Sector: Energy Efficiency & Energy Management Services
Reducing our carbon footprint is always the first line of mitigating climate change. It also happens to be amongst the most profitable.
In3 Energy Management & Energy Efficiency financial services now include project development and finance facilities designed to expedite build-out of pipelines of projects. Through innovative funding models turning products into services, we can assist with a wide variety of financing in the US and overseas. We also work with a growing network of affiliates and technical partners in solar/PV and wind project engineering, procurement and construction (EPC), waste-to-value, lighting controls and top-tier LED lighting solutions.
Lighting As a Service
Have you been wondering how your business, or your client’s business, can afford the initial investment in solar power or an LED lighting retrofit? What is the approval process for such a significant capital investment? If either of these conditions apply, then Lighting as a Service (LaaS) may be an option worth considering.
The lighting industry has started moving in this direction as the useful life of LED products continue to expand (10-year warranties are now common), and product quality and efficiency continue to improve. Sometimes basic building operations are overlooked, or other capital investments take precedence over high-tech-sounding improvements. Energy efficiency always pays dividends, and if you could arrange for the upgrade in light quality and reliability paying zero up front, what would that accomplish?
How Lighting as a Service works
There are three different approaches to LaaS and In3 Energy Services can arrange any of them:
- Performance-based — via an Energy Services Company or ESCO
- Concessionaire — not keyed to performance, but paid for by a portion of the energy savings that will be realized for a pre-determined period (typically 5 years) after which time the lights are owned free-and-clear for their remaining life, typically at least 10 additional years. No up front cost. Also greatly reduces maintenance costs as the Concessionaire takes care of it.
- Lease model — similar to leasing other capital equipment, that has some advantages and disadvantages over the other options. Typically used for smaller projects, in the range of $300,000-$1 million.
Aside from realizing significant energy savings — at least 60% over convention lighting and as much as 90% for some types — and decreased maintenance costs (most quality lights are warrantied for 12-15 yrs of near 24/7 operation), the great advantage of LaaS is convenience. Everything is managed and you just enjoy the better quality light at a substantial cost savings. Plus, why go through the up-front investment when you can subscribe to a monthly service that’s designed to get you exactly what you need?
Instead of shelling out the capital investment for a lighting upgrade at the beginning of your project, your lighting service provider will come out and install and warranty your new long-life, high-efficiency lighting system on their dime. Then, with a portion of the money you save on reduced energy bills, you budget a monthly payment for your lighting. It’s effectively a way to get the advantage of the lighting upgrade you’ve been considering and making it cash-flow positive from day one.
Problems LaaS solves
As mentioned above, lighting as a service solves the problem of paying a large lump sum for a lighting retrofit. By using lighting as a service, you don’t have to spend countless hours convincing management to up your budget so you can afford the retrofit upfront. Instead, you pay a monthly fee that’s less than the amount you’ll save to have all of your lighting updated and maintained for you.
With the rapid pace of technological improvement in LED lighting, people often feel stuck with yesterday’s technology when new advancements hit the market. Lighting as a service also solves the problem of missing out on the latest improvements to LED. There are options (like iPhone upgrade programs) that include the price to upgrade to new technology in your monthly fee.
Pros and cons of lighting as a service
As with many project options, you want to choose an option that will work best for your application and company’s financial situation. Here are some pros and cons of lighting as a service:
Advantages of Lighting as a Service
- No upfront investment
- Allows nominal upgrades to be completed within the existing operational expenditure of the contract
- Subscribers are immediately cash flow positive
- Constant energy savings
- Device failures (lights that go out) are not your responsibility
- Quality installers and In3 partner make sure that upgrades comply with the latest local and federal requirements
- The investment stays off the company’s balance sheet — will not tie up long-term borrowing capacity or negatively affect credit ratings.
Lighting as a Service Disadvantages
- You’ll be held to the terms of the agreement for the duration of the contract — typically 5 years
- Net monthly costs are reduced, but not as much as if you make the up-front investment in the project since you’ll have to factor in the monthly lighting-as-a-service payment
- Like any payment program (from leasing a car to a home mortgage), the interest and fees associated with breaking the total cost into monthly payments will result in an overall cost that is higher than if you paid for everything up front.
Perhaps it is now clear why overall Building Efficiency, with LaaS and lighting controls a significant growth component, is a $68.8 billion industry in the US (more). Expect rapid growth over next five years. By solving many problems for today’s businesses, it’s a great opportunity for those looking for creative ways to retrofit their business without any sizable capital outlay. The opportunity to capture significant energy savings sooner is a huge benefit to businesses. With each day that passes without upgrading, money is left on the table, and preventable carbon emissions are released.
LaaS is a great win-win!
To find out if a Lighting Retrofit, Lighting as a Service, or other clean energy-related services would be good for your business, contact us and we’ll have a specialist reach out to you.