Expense Management Solution: The Value of Energy Saving LED Lighting
Total Cost of Ownership (TCO), also known as “ownership cost,” is a metric I like to use when explaining the value of using energy- and water-efficient products. TCO includes the up-front cost of the product and the costs associated with using that product for the duration of its life. Often, we use TCO, along with payback and return on investment (ROI) to compare two products, to determine which product to purchase that will make the most financial sense.
LED lighting have several advantages over traditional lighting such as longer average hour life, they are dimmable, color temperatures similar to incandescent lights, and low power consumption. LED lighting is a great example of when to use TCO to compare it to the alternatives. Let’s take a look at how an MR-16 LED bulb (MR-16 bulbs are used in pin-based applications such as track or accent lighting and are most commonly found in lobbies) compares to a halogen MR-16 bulb:
Take some time to digest that chart.
These LED lights really make sense. Although you will pay more up front for one LED, over its life that bulb should cost you nearly $200 less than it would to use standard halogen bulbs. How is this possible? As you can see, there are really two major places where LEDs save you money:
- You would need to buy 15 halogen bulbs to provide light that would last as long as one LED.
- LEDs use electricity MUCH more efficiently.
The amazing part of this calculation is that it isn’t even taking into account the labor costs incurred to replace that halogen bulb 14 times. The EPA’s ENERGY STAR® program estimates that it takes nine minutes to change a light bulb. Assuming your maintenance crew is paid $20 an hour, each LED could save you an additional $42 in labor costs. This brings the TCO of each product to:
Because of the higher up-front cost, LEDs might not make sense for everybody right now. However, if you can make the splurge, you will reap the benefits for years to come. For those of you interested in the other metrics used to evaluate an investment, payback and ROI, a lot depends on how many hours per day you leave the lights on. If you leave the lights on for 4 hours a day, investing in this LED would provide a 26% ROI and would pay for itself in just over 4 years. Not bad. But if these lights are on for 24 hours a day, like in an elevator or a common area, this LED would provide a 158% ROI and would pay for itself in just under 8 months! With numbers like this, it is clear that the right kind of LED can really help reduce operating costs and improve your bottom line.
Do you have LED lights on your apartment property? If not, what has stopped you from making the switch to this excellent expense management solution?