Costs and Benefits of Energy Efficient Lighting and Technology

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Courtesy of Larson Electronics LLC

In developed nations, lighting accounts for a large portion of the entire amount of electrical power consumed. In the United States, lighting is responsible for approximately 20% of total electricity consumption. In Canada, up to 50% of the electricity used in residential areas is consumed by lighting. In the US and Canada, lighting accounts for about 35% of the electricity used in commercial office spaces. In industrial operations the costs associated with lighting are similar, with up to 40% of an industrial operations electrical costs going to providing worksite illumination.

With the cost of electrical energy continuing to rise and the competition from overseas based industrial manufacturers also continuing to increase, US based industry is finding itself hard pressed to maintain competitiveness as well as growth. Although reductions in production costs through lower overall employee totals and the outsourcing of more expensive processes have served to help improve the profitability of manufacturing, these are band aid measures that negatively impact the very economy these manufacturing operations rely on for continued growth and success.

In an effort to maintain profitability, US based manufacturers have steadily shifted production to offshore locations where operating costs can be kept significantly lower. The result has indeed been improved revenues, but not in a manner consistent with healthy industrial growth. The approach that has been followed over the last two decades although effective in the short term, has served to reduce the size and value of the customer base that serves as the originating point for most revenues.

With the higher unemployment levels and lower end consumer spending that follows the shifting of operations overseas, the market for the end product shrinks as well, limiting actual growth, and potentially creating a situation where any further production cost increases may erode the gains provided. Some feel that this is the core reason why some business has slowly trended towards returning production to domestic locations, but the problem of managing production costs still remains.

To some, the addition of new environmental and energy regulations represents yet another expense which makes maintaining profitability and competitiveness even more difficult. This is unfortunate, because the reality is that such new regulation actually represents an opportunity for growth and savings as well as impetus for the growth of new markets and the expansion of existing operations that can result in greater revenues without the caveats of shrinking workforces or negatively impacting consumer value.

With the enactment of new regulation such as the Energy Independence and Security Act of 2007, new efficiency standards are coming to the fore and promise to have a significant impact on the profitability of US industry. On one hand we have those who suggest these regulations will increase costs and hamper growth, and on the other are those who feel the costs will drop and growth increase. So which is it?

The belief that the higher efficiency requirements and new energy mandates will increase the costs associated with industry is based in the idea that in order to comply, business will have to absorb the added costs of more expensive environmental controls, equipment which will meet efficiency standards, and have to deal with added legal ramifications. On the surface and taken at face value without considering any other factors, this would normally be true. However, there are mitigating factors to consider, and the scope of the impact these regulations will have goes far beyond simple compliance with a new set of rules.

Businesses which meet these new energy standards will indeed face some additional added costs in order to meet compliance. However, federal efforts in the form of tax incentives, rebate programs, sustainable business credits, and other programs offset the largest part if not most of these costs. The real benefit for established operations though comes in the form of long term savings from reduced energy use, reduced maintenance costs, and improved working conditions.

For example, federal and local government studies have shown that upgrading to LED lighting can result in an up to 80% reduction in energy used for illumination. With 40% of an operations energy costs being generated by lighting, this represents a huge potential for savings that will begin accruing from the moment of installation. Some few examples of this include;

“New York City was the first large American city to use LED traffic signals, converting fixtures at nearly all of the more than 12,000 signalized intersections Citywide and producing an annual energy savings of 81%.” -New York City DOT

“WalMart is now using LED luminaires to upgrade more than 250 existing lots. The company has reported energy savings of 58% compared with ASHRAE Standard 90.1-2010, a widely used commercial building code.” -US Dept of Energy

“...projected to have a cumulative savings of approximately $131,659 in the first year, with a return on investment of about nine months. These savings include projected energy, labor and cooling expenses, as well as the cost of the lamps. A cumulative savings of more than half a million dollars are predicted by the fourth year of installation.” -The Hyatt Regency Grand Cypress Resort on upgrading to LEDs

'reduced lighting costs by 83, ...electricity bill is now around $1,000 a month instead of the expected $2,100 a month” –Denny’s Restaurant, Joliet, IL after upgrading to LEDs

For the US economy, the benefits of energy efficient lighting and new energy regulations go far beyond simple industrial and commercial energy cost reductions. In order to meet new energy efficiency guidelines, new and existing technologies must be developed and instituted on a large scale. This means the creation of new industry and jobs as the raw materials must be procured and new energy efficient products produced to meet this newly created demand.

Already, due to the shortage of the rare earth elements needed to manufacture LEDs created by China’s efforts to limit their export, once defunct REE mining operations in the US are now being restarted. In the United States, Molycorp has reopened a rare earth mine that was once the largest in the world. New mines are also being opened, and the end result is expected to be a lucrative supply and export of these minerals as international demand for these materials rises along with the production of technology which is reliant upon them.

Additionally, development of solar, wind and alternative fuels technologies has resulted in related new development, manufacturing and industrial ventures across the US which hold the potential to provide employment for hundreds of thousands as well as provide a valuable commodity for export.

The upshot of all this is that rather than hampering growth and increasing costs, new energy regulations and the development of alternative technologies such as LEDS in fact represent a huge incentive and opportunity for savings and economic growth.

If we also factor in the environmental benefits found with a reduction in the amounts of fossil fuels burned for energy, it is clear that energy efficiency is not only an effective path to increased prosperity, but a cleaner and more productive future.

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