By the President of the United States of America
A Proclamation
Meeting our Nation’s future energy needs is a task of immense proportions — and utmost importance. To some American motorists, this challenge might be symbolized by long lines for gasoline and high prices at the pump. To others, it might be symbolized by lowering the thermostat during winter months. However, when it comes to building a secure energy future for the United States, there is more at stake than meets the eye. Safe, reliable, and affordable sources of energy are vital not only to our personal mobility and comfort but also to our Nation’s productivity and security. America’s utility companies and other energy providers supply the light, heat, and power that are needed to operate our factories and farms, our schools and defense installations, and other places of work.
Continuing instability and conflict in some regions of the world underscore the need to use energy efficiently; to reduce our dependence on insecure sources of energy; and to develop more energy resources. Of course, we must skillfully balance efforts in these areas with our determination to maintain a growing economy. We must also balance them with our commitment to a cleaner, healthier environment.
Our comprehensive National Energy Strategy calls for the wise and effective development of all of our Nation’s energy resources, including coal, natural gas, and nuclear energy, as well as hydroelectric power and other forms of renewable energy. It also calls for the development of new technology for oil and gas exploration; increased use of alternative fuels; and aggressive conservation efforts.
This month, the United States Department of Energy will be working to promote public awareness of our Nation’s energy needs and the energy options that are available to us. With strong leadership at all levels of government — and with the sustained cooperation of business, industry, energy providers, and concerned consumers — we can implement the sound energy policies and practices that are essential to America’s well-being.
Now, Therefore, I, George Bush, President of the United States of America, by virtue of the authority vested in me by the Constitution and laws of the United States, do hereby proclaim October 1991 as Energy Awareness Month. I urge all Americans to observe this month with appropriate educational programs and activities.
In Witness Whereof, I have hereunto set my hand this thirteenth day of September, in the year of our Lord nineteen hundred and ninety-one, and of the Independence of the United States of America the two hundred and sixteenth.
George Bush
[Filed with the Office of the Federal Register, 11:17 a.m., September 16, 1991]
A lighting retrofit is the practice of replacing components in the system with counterparts that make it use energy more efficiently. A lighting upgrade is any strategy that reduces the system’s energy use. Energy savings are realized over time that can be significant enough to not only pay for the new equipment, but produce a return on the investment.
While manufacturers and professional lighting managers have computer software that calculate the economic benefits of an upgrade, it pays to understand the principles.
Understanding Energy Consumption
Utilities bill their customers in a variety of ways, including an energy use charge, demand charge, power factor charge, fuel adjustment charge and other charges. In this section, we will focus on reducing energy consumption.
Energy Consumption (kWh) = Input Watts (kW) x Time (hours operated in a given year)
To reduce energy consumption, therefore, we can either reduce the input wattage or reduce the hours of operation. Input wattage can be reduced by replacing lamps and ballasts with more-energy-efficient counterparts or outright removal of lamps and ballasts. The hours of operation can be reduced using sophisticated controls and other methods.
Example
Let’s look at two purely fictitious lighting systems, A and B. Lighting System A is the existing system and Lighting System B is a proposed retrofit system which simply includes more-energy-efficient lamps and ballasts. They produce comparable light output.
Lighting System A
Lighting System B
Input Watts/Fixture
175
100
Hours of Operation/Year
3,000
3,000
Energy Consumption/Year (Wh)
525,000 Wh
300,000 Wh
÷1,000 to get kWh
525 kWh
300 kWh
Energy Savings/Year (kWh)
225 kWh
Utility Cost/kWh
$ 0.10
$ 0.10
Energy Savings/Year ($)
$22.50
Number of Fixtures Retrofitted
100
100
Total Energy Savings/Year ($)
$2,250.00
So we save $22.50 per year by replacing the lamps and ballasts in this fixture. For the 100 fixtures, we save $2,250 per year. Note that additional energy savings can be calculated from the air conditioning system, which now works less hard because less heat is produced by the lighting system (see Lighting and HVAC Interactions for more information).
Note that we simply could have installed occupancy sensors or some other controls that would reduce the hours of operation, or both strategies. If we installed new controls in this case and reduced the operating hours from 3,000/year to 2,300/year, we would produce an additional $700.00 in energy savings, or a total of $2,950 per year.
Payback and Return on Investment
Now that we know how much money we’re going to save while still enjoying comparable performance from the lighting system, it is time to do an economic analysis, which includes determining payback and return on investment (ROI). A full-fledged net present value analysis or life-cycle cost analysis is a major undertaking (best to use software), so for our purposes we will determine simple payback and ROI.
Simple payback is the amount of time in decimal years that will go by before a system upgrade option’s energy savings reach the net installation cost (also called the initial cost):
Payback (Years) = Net Installation Cost ($) ÷ Annual Energy Savings ($)
5-Year Cash Flow ($) = 5 Years - Payback (Years) x Annual Energy Savings ($)
Five-year cash flow was chosen based on expectations of the life of the lamps; by factoring in the cost of lamp replacement and other maintenance costs, a 10- or 20-year cash flow can be produced.
Simple return on investment is an internal rate of return, expressed as a percentage, based on the relationship between annual energy savings and the net installation cost:
ROI (%) = [Annual Energy Savings ($) ÷ Net Installation Cost ($)] x 100
Together, they represent a simple and effective first step at determining whether the new equipment would be a good investment for its owner.
In our example, let us suppose that the initial cost of the system (lamps/ballasts only) - - including the cost of the components and labor, waste disposal - - is about $70.00/fixture or $7,000 total (other initial costs may include financing, consulting fees, tax effects and waste disposal).
Simple payback is:
$7,000 ÷ $2,250 = 3.1 Years
Five-year cash flow is:
5 Years - 3.1 x $2,250 = $4,275
ROI is:
($2,250 ÷ $7,000) x 100 = 32%
These results usually must then be compared to the owner’s financial policies regarding capital investment to see if the ROI meets the internal “hurdle rate” and therefore enjoy the best chance of a green light by senior management. It is often desirable to examine a number of upgrade options to make the best choice. Note that some utilities offer programs that reward lower energy consumption with a dollar rebate that can make the upgrade even more attractive; also note that an energy service company may finance the upgrade.
For any electrical distributors questioning the current strength or availability of utility rebates and other monetary inducements encouraging the use of energy-efficient building envelope technologies such as lighting, motors, HVAC, etc., the market is solid and growing. There’s never been a better time for distributors to secure lucrative upgrade business by helping customers cash in on these attractive financial incentives.
Rebates: The first frontier
The availability of utility-sponsored rebates on a broad range of energy-efficient electrical products first became popular in the 1980s after the oil crisis of the 1970s focused the nation’s attention on the status of its precious and finite energy supply. Rebates, financial incentives, and other demand-side management (DSM) measures that encouraged energy conservation were made available because they proved to be an effective and significantly less-costly way to meet the country’s growing energy requirements relative to the supply-side construction of more power plants.
According to Department of Energy surveys, utility offerings of rebates and other demand-side-management measures hit their peak in 1993 and 1994, when the nation’s 3,200-plus utilities collectively spent more than $2.7 billion annually to encourage the use of such energy-efficient products such as T8 fluorescent lamps, electronic ballasts, occupancy sensors, and high-efficiency motors and drives. Following a near decade-long decline in the magnitude of DSM instruments made available to the market (and after a specific 2003 downturn in the aftermath of 9/11), utility rebate monies rebounded in 2004 and are expected to remain strong, with an ongoing emphasis on shifting the market toward the newer and more energy-efficient technologies.
Utility rebates can take a number of forms, from a “prescriptive” format, in which a utility offers a menu of energy-efficient product rebates and pays out financial incentives upon installation of the product(s), to more customized programs, where the payment is determined based on the magnitude of kWh saved. Either way, incorporating a rebate into the already financially attractive lighting upgrade can further reduce project costs by as much as between 30 to 40 percent, subsequently hastening payback periods and enhancing returns on investments (ROIs).
Today’s lighting rebate market
Time, experience and budget limitations may have forced utilities to redesign their rebate programs over the years in order to get the biggest bang for their buck, but most new programs have been met with overwhelming response from the marketplace. For example, a roughly $30 million lighting rebate program recently offered by a major California utility was fully allocated just two weeks after being announced. And, a $5 million offering by a large Texas-based utility generated an extensive and enthusiastic waiting list.
“Rebates as a concept and as a means of reducing energy consumption will remain strong because they’re effective,” says Todd Jarvis, chief operating officer of Wheatstone Energy, an Atlanta-based energy services company (ESCO). In the case of the offering by the utility in California, says Jarvis, “The $30 million that was made available — which helped to fund at least $90 million of lighting upgrade projects — freed up significant levels of megawatt capacity in that area in a fraction of the time and at a lower price tag than it would take to build new capacity.”
According to Ed Skeffington, vice president of Massachusetts-based Northern Energy Services Inc., lighting rebates in his region are definitely still strong but have been revised somewhat in light of recent skyrocketing electricity rates. “Instead of automatically being offered on traditional energy-efficient T8 lamp and electronic ballast products as has been historically done, we’re seeing more and more lighting rebates being focused on the latest generation of technologies that drive elevated energy savings, such as T5 products and new high-efficiency T8 fluorescent lamps and electronic ballasts,” says Skeffington.
The impact of EPAct
Adding more financial fuel to the lighting upgrade fire is the Energy Policy Act of 2005 (EPAct 2005). Considered to be among the most sweeping bodies of legislation to affect the nation’s energy production and consumption in decades, EPAct 2005 set a host of new product-efficiency standards and supports enhancements to the nation’s electric grid and generating infrastructure. The energy policy also introduces attractive new federally-sponsored financial incentives that reward the use of energy-efficient lighting, HVAC, and other high-efficiency building envelope technologies in both qualifying new installations as well as retrofit applications.
Available for eligible technologies placed into service between Jan. 1, 2006, and Dec. 31, 2007, these new financial incentives are offered in the form of tax deductions providing up to 60 cents per square foot on the installation of energy-efficient lighting products that result in a building’s increase in energy efficiency by 25 percent to 40 percent or more over the ASHRAE 90.1-2001 standard. Tax deductions of up to $1.80 per square foot are available on qualifying whole building upgrades involving a totality of technologies that improve a building’s energy efficiency by 50 percent or more over the ASHRAE 90.1-2001 standard.
Government and industry experts generally concur that EPAct 2005 will have a significant impact on the lighting upgrade market because it makes additional financial incentives available on top of the benefits of the high-performing, energy-efficient products and attractive utility rebates already offered by the industry.
Says Northern Energy Services’ Skeffington, “In many cases, current lighting upgrade projects being conducted were already meeting the criteria that would make them eligible for EPAct tax deductions, but they were being done without that incentive. EPAct now offers that incremental benefit.”
Wheatstone Energy’s Jarvis agrees and further believes that EPAct 2005 provides the official endorsement that will help change the industry. “With the backing and credibility now offered by the government, the market doesn’t have to ‘sell’ the upgrade opportunity anymore,” he says. “Now the focus is more on ‘how do we do it?’ and ‘which specific products will optimize the application for the customer?’”
Susan Bloom is the manager of public relations for Advance, Rosemont, Ill. Reach her via e-mail at susan.atc.bloom@philips.com.
Rebate and EPAct 2005 Resources at a Glance
These resources can help you learn more about the utility rebates and financial incentives available for energy-efficient building retrofits.
For information on state incentives offered for renewable energy, visit www.dsireusa.org.
For information on the services offered through comprehensive rebate administration firm Real Win Win, visit www.realwinwin.com.
Electrical Wholesaling’s 2006 Rebate Resource (page 30) provides information on many of the rebate programs now in effect.
EPAct 2005
To review the official “NEMA Assessment of the Energy Policy Act of 2005,” visit www.nema.org.
For summary information on the 2005 Energy Policy Act as well as the comprehensive benefits associated with energy-efficient lighting upgrades, visit www.energybillinfo.com.
For detailed information on the new federal tax deduction opportunities available through EPAct 2005, visit the dedicated NEMA-Commercial Building Tax Deduction Coalition site located at www.efficientbuildings.org.
For information on ASHRAE 90.1-2001 standards, visit www.ashrae.org (the American Society of Heating, Refrigerating, and Air Conditioning Engineers).
Tips for Cashing in
Given the overall financial attractiveness of the lighting-upgrade opportunity and the range of supplemental financial incentives being offered to drive further upgrade activity, are you tapping into your share of the benefits? These tips will help you capitalize on available rebates and financial incentives and maximize your participation in the lucrative upgrade market.
Canvas your customer base for lighting-upgrade opportunitiesOpportunities for lighting upgrades are often abundant within a distributor’s existing customer base and distributors are in the enviable position of having access to their customers’ ongoing purchases. By being observant of your customers’ current purchase patterns and usage, you have the unique ability to recommend an upgrade project or a package of products that your customer may not have even known was in their best interests.
Know your factsUnderstanding the big picture as well as the comprehensive benefits that result from a lighting upgrade will help you to sell the upgrade story to your customers. A knowledge of standard corporate and financial terms, such as payback period, ROI, IRR (internal rate of return), etc., is helpful so that you can speak the language of your customer base, enabling them to understand the full depth of the upgrade opportunity and the benefits they can accrue, both with and without a rebate or other incentive.
Familiarize yourself with your local utilityWhile upgrade projects are extremely attractive investments all on their own, the potential addition of utility rebates can only “sweeten the deal,” hastening payback periods and elevating returns on investment for your customer. Contact the utility companies in your region to learn about the current programs and incentives offered to encourage the use of energy-efficient lighting products such as lamps, ballasts and lighting controls.
Familiarize yourself with other local resourcesYour customers might be surprised to learn other resources exist that could help defray the cost of an upgrade — from loans designed especially for upgrade projects to state and local grants earmarked for such activities. Your state’s Energy Office or your local utility can update you on the programs and resources offered and how to qualify for these benefits.
Establish partnerships for increased market strengthTeaming up with an energy services company (ESCO) or other provider skilled in the specifics of lighting upgrades, energy analysis, energy-efficient products, and rebate/incentive administration can help broaden your served market, strengthen the arsenal of services you can offer customers, and establish a distinct advantage for your distributorship within a competitive marketplace.
Don’t waitLighting upgrades routinely drive payback periods of two to three years or shorter and 30 percent to 50 percent returns on investment. Whether or not a rebate is available to your customer, the lighting upgrade opportunity is still an extremely attractive investment that makes financial sense all on its own. With electricity costs continually rising, qualified efforts taken to reduce energy costs and consumption today are generally justified.
“We’ve seen many good upgrade projects tabled because a rebate wasn’t available,” laments Wheatstone’s Jarvis. He suggests that rebate opportunities not be considered the focal point of a project, but rather as ‘icing on the cake’ if they are available to your customer.
On top of the extremely attractive returns lighting upgrades generate on their own, existing rebate and new EPAct 2005 tax deduction opportunities provide an even more compelling reason for your customers to pursue energy-efficient lighting upgrades today. As both a product/service provider and an invaluable pathway for reducing customers’ operating costs, don’t wait to capitalize on the tremendous financial, environmental, and aesthetic benefits that an energy-efficient lighting upgrade — boosted by a range of utility rebates and other financial incentives — can offer your customers and your bottom line!
Among California’s colleges and universities, USC is tops in energy efficiency. Officials say attention to conservation measures, well-contained campuses and mild weather have made all the difference.
Calling the University of Southern California “an environmental leader and trendsetter” among universities and other large institutional utility customers, the Los Angeles Department of Water and Power has presented USC with a $1 million rebate check for savings realized this year through new energy-efficient power, cooling and lighting systems.The rebate, presented Aug. 28, covers conservation and efficiency efforts that will result in savings equal to the amount of electricity consumed annually by 1,500 homes, according to the utility.
The USC energy savings projects covered by the rebate include new lighting and chillers at USC’s main University Park campus and at the Health Sciences campus in East Los Angeles.
The projects are part of a five-year $10 million Master Energy Plan that have realized a 10 percent savings in USC’s peak power usage, reducing the average 25 megawatt peak load by 3 megawatts.
“The energy efficiency steps that USC has taken in partnership with LADWP are an outstanding model of how a coordinated and planned energy efficiency program can result in real cost-effective and tangible energy savings that are both good for the environment and the pocketbook,” said LADWP General Manager David H. Wiggs.
Wiggs presented the check to Dennis F. Dougherty, USC senior vice president for administration, in a ceremony at the University Park campus.
USC is the city’s largest private employer, and its two large campuses make the university the LADWP’s largest single private institutional customer.
“The savings we’ve realized have been effected though a mix of measures, ranging from new light bulbs to major construction efforts,” said Maurice Hollman, USC’s associate senior vice president for facilities management.
“The Master Energy Program was developed by a group of talented facilities management employees whose vision and technical expertise, in cooperation with the LADWP, have positioned USC at the forefront of campus conservation efforts,” said Hollman.
In 1997, USC launched its five-year Master Energy Program with approximately $10 million budgeted for major energy-saving investments.
“We got a jump on it before the energy crisis hit,” said Dick Snouffer, director of energy services for USC’s facilities management services.
Among the first improvements at both campuses were new lighting systems that require less power.
“We started the lighting retrofits and reduced our consumption before the calls for reduction in consumption began last summer,” said Snouffer.
A new state-of-the-art energy control center provides the capability to monitor and fine-tune energy supply and usage across the campus.
Another major investment was the construction of a roughly 1,500 square foot air conditioning chiller plant in the basement of USC’s Physical Education building, with pipes running underground to supply chilled water to 30 buildings across the campus. This system replaced the individual chillers that cooled each building.
“It’s more efficient to use one central chiller than to use separate chillers in each of these buildings, said Snouffer.
At the Health Sciences campus, a new chiller plant has been installed at the Center for Health Professions. The plant is scheduled to begin operations next month and will supply chilled water to the new Zilkha Neurogenetics Institute, now under construction, and the Harlyne Norris Research Tower, now in the design phase.
By building the chiller in the Center for Health Professions, said Snouffer, the upfront costs for the neurogenetics building and the Norris Tower will be lower and the energy efficiency greater. A future phase will extend the chilled water piping distribution network to serve buildings in the upper-campus quad.
In measuring its power usage and savings against other colleges and universities in the state, USC has found it consistently ranks at the top in energy efficiency, said Snouffer.
“Attention to all of these conservation measures has made a difference, along with our mild weather and the fact that we have two well-contained campuses.”
In the midst of a building boom entailing four new facilities at the University Park campus and four new buildings at the Health Sciences campus, the USC Facilities Management Services department has placed energy efficiency as a top priority in the design and planning process, said Snouffer.
“We’re planning for future buildings in the next three to five years, so when they come online they will be energy-efficient.”
More information about USC’s energy conservation efforts is at http://fmsnet.usc.edu/ .
1. According to a report published by the International Energy Agency (IEA), a global switch to efficient lighting systems would trim the world’s electricity bill by nearly one-tenth. The carbon dioxide emissions saved by such a switch would, it concludes, dwarf cuts so far achieved by adopting wind and solar power. According to Paul Waide, a senior policy analyst with the IEA and one of the report’s authors, “19% of global electricity generation is taken for lighting— that’s more than is produced by hydro or nuclear stations, and about the same that’s produced from natural gas.
3. Through the use of daylighting in design, builders can meet 25 to 33 percent of the necessary requirements to achieve a Silver LEED rating.
4. According to the federal Energy Star program: “If every American home replaced just one light bulb with an ENERGY STAR, we would save enough energy to light more than 2.5 million homes for a year and prevent greenhouse gases equivalent to the emissions of nearly 800,000 cars.”
