Reginald D. Cook, Vice President, Business Development, National Energy Services (a Johnson Controls company) (November 2011)
Energy-efficiency and overhead costs are two key factors in determining annual profits in all commercial and industrial operations today. Yet, all too often, operation managers overlook the simplest solutions because they are unaware of the waste - and potential savings - right in front of them.
Updating industrial lighting infrastructure is one such solution. Lighting accounts for up to 25 percent of all energy costs for industrial and commercial operations. Further, studies show that just two years ago, more than 40 billion square feet of industrial space was still operating on outdated lighting systems. So lighting infrastructure, still a massive, year-round expense, is positioned to be one of the leading cost-savers for industrial operations globally.
Incentives and More
But what is the initial investment motivation for individual owners? A recent study by Johnson Controls reveals that energy cost savings and government incentives are two of the leading reasons for investing in energy-efficiency updates like improved lighting infrastructure. Through January 2014, incentives such as the Energy Efficient Commercial Buildings Tax Deduction allow owners to write off the complete cost of a lighting upgrade, capped at a 60-cents-per-square-foot tax deduction.
These public incentives, combined with the individual utility savings, provide attractive payback on upgrades that are now worthwhile long-term and short-term financial investments for the commercial and industrial sectors. This means that annual timelines for realizing returns on investment are now often less than 24 months for a simple payback.
The lighting industry and commercial retrofitting operations are aimed at rapid new advancements and technologies. And thanks to market forces, sustainability mandates, and government incentives, a generous window exists today to obtain the maximum value on investment. But now is the time for implementation.
With the support of initial energy audits, owners can determine the condition of current lighting equipment, quantify potential savings, and choose from various technologies and systems that would optimize efficiency, including LED solutions. Studies show that a 45 percent global usage rate of LED lighting by 2020 could save five trillion kWh of electricity, eliminate the need for nearly 600 full-scale power plants, and eliminate more than eight billion tons of carbon emissions.
Industrial retrofitting is no longer a lofty idea. Instead, it is a measurable solution that makes business sense for operations across the board. In many cases, estimates conservatively place savings at nearly 50 percent of lighting energy costs and 50 percent returns on investment. This does not include the intangible and qualitative benefits that will come from sound business practices, including lowered maintenance costs and increased worker productivity. For example, a global producer of paper and packaging saved $3.5 million and 52 million kWh annually through a multi-year investment that will start achieving an exponential return on investment shortly after year two.
The benefits are enormous, but the commercial and industrial industries must invest in their businesses today or risk being left behind tomorrow. In the world of industrial energy, where cost is the driving force, lighting efficiency is an obvious solution that must not be overlooked.