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Crafting Incentive Structure to Speed Market Adoption of Advanced Lighting Controls

Utilities looking for deeper savings need to consider diversifying their energy efficiency portfolios. In many areas, state and regulatory targets are increasing, creating more complexity and moving the market away from offering only widget-based programs. Utilities that need to evolve their energy portfolio should consider an Advanced Lighting Controls (ALC) program incentive. A crafted incentive affords the utility the flexibility it needs to react to changing markets and increasing customer expectations.  Gone are the days when a program can rely solely on one-for-one lamp replacements to meet energy goals. When accounting for the integration of LED technology and advanced controls, calculating savings becomes harder than subtracting wattages and estimating run hours. Though savings from an ALC project may be harder to calculate overall, the results are data-driven and verifiable. Advanced Lighting projects have produced savings as high as 92%.

Incentive Structures Matter

Incentive structures are a critical feature of an Advanced Lighting Control offering. There exists no one perfect incentive structure that will satisfy every end-user. Examples of three separate Advanced Lighting Control offerings in three distinct markets, all of whom have approached the challenge differently include

  • Incentives based on fixture type and density
  • Incentives based on sq./ft.
  • Incentives based on kWh reduced with a bonus

We have learned that incentive structures need to have the flexibility to evolve based on the feedback from program pilots and initiatives.

Putting Costs into Perspective

The initial high cost of an Advanced Lighting Control system can be a barrier for many customers. When a customer plans a lighting project, they usually do not budget for sensors, panels, and software, because these are not part of a traditional lighting project.  While ALC projects may have a lower simple ROI, they can often offer a higher Net Present Value (NPV) over the life of the system. Utility Incentives lower acquisition costs which increase the financial attractiveness of a project. Most decision makers require a less than six-year payback, so utility incentives are often the mechanism that make an Advanced Lighting Control project viable.

Long Sales Cycles that Cross Program-Years

Because of their complexity, Advanced Lighting Control projects have a long sales cycle, often nine months to three years. The length of the sales cycle makes it distinct from other simple lighting retrofit projects. Our experience has shown that the time from project lead to payment will cross program years.  Although lighting has been a (virtually) instant-gratification measure in the past, with ALC utilities will need to learn how to wait on savings, much like they have for HVAC and large custom process improvement projects. But, like HVAC and process improvement projects, the savings available can be worth the wait.

Utility Support is Needed

Utility support is critical for ushering in market adoption of Advanced Lighting Controls. As with any new technology, educating the market about the numerous advantages of advanced lighting is paramount. A successful offering includes staff with expertise and a network to reach out to trade allies and other stakeholders to provide them with training, case studies and other marketing material focused solely on Advanced Lighting Controls. The utilities’ ‘stamp of approval’ has helped close advanced lighting projects by reinforcing the energy savings potential of Advanced Lighting Control projects.

Food for Thought

As we implement more ALC programs, we will be able to incorporate more market feedback into our incentives. Though ALC programs have barriers to wide-scale adoption, we can remove these obstacles with education and by providing the most motivating incentive. I have seen first-hand the power that a well-crafted incentive has on closing a deal. Because Advanced Lighting Controls reach far beyond code, they become an easy target for value engineering.  The incentive becomes critical for helping customers look beyond acquisition costs and begin thinking of costs and savings in terms of lifetime ownership. When visiting customers after their systems have been commissioned, I have been struck about how often they rave about all the non-monetary benefits an Advanced Lighting System provides. Advanced Lighting Controls help businesses save money and people be more comfortable!

My next post will focus on the ever-popular LED Retrofit Tube – and explain why they are incompatible with Advanced Lighting Controls.

DNV GL has successfully designed and implemented Advanced Lighting Control projects on behalf of our utility clients for four years. Our team has significant project experience in both retrofitting and new construction of lighting projects. We work through the project life-cycle to identify, justify and evaluate energy saving measures and provide post-installation engineering review to verify savings.

Our team is available to work directly with large institutions to assist them with Advanced Lighting Control projects. For more information, please contact Wesley Whited. Wesley Whited is a Senior Consultant for Advanced Lighting Controls at DNV GL. Mr. Whited has seven years’ experience in the commercial lighting market ranging from project management to sales. Mr. Whited is a graduate of West Virginia University (WVU) and holds a MBA from Capital University in Columbus, OH.

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