Economics of Energy Efficient Lighting Prepared by ISR

Economics of Energy Efficient Lighting Prepared by ISR – University of Coimbra July 2017

Economics of Lighting For the economic evaluation of different lighting solutions the Life-Cycle Cost (LCC) or Total Cost of Ownership (TCO) should be considered. Total lighting systems costs include: • Initial cost • Operating cost • Maintenance cost. 2

Economics of Lighting Life-Cycle Cost (LCC) / Total cost of ownership for two types of lamps 3

Economics of Lighting Life. Cycle Cost (LCC) 4

Economics of Lighting Life. Cycle Cost (LCC) 5

Economics of Lighting Life. Cycle Cost (LCC) 6

Economics of Lighting Life. Cycle Cost (LCC) 7

Economics of Lighting Simple Payback = Difference in Investment Costs ( IC ) Difference in Annual Savings ( OC+MC ) Simple payback period does not take into account the time value of money, which is a serious drawback since it can lead to wrong decisions in projects with long payback times (>5 years), and/or large discount rates 8

Economics of Lighting 9

Economics of Lighting 10

Economics of Lighting LCC calculation Example Replacement of: - Halogen Spotlights With: - LED Spotlights 11

Economics of Lighting LCC calculation Lamp characteristics Halogen LED Number of lamps 50 50 Luminous flux (lm) 1 200 1200 Efficacy (lm/W) 24 100 Power (W) 50 12 Lifetime (hours) 2 000 50 000 Annual operating hours 3120 Cost (€) 1, 20 10, 0 Installation Cost (€) 0, 10 12

Economics of Lighting LCC calculation Initial Cost (IC) Calculation • Number of luminaires (n) • Luminaire price including light source (CL) • Installation costs per luminaire (CI): 13

Economics of Lighting LCC calculation Annual Operating Cost (OC) • • Number of luminaires (n) Power per luminaire including lamp and ballast/driver, in Watt (PL) Electricity cost, €/k. Wh (CE) Annual operating hours (h) 14

Economics of Lighting LCC calculation Maintenance Cost (MC) • • • Number of luminaires (n) Lifetime of lamp, in hours (LL) Lifetime of project, in hours (LP) Lamp exchange costs, including lamp and work (Cm 1) Other maintenance costs (Cm 2) – in this example are considered zero 15

Economics of Lighting LCC calculation Life. Cycle Cost (LCC) 16

Economics of Lighting Simple payback calculation 17

Economics of Lighting Simple payback calculation If instead of comparing two technologies for a new installation we were analysing the retrofitting of existing halogen lamps with LED lamps the initial cost for halogen lamps is considered zero. The simple payback period would be slightly larger at just 0. 51 years 18

Economics of Lighting Life. Cycle Cost (LCC) Other considerations ― The electric energy for lighting is an internal heat gain in a room. In winter peaking regions (cold areas) it can be utilized for heating, but in other regions and in summer time it will increase the need for cooling energy. 19

Economics of Lighting Online tools There are online calculation tools that, with varying degrees of complexity, can help in the economic comparison between technology options. Some examples are: http: //glamox. com/gsx/investment-analysis-calculator http: //hub. currentbyge. com/current-articles/simple-life-cycle-costestimator http: //www. dialight. com/TCOCalculator/ 20

Economics of Lighting Energy Efficiency Investments Ring fenced investment budget Maximise support from grants and other external sources Best practice for investment Retention of a % of savings by relevant department Retention of a % of savings for more measures Appraisal on whole life cycle basis 21

Economics of Lighting Energy Efficiency Investments Financial options: • • own funding, third party financing, leasing, ESCO financing, rebates, incentives and others. 22

Additional Benefits of Energy-Efficiency Source-IEA, 2014 23