automated with round-the-clock operations, ideal choices are high color rendering light sources that aid in accurate identification of products and long life lighting systems that extend maintenance cycles and reduce disruption to operations. In a medium-sized facility responsible for producing and packaging high quality goods, T8 fluorescent lamps in high and low bays offer improved lighting and better color for considerably less energy.

Lower energy usage – reduced carbon footprint. Black sky friendly – light is directed downward with virtually no upward leakage (notice this the next time you fly at night, the LED lighting installations are easy to pick out as you see light on the ground but no spots of light visible to you in the air) No neighborhood encroachment of light – neighbors are not bothered due to the directed nature of LED lighting.

The light is directed to where it is needed and not into your neighbor’s bedroom window. Recycling ability – LED’s contain no environmental gasses or chemicals Safety – Replacing lighting up in the air every 2-3 years can result in shock and fall hazards.

The minimal maintenance of LED lighting mitigates this safety risk Control Systems – Smart LED’s

(Update: The CEE specification referred to above is no longer in effect. The current CEE Commercial Lighting Systems Initiative is described here on the consortium’s website.)

Dibble is vertical sales manager, Industrial, at OSRAM SYLVANIA.

LED Lighting: A Financial & Socially Responsible “No – Brainer”

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The financial and social responsibility business case for corporations and smaller private businesses to upgrade their existing lighting systems to LED lighting technology has become so compelling that companies must examine their strategies in this area.

Facility executives should start by evaluating the existing lighting system, independently or with a consultant, and determine how the new lighting may integrate into the warehouse’s current infrastructure. Expert lighting consultants and designers can play an integral role in auditing the existing system and providing recommendations on optimal improvements. They can also aid warehouse managers in understanding advances in new energy management technology and in addressing the latest standards and regulations. For example, though LED technology has made rapid advances in recent years, it is not automatically the best solution for every application, so managers shouldn’t be quick to do a full LED retrofit before fully understanding their options.

In addition to consuming less energy the LED lights have individual lenses over each LED. This allows for a highly controlled lighting pattern that puts the light where it needs to be resulting in more efficient light distribution. This often allows for a reduction in the amount of light fixtures needed with a more consistent light coverage. Typically a 10 –20 % reduction in the number of light fixtures can be obtained with a properly designed LED light retrofit installation. The color of LED light closely replicates outdoor light resulting in much higher quality of light perception to the employees and users of the lighted space. Another energy benefit that is often not even in ROI calculations is the reduced amount of heat generated by the LED light fixture which can result in significant air conditioning cost reductions as well.

Overall, good lighting is essential in a warehouse. A well-lit facility can not only help improve worker productivity and energy efficiency, but also reduce operating costs. Warehouse managers, owners and designers have many decisions to make from the beginning to the end of a lighting upgrade but, no matter what type of solution they choose to install, going through the process thoughtfully will allow them to successfully create an efficiently illuminated warehouse that can also help improve the bottom line.

Outline the project’s key objectives by answering a few initial questions:

Offsetting the cost of a lighting upgrade is always top of mind when considering the cost of the investment, and there are many financial avenues that managers can explore.

High bay indoor factory applications for industrial warehouses or parking garage applications where lighting is often needed 24 hours/day, 7 days a week can deliver ROI’s in the 1-2 year time frame. 

Although hard to quantify in simple ROI terms the societal movement that “Green” is no longer just a color but a requirement of individuals and corporations. LED’s have tremendously positive environmental considerations as follows:

But tax deductions and rebates alone won’t always help managers justify a new lighting system. At that point, they should look to new financing options. Some lighting organizations offer various leasing and performance based contract options to procure these fully integrated lighting and control systems, without an upfront heavy financial lift.

Performance guarantees can be structured standalone contracts, coupled with financing to allow the customer to “pay from their savings” or folded into a shared savings contract, ensuring a return or eliminating upfront costs and guaranteeing positive cash flow. With customizable terms and payment schedules, managers can also acquire funding from a capital lease, with on-balance sheet financing and a predetermined buyout amount, or an operating lease, with off-balance sheet financing and fair market value buyout at lease end.

Tomorrow, Dibble will address in a follow up article the key financial considerations of taking on a retrofit project as well as some of the major missed opportunities or pitfalls for warehouse managers to recognize.

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When upgrading the lighting, establishing informed goals is a critical first step. Based upon the intended application, goals may go beyond simply reducing energy consumption and also include improving security and enhancing the quality of light in warehouse aisles.

When executing a lighting retrofit, once goals are defined and the lighting systems specified, facility managers want to ensure the plan is comprehensive, thorough, and fiscally responsible. This second article in a two-part series explores the key financial considerations of taking on a retrofit project as well as some of the major missed opportunities or pitfalls of which those who are responsible for warehouses should be aware.

Tax incentives can be a source of savings too. Recently extended as part of the Tax Extenders Law, Section 179d of the Commercial Building Tax Deduction offers new or existing building owners up to $1.80 per square foot to install various improvements such as high efficiency interior lighting. Qualifying systems must reduce the building’s total energy and power cost by 50% or more in comparison to a building meeting minimum requirements set by ASHRAE Standard 90.1-2001.

The energy savings alone can deliver a simple return on investment of under two years in many cases.

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