Product pricing is a major driver of purchase decision-making in business. Such is often the case with lighting purchases. Building maintenance workers operating on a limited budget are constantly buying linear fluorescent, halogen, ceramic metal halide, and compact fluorescent lamps (bulbs) based on the price of the product. 'Going cheap' sounds reasonable until one begins to think about the overall cost of light.

Increasing numbers of chief financial officers, senior finance executives, and facilities executives are asserting themselves and influencing the specification and purchase of lamp and ballast products. These knowledgeable executives know that about 88% of the cost of light relates to energy consumption. Only about 12% of the overall cost of light maps back to the cost of the lamp and maintenance labor. Drilling down even further on that 12% reveals that the lamp purchase represents just one-third of it (about 4% of the overall cost of light).

Lighting isn't a simple expense item. Lighting choices today give CFOs an opportunity to reduce operating costs and improve operating profit.

Lighting Audits

Companies operating giant facilities or hundreds of facilities have numerous outlets for learning more about lighting energy consumption and opportunities for savings. For starters, energy services companies, lighting distributors, and manufacturer representatives can help to examine current lighting choices and make recommendations for better lighting choices.

Among the lighting audit tools available is the Value*Light cost of light software tool from GE Consumer & Industrial, Lighting. Value*Light is useful to companies considering lighting for new facilities, lamp retrofits, or total lighting redesign projects. In presenting a sophisticated analysis of the cost of operating and owning a lighting system, it compares the operating costs of existing lighting with the investment costs, operating costs and paybacks of new alternatives.

Audit tools use data inputs such as energy rate, analysis period, annual burning hours, geographic location, product types, and quantities-all specific to the end-user situation.

Numbers-hungry CFOs want and need proof points before agreeing to lighting retrofits or installations that call for more expensive lamps, even if performance is enhanced and lamp life is extended. Typical GE Consumer & Industrial, Lighting audit tool analyses and summaries show operating costs, available savings over existing systems, initial investments, cash flow, air conditioning savings based on location, optimum times for re-lamping based on labor rates and burn hours, payback periods, net present value calculations, and long-term return on investment.

Canadian Retailer

Macey's removed T12 lamps as part of a campaign to refresh its stores, with good customer response.

Retailers and property management companies operating hundreds or thousands of facilities have a lot to gain, or lose, when it comes to energy-efficient lighting. Hudson's Bay Company (Hbc), Canada's largest department store retailer and oldest corporation, employs a senior manager of energy and environment, Fred Ware, who earns his keep by controlling energy expenses across the 500-store enterprise. Ware sets energy and environmental policies and procedures, and works with facilities managers to implement his strategies.

He says his CFO and CEO are among the biggest supporters of his efforts to track energy usage with an energy management system. “They like the idea that we monitor individual store energy usage and compare consumption among similarly designed stores,” he says. “We monitor closely and act quickly to optimize energy efficiency.”

Ware has overseen the cutting of lighting energy use at Hbc's Zellers mass merchandise stores, Bay department stores, and Home Outfitters bed and bath specialty stores. He says smart lighting choices play a big part in meeting Hbc's goal of exceeding by 25% the energy-efficiency targets set by the Canadian Model National Energy Code for Buildings.

Recent lighting initiatives involving its stores have helped Hbc to cut lighting energy consumption in each store while reducing lighting maintenance costs. The company saves millions of dollars annually thanks to new lighting technologies.

Hbc's energy-saving strategy began with a lighting retrofit at 98 Bay stores: out came standard halogen 130-volt (V) 75-watt (W) PAR38 lamps and in came GE 130-V 60-W Halogen HIR lamps. When run at 120 V, the 75-W PAR lamp operated at 66 W, provided a rated life of 5000 hours (hr) and delivered 800 lumens (lm) and 12.1 lumens per watt (lm/W). By comparison, the more efficient 60-W Halogen HIR lamp, when run at 120 V, operates at 54 W, provides a rated life of 6000 hr, and delivers 800 lm and 14.8 lm/W. The retrofit helped Hbc achieve energy savings, 20% longer life, and identical light output. Because the rated life of the new HIR lamp is 1000 hours longer, Hbc reduces maintenance labor costs.

Hbc realized huge savings when it converted more than 300 Zellers stores from 32-W T8 XL Long Life fluorescent lamps to 30-W GE T8 XL Watt-Miser lamps. Cutting load by two watts per lamp represents a significant savings given the volume of lamps-up to 5000-in each store.

Smaller Scale, Same Results

Zeller's, also a Hudson's Bay retailer realized savings from energy but also from reduced maintenance costs.

As part of a program to be more competitive in the marketplace against major supermarkets and big box retail outlets, the 10-store, Utah-based Macey's grocery chain decided to remodel its 65,000 ft2 store in South Ogden, UT.

“While the building was just six years old, we decided to remodel it to enhance our competitive position in the marketplace,” says Mike Jackson, director of store development for Macey's. “Installing new energy efficient fluorescent and metal-halide lighting helped create the exciting shopping experience we wanted.”

As part of its plan to refresh store décor, Macey's removed existing T12 linear fluorescent and high-bay metal-halide lighting, and retrofit the store with energy efficient linear fluorescent F28T8 low-mercury, TCLP-compliant lamps with new electronic ballasts, and leading edge 320-W, high-output, metal-halide lamps. The retrofit was modeled after a new-store lighting scheme that Macey's had used six months earlier.

“We received an exciting response from customers and store staff,” Jackson notes. “The new lighting gave us the dynamic look we wanted, plus the energy efficiency earned Macey's a conservation rebate from our local utility. What more could we ask for?”

Healthcare Settings

Good lighting equals good health care, at least as far as the owners of Inova are concerned.

An energy management cost team headed by Stephen Fuoco at Inova Health System, a not-for-profit health care system located in northern Virginia, had a tall order for its energy services company, Baltimore-based Consumer Lighting Products, Inc. Invova asked Consumer Lighting Products to identify and implement lighting conservation projects that would save energy, reduce HVAC and maintenance costs, and improve aesthetics and ambiance-all without disrupting the 24/7 activities of staff or the comfort of patients.

Consumer Lighting Products' proposal involved a lighting upgrade that, among other things, called for the removal of T12 fluorescent lamps and electromagnetic ballasts and the installation of F28T8 lamps and electronic ballast systems. F28T8 fluorescent lamps offer a three-year/ 10,500-hr limited warranty when used with the UltraMax ballast; high lumen output; an 82 CRI; and a 24,000-hr rated lamp life based on 12 hr per start. The electronic ballasts offer a five-year limited warranty, multi-voltage control, arc-guard protection, anti-striation control, cooler operating temperatures and lower energy consumption.

The performance of the new fluorescent lamps helped Inova cut energy consumption more than 40%. There are other benefits such as HVAC savings and lifecycle cost savings.

According to Frederick L. Mackler, CEO, Consumer Lighting Products, “We brightened things by using the right T8 lamp and ballast combinations, adjusting fixture configurations when necessary, cleaning reflective surfaces and dirty lenses, and installing our custom-engineered Horizon 2000 enhanced aluminum reflectors.”

Mackler and his team used cost of light tools and analysis generated by Value*Light to calculate a payback time frame and return on investment that helped Inova make an informed decision about its lighting conservation initiative. “We delivered a project that exceeded Inova's requirements and everybody loves the results,” adds Mackler.

ROI Checklist

GE's Value Light provides on-line audit information that can be part of the decision-making process.

Most CFOs and energy management executives involved with lighting choices or enterprise-wide energy saving initiatives would agree that energy-cost reduction is the most tangible benefit of energy-efficient lighting. There are additional benefits to keep in mind:

• More efficient lighting represents a sustainable operating cost reduction

• Energy-efficient lighting often delivers longer life than standard lighting, a factor that can significantly reduce maintenance labor hassles and costs

• Energy-efficient lighting can improve the quality of light, which can increase worker satisfaction and productivity

• Shareholders and other stakeholders will recognize the value of energy-saving initiatives and applaud executives that are watchful of the bottom line and the environment

• Companies can leverage improved cash flow and operating profit tied to more efficient lighting and re-invest in the business (e.g., spend more on product development, marketing, etc.)

Due Diligence

Regardless of a company's collective state of mind about energy-efficient lighting-wrestling with the initial cost vs. the lifetime cost or geared up to undertake an initiative-it is advisable to conduct a comprehensive lighting audit before making any product decisions. Such audits allow a company to understand its options for return on investment and payback time frames.

Oftentimes, energy services companies-commonly known as ESCOs-lead such lighting audits.

ESCOs, according to the National Association of Energy Services Companies (www. naesco.org), develop, install, and finance projects designed to improve the energy efficiency and maintenance costs for facilities over a 7 to 10-yr time period. ESCO services are typically bundled in a project's cost and repaid through the dollar savings generated (read: ESCOs assume the risk for forecast savings).

ESCO services typically include developing, designing and financing projects; installing and maintaining new equipment; and measuring, monitoring, and verifying energy savings. Besides lighting, ESCOs help companies look at savings options for heating and air conditioning; motors and variable speed drives; and centralized energy management systems. On its web site, NAESCO reports that the ESCO industry's origins date back to the late 1970s and early 1980s, when the U.S. saw energy prices spike upward in 1973 and in 1979.

If Kids Can Do It

Regardless of a company's collective state of mind about energy-efficient lighting-wrestling with the initial cost vs. the lifetime cost or geared up to undertake an initiative-it is advisable to conduct a comprehensive lighting audit before making any product decisions. Such audits allow a company to understand its options for return on investment and payback time frames.

Oftentimes, energy services companies-commonly known as ESCOs-lead such lighting audits.

ESCOs, according to the National Association of Energy Services Companies (www. naesco.org), develop, install, and finance projects designed to improve the energy efficiency and maintenance costs for facilities over a 7 to 10-yr time period. ESCO services are typically bundled in a project's cost and repaid through the dollar savings generated (read: ESCOs assume the risk for forecast savings).

ESCO services typically include developing, designing and financing projects; installing and maintaining new equipment; and measuring, monitoring, and verifying energy savings. Besides lighting, ESCOs help companies look at savings options for heating and air conditioning; motors and variable speed drives; and centralized energy management systems. On its web site, NAESCO reports that the ESCO industry's origins date back to the late 1970s and early 1980s, when the U.S. saw energy prices spike upward in 1973 and in 1979.

Action Plan

CFOs that want to reign in wasteful spending on lighting energy can approach the matter in a number of ways.

For starters, a CFO should talk to the company's senior operations executive or energy manager about enterprise-wide lighting and ask if the lighting systems provide value or waste money. Acting more aggressively than usual with regards to lighting also might involve the initiation of a lighting audit to see how existing lighting selections compare with the latest available technologies, and to determine the need for a partial or complete lighting retrofit.

Additional tactics could include:

• Establishing lighting performance standards or product standards for all company properties

• Creating informed lighting buyers across the enterprise and setting up an ad-hoc lighting buying team

• Reporting to the board of directors and employees about how lighting-related operating profit and cash flow improvements will help the company and the bottom line

It's important for CFOs carrying the lighting audit torch to know that the tipping point in most companies-that 'light bulb' moment of realization-occurs when a lighting audit shows that product pricing cannot be the major driver of lighting purchase decision-making.

Maintenance and energy costs are a far greater concern. And energy costs-at about 88% of the overall cost of light-present the best opportunity to stop wasteful spending.

Get Out the Calculator

Consider this example of enterprise-wide ROI: A mall store with 250 PAR38 sockets pays $10,000 per year for lamps, energy, and labor. That single mall store spends $2,000 too much per store annually because there is a more efficient product available-the 55-W HIR PAR 38 lamp-that matches the performance of existing 75-W PAR 38 lamps. This 20% net savings assumes 4500 hr of use per year, 10 cents per kilowatt-hour, and lower HVAC costs. At this rate, a 100-store chain could save $200,000 per year, and a 1000-store chain could save $2 million per year. That's what can be realized retrofitting just one lamp type; the savings could be even greater with a broader retrofit project.