LED Lights for Virtually Free?

Darren Levine, Managing Director, Lighting of Orginal Energy Darren Levine’s article for MANN Report Management originally published in the June/July 2016 issue. https://mydigitalpublication.com/display_article.php?id=2502955&id_issue=308668  
Why Owners and Tenants Need to Take Advantage of Section 179D Now
As the commercial real estate industry heads into the second half of 2016, now is the time for owners and tenants to consider energy-saving lighting retrofits. On December 31, Section 179D of the Energy Policy Act of 2005 is set to expire, bringing an end to deductibles that make energy efficiency upgrades a financially attractive proposition.

The Section 179D provision, as per the Internal Revenue Service, provides a deduction to taxpayers who own or lease a commercial building and install property as part of the commercial building’s interior lighting, heating, cooling, ventilation, and hot water systems, as well the building envelope. The deduction may be as much as $1.80 per square foot for buildings that achieve a 50% reduction in energy and power costs; buildings that achieve less than 50% may qualify for a deduction of $0.60 per square foot. Lighting is one of the easiest ways to take advantage of the Section 179D provision–and we’re talking a lot of money, based on what our clients have already been able to achieve. Original Energy, which is a turnkey provider of LED lighting solutions, is working on a lighting retrofit at a 900,000-square-foot distribution center in Southern New Jersey.

Overall, it costs $675,000 to swap the fluorescent lighting for LED, and since we’re looking at achieving 65% savings in energy and power costs, Section 179D will provide a $690,000 deduction–in essence, the client is getting its lights for free, including labor. Part of our installation includes occupancy sensors, so if workers are not using a particular section of the warehouse, the lights go out. At another office property, in White Plains, NY, Original Energy was able to achieve over a 70% reduction by converting the existing inefficient lighting to LED; the owner was also able to garner additional savings through rebates from a number of different venues.

The ideal 179D candidate is anyone who owns or occupies a building totaling 50,000 square feet or more. You can calculate your potential savings by understanding how much energy you are burning and how much wattage each fixture in your property requires. For instance, a typical office space will have T8 compact fluorescent (CFL) tubes burning 10 hours a day. Each tube–and there are usually three to four per fixture–consumes 32W of power. That’s upwards of 128W per fixture. Like-for-like LED replacements, by comparison, only consumer 12W of power per tube. That’s an 80W savings per fixture. Our favorite customer is anyone burning a lot of power–think sports facilities, office buildings, parking lots, car dealers, retailers, and supermarkets. Have you ever noticed how many lights it takes to illuminate your local Costco? The Power of LED Technology

One thing we stress to customers is that LED technology is a justifiable cost now. There are a lot of misconceptions in the market about LED lighting, and understandably so–up until about two years ago, many of the products and providers were not up to the quality standard that we expect from providers. There wasn’t a lot of quality control among the manufacturers, and a lot of the product was coming from overseas. As a result, users’ wallets were getting burned, and early adopters didn’t benefit from LED technology the way that they can today. The majority of LED technology that we supply is now assembled and/or built in the United States, helping to keep the quality at a higher level. Another previous drawback to LED technology was its limited color spectrum. The lights were harsh and bright, giving most spaces the striking ambiance of a hospital operating room.

Today, we are able to offer LED lights that run the entire Kelvin spectrum, or the measurement of light temperature, from daylight to amber. The bulbs can even mimic the glow of incandescent lighting. LED technology is also safer than fluorescent bulbs, as they’re just circuit boards with light-emitting diodes. CFLs contain a small amount of mercury, and if a bulb breaks, can release vapors harmful to human health in the air. (Original Energy has a program to help clients safely dispose of fluorescent bulbs that have been replaced by LEDs.)

Lastly, LED technology has a superior lifespan to fluorescent bulbs. All LED lighting solutions that Original Energy provides its clients are backed by a 50,000-hour warranty, versus an average 8,000 hours for a typical CFL and 1,200 hours for incandescent bulbs. For a typical office environment, that’s five years of illumination. Taking the Next Step If your company is considering a lighting retrofit, now is the time to take advantage of the Section 179D provision, or at least make plans to get your project on the books before the December 31 deadline. There are many programs that enable your project to be financially viable, including incentive and rebate programs through companies like Con Edison and the New York State Energy Research and Development Authority that can be combined with the Section 179D deductions. Original Energy also offers complete project financing through its Original Energy Capital Solutions (formerly GEC Finance) arm, which includes a two-to five-year payback that can be paid back though savings realized at your upgraded facility.

Darren Levine, Managing Director Lighting of Orginal Energy