Utility Rebates for Energy Efficient Lighting Upgrades

Don’t leave rebate money on the table with energy-efficient lighting retrofits

Growing environmental consciousness and the need to utilize energy resources more efficiently is creating an urgent need to upgrade existing lighting systems for commercial building owners.

Utility companies around the country are encouraging these efforts by offering energy efficient lighting upgrade and replacement rebates, some of which cover up to 50 percent of installation costs for retrofits.

And, utilities aren’t the only source for rebates on purchases of energy efficient lighting products. Colorado’s city and county of Denver is offering commercial property owners access to limited-time rebates for lighting upgrades through its Denver Energy Challenge.

Why Do Utilities Offer Rebates?

The whole reason for rebates is to lower the peak demand for utilities as much as possible.

Fact is, it’s simply more cost-effective to promote energy efficiency by offering rebates as a means to control demand than the capital expense of building additional power plants and transmission lines to handle the burgeoning demand for electricity.

According to the U.S. Energy Information Administration’s Annual Energy Outlook 2012, electricity demand in the commercial sector is projected to increase by 28 percent, to 1.7 billion kilowatt hours (kWh) in 2035, led by demand in the service industries.

About 40 percent of an average commercial building’s electric bill is for lighting, according to the U.S. Department of Energy (DOE).

That alone can make energy-efficient lighting retrofits an easy decision when considering capital expenditures aimed at achieving the highest return on investment (ROI).

An Attractive Opportunity for Commercial Property Owners

Utility rebates help offset the initial costs of purchasing energy efficient lighting products – lamps, ballasts, fixtures, sensors and controls – which generate immediate daily savings in energy consumption, shortening the payback period on investments.

On average, energy-efficient lighting retrofits yield a 45 percent return on investment in just over two years, according to the Energy Cost Savings Council.

Just last month, one of the world’s largest accounting firms, Ernst & Young LLP, said it dropped its upfront costs for a new 32-floor LED lighting retrofit by more than 13 percent thanks to utility rebates.

The retrofit saves the company nearly $1 million per year by cutting energy and maintenance costs by over 50 percent annually, and reduces energy use by about 2.9 million kWh per year.

Another example is the Westin Ka’anapali Ocean Resort Villas in Hawaii, which recently received a $215,657 rebate from its local utility for a retrofit that included replacement of more than 9,500 incandescent lamps with energy-efficient LEDs – reducing electricity use by more than 80 percent. Estimated payback for the project is less than six months, the company said in a news release.

The Window of Opportunity is Closing Fast

Thing is, rebates don’t last forever. Commercial building owners and managers need to act quickly to make sure they’re not leaving free money on the table.

Most utility rebate programs are offered on a first-come, first-served basis until funding is exhausted or the program is discontinued, so it is important for customers to get applications in early.

Understandably, lighting rebates can be a real challenge for many commercial property owners and executives.

Rebate programs continually evolve and can be confusing, and many hotel managers and owners are simply unaware of the rebates utility companies are prepared to offer.

Here at Lumenistics, we eliminate the confusion in efforts to maximize ROI for commercial property owners by netting the most money from utility rebates to upgrade inefficient lighting systems.

Types of Rebates

There are two types of utility rebate programs:

• Prescriptive rebates offer a fixed, predetermined dollar amount for each fixture replaced.
• Custom rebates are based on the total energy savings of a specific lighting retrofit.

Custom rebate programs offers payments for both actual energy savings (kilowatts saved per hour) of upgrading to more efficient lighting technologies and reductions in peak demand (kilowatts) achieved in the first year after implementation.

Prescriptive rebates, however, do not account for the energy savings gained by reducing the number of fixtures through a redesign.

Lumenistics can help determine the scope of a project, and advise clients on what type of rebate works best for your facility and offers the highest rebate payout.

Examples of prescriptive rebates include:

• Retrofits of existing systems
• Reductions in overall number of lamps with high-efficiency fixture upgrades
• New construction that chooses energy-efficient lighting

Xcel Energy’s Rebate Program

Look at the example of Xcel Energy, Colorado’s largest utility company. Xcel offers rebate programs for Colorado commercial and industrial customers for a wide range of energy efficiency technologies including lighting.

Here are examples of prescriptive rebates under Xcel Energy’s rebate program:

• LED Interior Lamps (1W – 20W): $20 – $35
• LED Interior Downlight Luminaires (1W – 25W): $100–$125
• T12 Delamping: $12–$26
• Occupancy Sensors and Photocells: $30–$50
• LED Canopy/Soffit Fixtures: $275

A Redesign Study is the First Step

Custom rebates are largely based on lighting redesign studies, which give customers a facility-wide lighting system audit with recommendations on how to best to reduce electrical consumption, while maintaining lighting quality and proper light levels.

These studies, which require pre-approval from the utility, must be conducted by a Lighting Certified (LC) professional, a member of International Association of Lighting Designers (IALD) or hold the Certified Lighting Efficiency Professional (CLEP) certification.

Xcel offers rebates for these studies by funding up to 75 percent of the cost of the study – not to exceed $25,000 – and also offers cash rebates of up to $400 per kW saved if recommended changes are implemented.

Bonus rebates

In July 2012, the DOE’s efficiency standards regulating inefficient T12 fluorescent lamps took effect, virtually discontinuing future use of the 80-year-old lighting technology from the market.

This is the first time that lamps and ballasts used in almost every commercial building are being forced to be discontinued on such a large scale.
~Michael Lassle,  Technology Director, Lumenistics

Some utility companies are offering limited-time bonus rebates for upgrading the obsolete T12 lighting.

“This is a whole new world,” said Michael Lassle, Technology Director of Lumenistics. “This is the first time that lamps and ballasts used in almost every commercial building are being forced to be discontinued on such a large scale.”

Xcel Energy, Colorado’s largest public utility, is one utility company that extended its rebate time period.

Xcel kicked off a program in April that provides Colorado businesses a 30 percent bonus rebate to replace 80-year-old T12 fluorescent lamps, which the federal government discontinued given their lower efficiency as compared to today’s higher quality, more efficient products.

But customers need to act quickly to be eligible. Equipment invoices must be dated on or before December 31 and applications must be submitted no later than May 1, 2013, to be eligible for the bonus rebate.

That doesn’t leave much time. Depending on the size of the project, based on Lumenistics’ preliminary assessment, a redesign study can take up to a few months. So, that window of opportunity is closing.

Xcel said it anticipates no rebates to be available in 2013 for T12 removal.

Denver Energy Challenge Rebates

The Denver Energy Challenge, mentioned above, also offers rebate dollars on a first-come, first-served basis through December 31, or until available funds are allocated, whichever occurs first.

The program underscores the urgency of applying for the rebate with this statement on its website: “2012 rebates are still available for Denver businesses, get yours before funds run out!”

The program offers locations a lifetime cap on lighting projects of $3,000 but provides an additional $2,000 for non-lighting improvements.

Rebates from the Denver Energy Challenge can work in conjunction with other utility rebates, including those mentioned from Xcel Energy, but with stipulations.

For instance, when Denver Energy Challenge rebates are combined with Xcel Energy rebates, the total rebates issued can’t exceed a project’s total cost for prescriptive measures and will not exceed 70 percent of total cost for custom measures.

[table id=2 /] * Annualized over 10 years with a 1.5% annual rate increase

What Next?

For help with the decision-making process when considering energy efficient lighting upgrades, contact Lumenistics to schedule a no-cost, preliminary assessment of your facility. We can help determine current lighting needs and the optimal design to save our customers money and energy.

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Sources used for this article:

• US Energy Information Association (EIA)
• Xcel Energy
• MarketWatch